What if an Employee Terminates, and Is Later Rehired? Applying ERISA’s Rule of Parity in Counting Service

Some employees stay a short while, others longer. Sometimes they leave and return. How do you count service, for eligibility and vesting, where a break in service occurs? Service counting, for vesting in employer contributions, like a 401(k) match, is important in administering a qualified plan, but employees may have to stay a minimum, like three years, to be vested. A plan can disregard an employee's service before a break in service if the employee has no vested interest in any benefit under the plan and the rule of parity applies. Under that rule, a rehired employee's prior service is disregarded if the employee's breaks in service exceed either the number of years of service the rehired employee had prior to the breaks, or five years—whichever is greater.

READ NOW »

Related Content

• Counting Service in Retirement Plans
  Learn more about the service-counting rules that an employer plan applies in determining when an employee can participate in a plan, when the employee vests, and, in a defined benefit plan, even how much credited service counts toward the employee’s accrued benefit.

Legal Developments  

• SEC Finalizes Exec Comp Disclosure Rule After 12-Year Wait
  The SEC has finally adopted the so-called pay-versus-performance rule requiring companies to justify executive pay to shareholders by comparing it to the company's financial performance.

• Inflation Reduction Act's Impact on Group Health Plans
  The Inflation Reduction Act extends Affordable Care Act premium tax credits, allows a health savings account to pay for insulin before meeting a high-deductible health plan’s deductible, and can favorably impact retiree Medicare supplement plans by its capping seniors’ out-of-pocket drug spending.

• Insurance Issues after Dobbs Part V: Insureds, Health Plan Sponsors, and Individuals
  Learn from this practice note how the overruling of Roe v. Wade by Dobbs v. Jackson Women's Health Org. impacts health plan sponsors, corporate insurance policyholders, insureds, and individuals. 

Practical Guidance Updates
Featuring the latest updates from your Practical Guidance account.  

• Employee Benefits & Executive Compensation Key Legal Developments Tracker
  Stay informed on new developments.
  • ERISA Litigation. The U.S. Court of Appeals for the Fifth Circuit ruled that HHS could not enforce an interpretation of the nondiscrimination provisions of ACA Section 1557 in a way that would require the religious plaintiffs to perform or provide insurance coverage for services related to gender transition or abortion. Franciscan Alliance, Inc. v. Becerra, 2022 U.S. App. LEXIS 24142 (5th Cir. 2022). 
• Document alerts allow you to stay current on legal developments that affect your practice. Find out how to set up your document alerts.
• Listen up! Access our growing collection of podcasts by navigating to the Practical Guidance Podcasts Resource Kit.
• Check out the new Practical Guidance Author Center! Learn about the 1500+ leading attorney authors contributing to our 21 practice areas, and find out how you can Become a Practical Guidance Author.
• The Practical Guidance Journal Summer 2022 Edition features wage and hour issues related to remote and hybrid work.

• New Practical Guidance Content
  • State Abortion Laws Tracker After Dobbs v. Jackson Women's Health Organization
  • Dobbs and Employee Benefits Issues Podcast
  • Defined Contribution Plan Notices (Plan Event Notices)
  • Golden Parachute Rules Video
  • DOL Correction Program for Fiduciary Errors: The VFCP (Part 1) Video
  • DOL Correction Program for Fiduciary Errors: The VFCP (Part 2) Video

Experience results today with practical guidance, legal research, and data-driven insights—all in one place.

Experience Lexis+