Nick Lenness Posted August 6, 2024 Posted August 6, 2024 I am writing to seek clarification regarding the enrollment restrictions for 401(a) retirement plans. My HR department at a NON-Profit has informed me that, according to IRS guidelines, I am only eligible to enroll in a 401(a) plan within the first 12 months of my employment. They have also indicated that I would not be able to enroll during any open enrollment periods thereafter due to these IRS restrictions. I also was never told about the 401(a) company guidelines of enrollment as i never had to complete orientation which had the class where it would have been the only time your notified about this. as per my instructions of my manager (it not important you can do it later) that was 2 years ago still haven't. I am seeking your assistance to verify the accuracy of this information. Could you please confirm if there is an IRS guideline that restricts 401(a) plan enrollment to the first 12 months of employment? If such a guideline exists, could you kindly provide me with the specific reference or documentation that outlines this rule?
Bill Presson Posted August 7, 2024 Posted August 7, 2024 Generally, not for profit entities refer to a retirement plan that is exclusively employer funded as a 401(a) plan. The employee funded plan is 401(k) or 403(b). With that said, an employer funded plan under 401(a) may have a one year wait for eligibility (pretty typical) but employee enrollment isn’t required. About the only thing a participant needs to do is complete a beneficiary form. But not doing that doesn’t keep one out of the plan. Whole thing seems a bit off kilter to me. acm_acm, Nick Lenness and Luke Bailey 3 William C. Presson, ERPA, QPA, QKA bill.presson@gmail.com C 205.994.4070
justanotheradmin Posted August 7, 2024 Posted August 7, 2024 Ask your employer for a copy of the Summary Plan Description. That is a document that should have the plan provisions in easier to understand language. Bill Presson, acm_acm, Luke Bailey and 1 other 4 I'm a stranger on the internet. Nothing I write is tax or legal advice. I'd like a witty saying here, but I don't have any. When in doubt, what does the plan document say?
Elizabeth G Posted August 8, 2024 Posted August 8, 2024 Have a look at Treasury Regulation 1.401(k)-1(a)(3)(v). A one-time election upon initial eligibility is not considered a cash or deferred arrangement subject to the IRC 401(k) rules. An employer that's not subject to ERISA (for instance, a governmental agency) is not obligated to deliver an SPD, but frequently a similar document is available.
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