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Benefits December 24, 2008
Companies Move Toward Faster Eligibility for Retirement Plans
December 24, 2008 (PLANSPONSOR.com) - Profit
Sharing/401k Council of America (PSCA) research shows a
dramatic change over time to employee eligibility
requirements for company sponsored retirement
plans.
Reported by Rebecca Moore
PSCA noted that in 1998, when it first began collecting defined contribution plan eligibility data, only 24% of employers allowed employees to begin contributing to their 401(k) plans immediately upon employment. This percentage has more than doubled to 55.1% of all employers in the fall of 2008.
The percentage is even greater among employers with 1,000 or more employees (70.5%).
Employees are eligible to participate within the first three months of employment at 72.7% of companies and at 87.2% of large companies (1,000 or more employees), PSCA said. Only 14.7% of all plans have a one-year or longer service requirement prior to eligibility.
For matching company contributions, 38% of all employers allow immediate eligibility for employees, while 8.7% have a three-month service requirement, and 9.9% have a six-month service requirement for eligibility. A little more than 29% of employers have a one-year service requirement for employees to be eligible for company matching contributions.
As for age requirements, 42.8% of companies have no minimum age mandate for eligibility for participant deferrals. Just over 40% have no minimum age requirement for employees to be eligible for matching contributions.
PSCA's research also indicated a trend away from longer service requirements for employees to be eligible for non-matching company contributions to retirement plans; however, in 2008, 49.3% of companies still required one year or more of service.
Nearly 22% of all companies allowed for employees to be immediately eligible for company match upon employment, but among the largest employers (1,000 or more employees) almost 65% provide for immediate eligibility.
As for age requirements, 42.7% of companies had no minimum age requirement for eligibility for non-matching employer contributions, while 21.9% had a minimum age requirement of 18, and 34.7% required employees to be 21 to be eligible.
PSCA collected defined contribution plan eligibility data from 531 companies, 97.7% of which permit employee contributions to an employer-sponsored defined contribution plan, 78.5% offer employer matches, and 54.9% make non-matching company contributions.
The PSCA report is here .