Field directive says part-timers cannot be excluded.

• Author: Amoroso, Vincent
• Position: Brief Article

The Service has issued a field directive providing guidance on the exclusion of part-time employees under Sec. 410. In essence, the IRS National Office has put its imprimatur on the position set forth in a newsletter issued by the Dallas Key District Office in early 1994.

Sec. 410(a) sets ceilings on minimum age and service conditions in a qualified plan. Thus, a qualified plan cannot condition participation on completing a period of service extending beyond the later of (1) the employee's twenty-first birthday or (2) the date the employee completes one year of service. A year of service generally means a 12-month period in which the employee has at least 1,000 hours of service. Regs. Sec. 1.410(a)-3(d), on the other hand, provides that Sec. 410(a) does not preclude a qualified plan from establishing conditions - other than conditions relating to age or service - for participation in the plan. For example, Sec. 410(a) does not preclude a plan from requiring, as a condition of participation that an employee be employed within a specified "job classification."

Citing Regs. Sec. 1.410(a)-3(e), the field directive states that plan provisions may be treated as imposing age and service requirements even though the provisions do not specifically refer to age or service. As an illustration of this rule, Regs. Sec. 1.410(a)-3(e)(2), Example (3), states that a plan that...