Employers Continue Trend of Earlier DC Plan Eligibility

Employers are not only urging employees to join their retirement savings plans, but a new study indicates more companies are allowing workers to get started right away.

A news release from the Profit Sharing/401k Council of America (PSCA) said its latest eligibility survey for defined contribution plans found 57.4% of plans surveyed allow immediate 401(k) participation—more than twice the 24% from 1998. Some 15.4% had a three-month eligibility period, while 9.4% used six months.

Some 71.1% of plans with 1,000 or more workers now permit employees to get in their 401(k) right after they have been hired.

PSCA said 75.8% of companies (and 85.5% of firms with 1,000 or more workers) allow employees into the plan after 90 days. Only 11.5% of all plans have a one-year or longer service requirement prior to eligibility.

The news release said 72.3% of the plans surveyed offer employer matches, while 56.1% of companies make non-matching contributions to employee accounts.

Company Match Eligibility 

In 2009, only 28.5% of companies required a year of service or longer for matching contribution eligibility, 13% required three months, and 11.3% required six months. Forty-seven percent of employers required one-year or more to be eligible for non-matching company contributions, and 13.6% required six months or more.

PSCA said 40.7% offer immediate match eligibility in 2009, up from 35.8% four years earlier, while 21.3% use immediate eligibility for non-matching contributions in 2009, up from 17.1% four years earlier.

In terms of company size, companies with 1,000 to 9,999 workers had the highest percentage of a 90-day eligibility or less for a company match at 67.6%, while those with 10,000 or more workers were next at 61.2%.

The PSCA poll gathered eligibility data from 494 companies.

The PSCA report is available here.