New Partner Eligibility to 401(k)

[michael519]

A law firm with one owner currently has a 401(k) with a service eligibility requirement of the next entry date following three months of service, with the entry dates being January 1 and July 1.

The law firm will be bringing in two partners who have not been employed before by the law firm, but will become partners immediately.

The firm is interested in allowing these two partners to participate in the 401(k) plan immediately, or at least the beginning of the calendar quarter following their employment.

It would require a plan amendment and they don't want this change to apply to non partner employees. There is a chance that employees who had worked for the new partners in another law firm could also become employees in this existing law firm who would not be partners, so it opens up a can of worms.

The 401(k) plan has no match, so other than administrative fees, there would be no downside to adding employees with a more liberal entry requirement.

I would appreciate any comments on the advisability of this.

[Mike Preston]

"they don't want.....". Grow some stones and tell these guys that they adhere to qualified plan rules or they find another firm.

[Mr Bagwell]

I'd bet the new partners are going to be HCE right away because of ownership percentage?  I don't think I'd want to change the eligibility requirements to allow in the potential HCE's and not the non's.....

I'd convince them to let 2017 ride without them and start fresh on 1/1/2018.

[michael519]

Thank you gentlemen. That is ultimately what the firm decided, to wait until the next eligibility entry period.

(I apologize for the late reply. I never received a notification that my post was responded to.)