Is it allowable to have a match provided to only first year employees?

[401king]

Plan is looking into establishing a match whereby only first year employees receive the match. On the employee's one year anniversary, they would no longer receive the proposed match. The hopes are that once they are signed up, they won't stop deferring just because the match is no longer provided.

Assuming that I could write in an excluded class of, "Individuals employed for one year or more," would the plan be facing potential coverage issues?

Any ideas are appreciated. Thanks!

[ESOP Guy]

I THINK you would not have coverage issues because the only way an person can be an HCE their first year of employment is if they are an owner.

I guess you could also exclude anyone who is an owner by direct ownership or by family attribution, if you wanted to make sure. Or just exclude HCEs the first year.

Wouldn't it be easier to just set up an auto enroll plan?

Auto enroll plans aren't something I ever work with so I could be wrong, but that seems more reasonable. The average worker really doesn't strike me as so dumb as to fall for the one year match "trick".

[401king]

I THINK you would not have coverage issues because the only way an person can be an HCE their first year of employment is if they are an owner.

I guess you could also exclude anyone who is an owner by direct ownership or by family attribution, if you wanted to make sure. Or just exclude HCEs the first year.

Wouldn't it be easier to just set up an auto enroll plan?

Auto enroll plans aren't something I ever work with so I could be wrong, but that seems more reasonable. The average worker really doesn't strike me as so dumb as to fall for the one year match "trick".

The Auto-Enrollment idea is one that I'm sad I didn't think of. Another suggestion from a colleague is to setup class-based non-elective contributions. The company would simply establish their own internal policy (along the same lines of their proposed match) and we would allocate the NEC in that manner.

[GMK]

Auto enroll increases participation, and it is easy to administer (without extra policies and procedures).

People understand auto enrollment, and they will opt out if they want or need to.