Write It Into the Plan
Your measurement, administrative and stability periods, and your rules for breaks in service, belong in the plan document and the summary plan description, applied uniformly within each category.
The three things to know.
What to Write Down
The categories you use, the method for each, the period lengths and dates, the definition of hours of service, how non-hourly hours are counted, and how rehires and leaves are treated.
Why It Matters
A design that exists only in a payroll setting is hard to defend. Plan documents give eligibility rules a legal basis and keep administrators consistent.
Keep It Current
Every change to the design or the plan year should be reflected in the documents, and communicated to participants where the summary plan description requires it.
Sources: 26 CFR § 54.4980H-3. General information, not legal advice.
A worked example.
An SPD That Matches the Design
An employer adopts a 12-month look-back design but its summary plan description still says employees become eligible after working 30 hours a week for 90 days.
What the Rule Produces
The two disagree, so administrators are working from a design the plan does not describe. The employer updates the plan document and SPD to state the categories, periods and definitions, and tells participants about the change.
Four steps to apply it.
1. List the terms
Gather the definitions and periods you use.
2. Draft with counsel
Have counsel or a document provider write the plan language.
3. Update the SPD
Describe eligibility in plain language.
4. Communicate
Tell participants about the change.
Where it goes wrong. Letting payroll settings drift from the written plan.
The questions that come up next.
Who updates the plan document?
The plan sponsor, usually with counsel or a document vendor. Your advisor can identify what needs updating but should not draft legal text.
Does a benefits guide count as the plan document?
No. A guide is a communication tool, not an SPD or a plan document.
What should staff see?
The eligibility definition and how status is determined, in plain language, so employees understand why they were or were not offered coverage.
Do we need a wrap document?
If the plan has no SPD that meets the requirements, a wrap document may be needed. Ask counsel.
How often should we review the language?
Whenever the design, the plan year or the categories change.
Plan-specific questions belong with ERISA counsel, and we will bring them in.
Related pages on the look-back method.
The Case for Longer Windows
Longer measurement windows give one cycle a year, one round of notices and fewer status changes.
The Case for Shorter Windows
Shorter measurement windows react faster.
The Full Look-Back Guide
Every rule, example and source behind this page, in one place.
Talk it through with someone who runs this every year.
We help you choose the design, document it and reconcile the hours before the numbers reach your reporting.
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