Guest kdzurinda Posted February 24, 2006 Share Posted February 24, 2006 A client has decided to implement a 401k and safe harbor nonelective contribution. They want to have a 21 age and 1 year service requirement with an annual entry date of 4-1. (they are a fiscal plan) My question is can they do this or must they use semi-annual entry dates? Essentially, if someone hires in April, they have to wait almost 2 years in order to be eligible. Please advise asap. Thanks Link to comment Share on other sites More sharing options...
rcline46 Posted February 24, 2006 Share Posted February 24, 2006 You should know this one cold! You cannot keep someone out for more than 18 months. This directs the use of dual entry dates as the most restrictive. Link to comment Share on other sites More sharing options...
Dan Posted February 24, 2006 Share Posted February 24, 2006 Actually, you can require 2 years of service for entry as long as all employer accounts are fully vested upon participation. If the plan isn't designed for two years of service, then the annual date is fine as long as the entry date is retroactive so no participants exceed the 18 months. Link to comment Share on other sites More sharing options...
Tom Poje Posted February 24, 2006 Share Posted February 24, 2006 you could have 2 years, but not for 401(k) deferrals. that would also mean you could not have a 2 year wait in a safe harbor 401k Link to comment Share on other sites More sharing options...
Lori Friedman Posted February 24, 2006 Share Posted February 24, 2006 A plan can have just one entry date per year, but that would be a bad design choice with unanticipated results. Employees can begin participating in the plan before they've met the age/service requirement. Example. A plan has one entry date per year -- January 1. A new employee completes his first year of service on 03/01/06. The individual can't be kept out of the plan until 01/01/07 (the "waiting" period can't exceed 6 months), so he'd participate as of 01/01/06. That's why plans are designed with a minimum of 2 entry dates per year. If this same plan had provided entry dates on January 1 and July 1, the employee would have started participating on 07/01/06. Lori Friedman Link to comment Share on other sites More sharing options...
PMC Posted February 27, 2006 Share Posted February 27, 2006 Look at IRC 410(a)(4) Link to comment Share on other sites More sharing options...
E as in ERISA Posted February 27, 2006 Share Posted February 27, 2006 If you have a service requirement together with annual start dates, you generally have to provide retro entry to the beginning of the year for those who satisfy requirement during first half of year. Doesn't work with a 401(k) plan. Link to comment Share on other sites More sharing options...
Guest mjb Posted February 27, 2006 Share Posted February 27, 2006 401k2D states that plan cannot require as a condition of participation (not eligibility to particiate) that an employee complete more than 1 year of service which requires allowing the employee to make salary reduction contributions after performing a year of service. Link to comment Share on other sites More sharing options...
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