401(k)

[Guest ACE]

It has been a while since I have been administering a 401(k) plan. Please help me rember if there are minimum hours that an employee must work in order to participate in the 401(k) plan. This plan has ee contributions only, no employer contributions, so vesting is not an issue. If there are minimum hours, is it 501? Thanks for any help.

[Lynn Campbell]

You need to read the Plan document to see what the Eligibility Requirements are.

[E as in ERISA]

A 401(k) plan can have an eligibility requirement -- e.g., one year of service with 1,000 hours. Once an employee meets that requirement and enters the plan, there would be no further hours requirements for continued participation.

[Brian Gallagher]

I believe, also, that if a plan has an eligibility period of less than 1 year (eg 6 months), there cannot be any hours worked restriction. Also, on a standardized prototype the maximum hours restriction is 500 hrs, isn't it?

[Blinky the 3-eyed Fish]

Brian, the statement that you can't have an hours requirement if the eligibility period is less than a year is a common misconception. You can have an hours requirement, but must make sure that in any event that a person who works 1,000 hours will enter the plan. An example would be a 6 month requirement of working 83.33 hours per month with the 1,000 hours stipulation over a year.

Also, the 500 hours requirement for a standardized prototype is for the right to receive the allocation and it is 500 hours or employed on the last day. The idea is so that the plan cannot possible fail 410(b). A standardized protype can have a 1,000 hours requirement for eligibility.