Youngest Age of Eligibility

[The 402"(G)"]

Hello All,

A recent discussion in the office brought rise to a hypothetical question on eligibility of minors. Assuming the plan has no age limit on contributing, what would be the youngest age someone can participate in the plan?

From research not much came up, and the few posts I could find on here were dated 10+ years ago.

My guess is as long as they have eligible wages as defined by the plan they would be okay, but I also am thinking it wouldn't make sense to have a 2 year old deferring (say from a advertisement for that company).

Thanks

[BG5150]

There is no minimum wage, however, there are state laws governing the employment of minors that may be applicable.

[ESOP Guy]

I also am thinking it wouldn't make sense to have a 2 year old deferring (say from a advertisement for that company).

Thanks

Back in the '80s my wife and I knew a couple whose baby did a number of ads for P&G. The baby got paid really well for pictures of it being put into print ads. The parents said at the time it was the baby's college fund.

I kept thinking 60+ years of compound interest in an IRA wow!

Might not make sense for a company but might make sense for the 2 year old.

[BG5150]

Does a 2-yr old get paid on a W2, or 1099 for something like that?

[GMK]

Good point, BG. Anyway, the 2-year old should just dump the money into a Roth IRA and amass a pile of 'magic money' (a technical term some retirees use for their Roth accounts) for retirement.

For the 401(k), there's no reason that a minor can't be allowed to participate. I'd consider if there are any extra administrative headaches for distributions to minors, and if I want to deal with them or not.

[My 2 cents]

Good point, BG. Anyway, the 2-year old should just dump the money into a Roth IRA and amass a pile of 'magic money' (a technical term some retirees use for their Roth accounts) for retirement.

For the 401(k), there's no reason that a minor can't be allowed to participate. I'd consider if there are any extra administrative headaches for distributions to minors, and if I want to deal with them or not.

I am not involved with 401(k) plans, but the defined benefit plans I see all have provisions concerning payment to minors or otherwise incompetent persons. I can't imagine any retirement plan of any sort would lack such a provision, so should have procedures for handling those situations already in place.

[GMK]

^ You are absolutely correct that the plans have provisions for all kinds of distribution situations.

All I'm saying is that the people who have to administer the plan should consider how big an added burden this is, if any, and whether they want to take it on. That gets balanced against things like how attractive the offer of a 401(k) would be to the best candidates (who are minors) for the company's job openings, and on and on.

[My 2 cents]

There is probably a big distinction between small plans (set up, for example, as a way to create tax-favored savings for modeling fees earned by children) and large plans (for example, chain supermarkets hiring 14-year old baggers). The former kind of plan would presumably not regard special procedures as unduly burdensome, while the latter are probably able to cope fairly well with relatively small additional administration resulting from covering legal minors.

Would the children appearing in advertising circulars for department stores be considered employees of the department store (or chain) or would they be considered employees of the talent agency retained to provide models? I don't think that they could be considered as either employees or even leased employees of the store. They might even qualify (legitimately!) as independent contractors, fully excludable from the department store's plans by virtue of not being employees at all.