Survey Finds Time to 401(k) Eligibility Decreasing

More employers are allowing workers to joining their 401(k) plan earlier, a new Profit Sharing/401k Council of America` (PSCA) survey says.

PSCA said its latest eligibility survey from 2007 found the number of 401(k) plans allowing immediate eligibility more than doubled to 51% from 24% in 1998. Some 63.8% of plans with 1,000 or more employees now permit immediate 401(k) participation.

According to the PSCA, 70.5% of 401(k) plans permit workers to participate within three months of their hire date, up from 69.2% a year earlier. The survey covers 405 401(k) plans.

“Workers benefit from early eligibility,” said PSCA president David Wray, in a news release. “They have a greater opportunity to save for retirement with fewer gaps in coverage and they are able to begin contributing without feeling the pinch that sometimes affects workers who enroll later on.’

PSCA found that for matching contributions there is a trend away from one-year eligibility requirements. In 2007 only 35.8% required one year of service or longer for matching contribution eligibility. By a slight majority (51.7%), most employers still require that employees work for the company one year or longer to be eligible for non-matching company contributions.

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