Survey Says: How Soon Can Participants Join YOUR Plan?

January 16, 2003 (PLANSPONSOR.com) - It might be a coincidence, but with more than half of the programs honored in PLAN SPONSOR's Top 100 DC Plans providing for immediate participation, we asked readers how soon THEIR employees could begin participating.

Nearly 40% of this week’s respondents offer “immediate” eligibility or, as some put it, the next best thing (first of the month after their hire date).   Most who were offering this were quite positive about the choice, such as the reader who said, “We just came into the 21st century by allowing our employees to participate immediately. In my estimation, this is a definite plus for recruiting good people for our team.”  

There was a downside to immediate participation, according to some.   One reader noted, “…two years ago we moved to immediate eligibility.   We found the waiting period did impact participation but also it was more of an administrative headache and not worth the effort.   Now all paperwork is processed in orientation.   But anyone who does not sign up gets various emails throughout the year, reminding them of the benefits of participation and inviting them to join the plan.”

The next most common response was the nearly 18% that said participation could begin after 3 months/90 days (again, frequently it was the first of the month AFTER 90 days).   Close behind were those who had workers wait a year, some 16.5%, while roughly 14% cited a 6 month waiting period.   One in the latter category noted, “After 6 months.   This delay is mainly because of a high turnover rate among low-skilled employees.   Generally, folks who make it through the first 6 months will be with us for years.   Targeting long-term employees cuts-back on the plan’s administrative burden.”  As for the former, many who said the wait was 12 months echoed the sentiments of the reader who said, “After 12 months.   A bit long if you ask me!”   

The remaining 12% fell into the ever-popular “none of the above” category, generally due to the fact that while workers could PARTICIPATE immediately, they still had to wait some period of time before receiving a company match (generally a year).   Some might quibble that immediate participation is immediate participation – but the readers who made that distinction saw fit to do so – and I feel that they have a point.

As one reader noted, “We answer (a).   However, there is a slight catch.   Employees will not be able to receive Company Matching contributions until after they have completed one year of service.   This is really an interesting marketing move.   A potential new employee would ask, “When can I join the 401(k) plan?”   The answer, “Right away – Immediately” which leaves him/her with a warm fuzzy feeling.   If the potential employee does not specifically ask when the match will start, there is a gap where even veterans can be misled.”

                                           

But this week’s Editor’s Choice said, “My answer is (e) none of the above.   We have a 30 day waiting period and then you can enter on the first day of the month following the 30 day period.   That way we don’t have to enroll employees who wander in the company by mistake (either ours or theirs…)”

Thanks to everyone who participated in our survey!

We allow new hires to participate immediately for salary deferral purposes, but they must wait 6 months before employer contributions begin.


e) None of the above.   We have two entry dates each year for new hires - January 1 and July 1.   However, if you're hired on the exact date, you can start in the plan immediately.   I'm all for changing it to immediate eligibility, but the rest of the committee disagrees.   Go figure!


Our former plan had a one year waiting period for participation, but our employees were also covered by a DB plan.   The one-year wait was convenient for administration purposes only.   Our plan was changed in 1998 to allow immediate participation (first of month following date of hire), but our DB plan has been frozen - no new entrants, no additional benefit service.  

For new employees, the immediate participation is great if they are wise enough to start investing, even in this lousy market.


After 12 months AND an open enrollment period.


Immediate -- after all, they ARE employees


We answer (a).   However, there is a slight catch.   Employees will not be able to receive Company Matching contributions until after they have completed one year of service.                       

                                                                                                   

This is really an interesting marketing move.   A potential new employee would ask, "When can I join the 401(k) plan?"   The answer, "Right away - Immediately" which leaves him/her with a warm fuzzy feeling.   If the potential employee does not specifically ask when the match will start, there is a gap where even veterans can be misled.                                            


We have four 401(k) plans.   Three permit immediate participation, all three are safe harbor (3% NEC) for non-union employees.   The fourth plan is for a union group - they have quarterly entry after 30 days service.   Go figure - you would think the union would have asked for immediate entry when they bargained for the plan.  


We have four 401(k) plans.   Three permit immediate participation, all three are safe harbor (3% NEC) for non-union employees.   The fourth plan is for a union group - they have quarterly entry after 30 days service.   Go figure - you would think the union would have asked for immediate entry when they bargained for the plan.  


It actually is the first of the month following the date of hire.


Survey answer is next open enrollment (January 1 or July 1) after twelve months of service (D).


e) On Jan. 1 or July 1, after 6 months are completed.   Therefore, the earliest is 6 months, the longest wait can be 1 day less than a year.


Immediate eligibility with immediate vesting in er funds.   However, the match is discretionary and the market has not been kind to that portion of retirement funding.


Our company waiting period is (d). We have lots of turn over and administrative costs would increase if anything less.


Our 401k plan has a 12-month waiting period before an employee eligible to participate.


We allow workers to contribute to the 401k immediately.   Our company match, however, doesn't start for 6 months.


Our associates can participate (contribute to the 401(k)) in our DC plan immediately.   However, they are not eligible for the company match component until after a year of service.   Profit sharing eligibility requires two years service.


Our Plan has several different money sources, with different eligibility features.

401(k):   (b) - actually, 90 days, not 3 months. - We are a safe harbor plan and want to make sure that our participants are here to stay before we start making those      contributions!   I would be interested in seeing a survey on how many plans are making safe harbor contributions.

Profit Sharing:   (d) one year


Salaried employees - immediately

Hourly employees - 3 months


Employees can immediately participate in our DC plan, employer match doesn't start until 1 year later.


Immediate. I was a part of that change.


Employees can participate after one year (12 months) of employment and must have worked 1,000 hours!


We just came into the 21st century by allowing our employees to participate immediately. They are eligible for the match after their first year.   In my estimation, this is a definite plus for recruiting good people for our team.


After 12 months.   A bit long if you ask me!


My company allows 401k participation on the first of the month following 2 full months of employment.   Employees are automatically enrolled at 3%.


If a new hire starts before the 15th of the month he or she is eligible the first of the following month, if after the 15th they must wait until the first of the second month.


Ours is a very "early days" traditional 12 months and hit the quarterly enrollment date.   We're a solid (d), same grade for our plan as a whole.

Our Company didn't even get a 401(k) plan until 5 years ago.   The catalyst behind that was the number of hiring managers complaining that they couldn't get many of the younger professionals to accept a job offer because we didn't offer one.   So begrudgingly a very basic plan was put in place.   It takes a year to get into it and there is no matching.    Ownership has said they won't consider matching until we start to fail ADP testing and it begins to cost officers deposits.   In their eyes matching is an unnecessary expense unless the top handful is offended.   There is of course no guarantee failed ADP will be the start of matching either.   Personally I'm hoping pension reform will eliminate such testing anyway.  

I've asked for matching many times and will continue to do so because I think financial freedom and independence is the biggest driver for creativity, motivation and risk taking.   When the average person feels their future is at risk they usually aren't willing to speak up about anything unless it's happy hour and then it's nothing but mindless ill conceived shall we say "suggestions."   The other thing I've tried for many times is enrollment upon hire or at least upon completion of our three month probationary period.   My thought is more will enroll then because they are still excited about the new job, often making more than their last job which is way the made the switch and maybe feeling a little richer with the new check so may be willing to try that saving thing they hear about.   Once a years past they're spending all of their check and have learned that cost of living is about all they'll see here in a raise.   Are their any studies out there that show early enrollment will increase participation?   I've looked a couple of times and not found one that makes that link.

I've considered suggesting negative enrollment but have heard strong arguments that it will increase the number of participants in your plan but most will not increase deferral above the original enrollment percentage so overall deposits actually may decrease over time.   I've been told without a match a negative enrollment will be viewed very negatively by employees.   Personally I don't think I can get that approved either.   Our enrollment is at about 60% and going down for new eligible.   We do not aggressively seek enrollment.   When an employee becomes eligible they get a packet, no presentation or follow-up and that's the last they'll hear about 401(k) until they see a Schwab commercial on television.    This spring I hope to give HR & Benefits some customized education material I've been working on to send to all participants and different material to non participants once a quarter with paychecks.   Anything to keep the word out there.

Anyway my question is does earlier enrollment help boost participation?   Other than trying to step up education do you know of ways to get participation higher?   I'm still convinced once most people see their accounts start to climb they will become a little more motivated and happier about their contribution.   When they see their accounts grow they can start to relate their account value to value they've given.   Other than those few who can't stand to see a balance and start the constant revolving loan process.

Our 401(k) policy allows employees to participate on the first of the month after their hire date.


Our participation is timed to the first of the month following date of employment.

We have automatic enrollment and new hires must opt out of the program on date of hire - otherwise they are enrolled the first of the month following date of employment.   This method was chosen for administrative simplicity and consistency.


Ours is "(a) immediate" along with immediate vesting of employer match.


Most of the plans we consult with in Silicon Valley allow entry into the plan at the beginning of the month following date of hire.


Employees are eligible on the 1st of the month following one calendar month of service.


In the past, our waiting period was one year.   Effective, January 1 of this year, we lowered the requirement to 6 months.  


Our waiting period is 12 months due to the extremely high number of new employees that realize they really don't want to work for a living.    By the way, our participation % is running at 95% and the average NHCE contribution rate is just over 5% even though the company match tops out at an employee contribution of 3%.


After 1000 Hours of Service in first 12 months, they can enter on the next entry date, either Jan. 1 or July 1.


New employees who are a .8fte or greater may participate after 1 year of service.   They automatically go in the first of the next month.   All 100% paid by employer.


Our participation date is (of course) e - none of the above.   A new participant must complete 450 hours worked.   As you can imagine, this is an extremely difficult requirement to administer when employees work variable full-time and part-time schedules.   I am hoping that we can change it to a specific date, like the first of the month following 30 days of employment.


We allow employees to join immediately - making them wait really makes no sense, it's just another piece of paperwork to have to keep up on....


Workers can begin participating the first of the month following the month of hire.


In reply to the survey: (b) after 3 months

The downside to this is that if people don't sign up right away it is much harder to change their minds later even after multiple communications.


In response to your survey on immediate participation, please note that all employees can participate on the open enrollment dates of January 1, April 1, July 1, and October 1, which fit into your category of every three months.   If an employee is hired on any of those dates they can participate immediately.


Our employees can join the plan after 90 days.   They do not receive any match or company contributions until they have been here one year.


Last year, we decided to allow immediate participation (next entry date - January 1 or July 1 for the plan) in the 401(k), bowing to popular demand.   However, because our plan is now top-heavy, this strategy will end up costing us in additional profit sharing contributions - to those who signed up for 401(k) but who wouldn't normally be eligible for profit sharing until they'd been here for a year - turning our "nice guy" strategy into a budget buster...We may be rethinking this one.


We just changed our eligibility to requirement to 90 days, which I suppose, is closest to "(b) after 3 months".   It used to be one year of service.


Our 401 (k) plan allows full-time employees to participate on the first day of the month following the month in which you complete one full calendar month of service by making employee contributions.   The employer match begins after 12 full calendar months of service.   So, if you start May 25th, you can contribute July 1st and employer match begins July 1 year 2.


Immediate entry into the 401(k) portion of the plan; however, you must complete a year of service and be employed on the last day of the plan year to receiving a matching contribution.   Personally I think this is a poor formula and wish that we could get it changed!


New participants are eligible after 3 months of service.   The entry dates are the 1st of the calendar quarters, so depending on when someone starts it can be anywhere from 3 to 6 months before he or she is actually able to participate in the plan.


Once our company plan was no longer "top heavy," we made eligibility immediate for the salary deferral portion of the plan and left eligibility at 2 years with 100% vesting for the employer contribution portion of the plan.   As a TPA, we have seen many of our clients accelerate eligibility in the last 2 years.   Many of my "top heavy" clients would jump on that bandwagon immediately if the top heavy rules are repealed.     I was very disappointed that EGTRRA did not include a complete repeal of those rules. I'm tired of explaining the IRS "apples and oranges" rule to small top heavy plans.   It's very hard to explain to a plan sponsor that they would need to make a contribution of at least 3% for those who are only eligible for the salary deferral portion of the plan (and not eligible for the employer portion of the plan) just because the plan is top heavy. The key employees in a top heavy plan have apples (employee salary deferrals of 3% or more), so you have to give oranges (employer contributions of at least 3%) to non-key employees.


The answer on our plan is (a) immediate but with some restrictions/conditions.   The employee must be 21 and there are no matching contributions until the employee has been employed for 1 year.


E. None of the above.  Our participants can join after 1 month of service and the appropriate quarterly entry date.


New workers under our Non-Bargaining plan can participate in our defined contribution plan (b) after 3 months.   New workers under our Bargaining unit plans can participate (d) after 12 months.   It really doesn't matter under the Bargaining plans because the rate of participation is so low anyway (20%)


You are eligible immediately for our 401k, but you can only enroll at the calendar quarters.    So, it varies from one day to three months.


Immediate - and we recently also changed to immediate vesting!


While we have only had a 401(k) plan for 8 years, we have gradually reduced the waiting period to where two years ago we moved to immediate eligibility.   We found the waiting period did impact participation but also it was more of an administrative headache and not worth effort.   Now all paperwork is processed in orientation.   But anyone who does not sign up gets various emails throughout the year, reminding them of the benefits of participation and inviting them to join the plan.


My answer is (e) none of the above.   We have a 30 day waiting period and then you can enter on the first day of the month following the 30 day period.   That way we don't have to enroll employees who wander in the company by mistake (either ours or theirs...)


Our plan enrollment eligibility is the first day of the calendar qtr following 90 days of employment.  


Newly hired employees can begin contributions after one month, but the company won't match until after one year.


How soon can new workers participate in YOUR defined contribution plan?  (d) After 12 months . . . too long!


After 6 months.   This delay is mainly because of a high turnover rate among low-skilled employees.   Generally, folks who make it through the first 6 months will be with us for years.   Targeting long-term employees cuts-back on the plan's administrative burden.


We have immediate eligibility (actually, first of month following date of hire).   However, our company match does not kick in until a participants has been with the firm for a full year.   This was the first change I made for our plan when I took the job 4 years ago and it has proven effective in our recruiting process.


Ours is b) 3 months, however since we have only two initial entry dates per year, the wait could be anywhere from 3 months to 9 months, depending on date of hire.   With a 60+% annual turnover rate in the field, it was a simple decision just to minimize the administrative cost of enrolling people who terminated before their first deferral ever came out.


To participate in our ESOP, you have to be here January 1 and December 31, so you can participate as early as 1 day or as late as 365 days.


Employees are able to participate after 3 months of service and are 100% from the start in our 401(k).   The downside is that the company match is based on 1,000 of service and does not go in until the end of the year. It's a nice Christmas present though!


Immediately with their actual first contribution being deducted the first of the next quarter after their hire date, unless of course, that their hire date is the first of the quarter.   This along with auto-enrollment at 3% and a default investment direction helps lull the participant into non-action.


((a) Immediate   - with an explanation.   We're a consortium of not-for-profit educational corporations with two "levels" of retirement plans.

Level 1 includes a defined benefit plan for staff and a 403(b) defined contribution plan for faculty and administration.   Both plans are 100% employer-funded.   There can be up to a 2-year wait for participation in Level 1 plans.

Level 2 is a 100% employee-funded voluntary 403(b) plan where eligibility is immediate.   There is no employer match in the level 2 plan.


We are able to participate the first of the month after our hire date.


Our employees may elect 401(k) deferrals immediately after being hired but do not qualify for company matching contributions until they complete a year of service.   We have about 600 employees.


We changed to "immediate" within the past 6 months, small but increasing trend in prompt enrollments.


My company allows its employees to participate immediately in our defined contribution plan, as long as we are in an enrollment period (i.e., the first 15 days of each new calendar quarter).

And why not!


Exempt workers can put 401(k) deferral contribution immediately and non exempt workers can put 401(k) deferral contribution after 12 months.


Our eligibility requirement is age 21 and first of the month after DOH.


Participation (without Company match)- Immediate.   Participation (with Company match)- One Year.  

Also FYI, 750 hours is considered a year of service, but can't get more than one year of service per calendar year.


Employees can participate immediately. However, it does not appear to have increased our participation percentage.


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