Employer required 401K?

[Guest aoshell]

I'm considering a job offer and am being offered a package with and without benefits, including their 401K. My question is, is the employer required to allow me to participate in their 401K plan without matching if they have one?

Thanks

[Guest Delite]

In short, if you meet the eligibility requirements set forth in the plan and are not a member of an excluded group, you would be allowed to participate. You need to find out from the plan administrator what the eligibility requirements are for 401(k) deferrals and what the entry dates are to determine if and when you would be eligible.

[actuarysmith]

I am somewhat unclear on the exact meaning of your question - are you saying that they are offering you choices of different benefit packages? (one package that includes the 401(k) plan, and another package that does not)

If so, the employer may be in violation of Code Section 401(k)(4) which states-

"Benefits (other than matching contributions) must not be contingent on election to defer. A cash or deferred arrangement (the fancy phrase for 401(k)) shall not be treated as a qualified CODA if any other benefit is conditioned (directly or indirectly) on the employee electing to have the employer make or not make contributions under the arrangement in lieu of receiving cash."

In other words, unless I'm missing something, your choice of benefits should not be dependent upon whether you are included in the 401(k) plan or not.

[david rigby]

I'm also bothered by this, but for a different reason. My read of the original question is that the job offer may be one of two ways:

1. The usual, salary and benefits, or

2. Salary only (presumably higher) and no benefits.

If this is what you are asking, then the employer might be trying to find a way to avoid paying for benefit costs, by "hiring" independent contractors. See Microsoft for how this can backfire.

[wmyer]

I read the original post the same way as actuarysmith. Although it could violate 401(k)(4), I've seen this done. At the outset of employment, the employee chooses one of the two packages -- if he chooses the package without 401(k), he's put in an excluded class of employees called "Non-retirement eligible" and excluded from the non-standardized agreement as a separate class of employee. Alternately, you could name the class something else which won't catch the IRS/DOL's attention so much.

[Guest aoshell]

Pax is correct in his interpretation - they are offering me one salary that includes benefits and another salary that does not include taking company benefits - period. This is not a choice between 2 different benefit packages.

They have a 90 day waiting period for their 401K. I'm not sure of the eligibility requirements and hesitate to ask them in case they think I am being pushy. Their 401K is with Aetna. Could I ask them?

I am currently an contractor with the company and am negotiating a permanent position. I am thinking that the company means to do as WMYER suggests and put me in a "Non-retirement eligible" class.

I really want the non-benefits position WITH the 401K, even if there's no company matching. It doesn't sound like I have much legal recourse. I read the ERISA "pension rights" (http://www.pueblo.gsa.gov/cic_text/employ/...ts/penrghts.txt) over the weekend on the web and it only says they say...

"Generally speaking, if your employer provides a plan

that covers your position, you must be permitted to become a

participant if you have reached age 21 and have completed 1

year of service. Even if you work part-time or seasonally,

you cannot be excluded from the plan on grounds of age or

service if you meet this service standard. You must be

permitted to begin to participate in the plan no later than

the start of the next plan year or 6 months after meeting

the requirements of membership, whichever is earlier. You

should be aware, however, that your employer may provide one

or more plans covering different groups of employees or may

exclude certain categories of employees from coverage under

any plan. For example, your employer may sponsor one plan

for salaried employees and another for union employees, or

you may not be within the group that the employer defines as

covered by the plan."

So it sounds like I'm SOL. What I would really like to do is go independent consultant to take advantage of the new 40K 401K contribution level, but my consulting firm had me sign a noncompete contract and that's out.

Thanks everyone for your time and consideration!

[actuarysmith]

It sounds like it is a choice of two benefit packages - one package includes a retirement plan, and the other does not. I read the original quesion correctly and have the same concern voiced in my previous post.

[Guest PAUL DUGAN]

We have a number of clients who classify empoyees as either "benefited" or "non-benefited". Non-benefited EEs are excuded from all fringe benefits pension, PS, life ins., medical, etc..

Under the qualified plans the document excludes by class "non-benefited employees". We of course must do a 410(B) testing each year but have no problems because these class normally has very few EEs (normally less than 10%) All the plans have IRS approval letters and the excluded EEs where disclosed on the filings. Two of the plans have been audited in the last three years with no problem. I have not heard of any of these clients having any DOL problems.