Participation Requirements Under 410(a)(1)(A)

[Guest KHanvey]

Code § 410(a)(1) sets forth the minimum age and service rules for qualified plans. This section provides that "[a] trust shall not constitute a qualified trust under section 401(a) if the plan of which it is a part requires, as a condition of participation in the plan, that an employee complete a period of service with the employer or employers maintaining the plan extending beyond the later of the following dates—(i) the date on which the employee attains the age of 21; or (ii) the date on which he completes 1 year of service." Code § 410(a)(1)(A)(i)-(ii).

Is anyone aware of any guidance on what "as a condition of participation in the plan" means in this context? For example, if a plan generally permitted employee participation after 1 year of service and attainment of age 21 (in accordance with the general 410(a)(1) requirements), but restricted employer matching contributions to employees who had completed 1 year of service and attained age 26, would the plan fail to satisfy these requirements? Or would Plan "participation" be viewed as general plan participation, not as participation with respect to each type of contribution permitted under the plan?

[Guest Sieve]

There cannot be an age condition on accruing any benefits under the plan (e.g., allocation of employer contributions, including matching contributions) if that age condition exceeds 21. But, look in the Code just below the material you cited, and you'll see that there is an exception for educational institutions which are exempt organizations--i.e., private schools--if there is full vesting after 1 year of service, and that exception allows the eligibility age to be 26. (IRC Section 410(a)(1)(B)(ii).)

So, eligibility for any employer contribution made by such an organization (such as a matching contribution) can be age 26, if contributions are fully vested after 1 year of service.

Are you employed at such an organization which maintains a 401(k) Plan?

[Guest KHanvey]

Thanks Sieve.

The organization is such an educational instutitution, but employer matching contributions do not vest for 3 years, so I do not beleive that the exception you cited works in this context.

Are you aware of any authority out there that supports the idea that the age restriction rules apply to every benefit accruing under the plan?

Thanks again.