Jump to content

401k entry dates


Guest kdzurinda

Recommended Posts

Guest kdzurinda

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

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

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

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

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...