401K Plan Eligibility ?

[mtngirl]

Looking for what others have. I am a partner at a small law firm.  We have a 401K plan.  Employees are not eligible until they have worked at least a year, and then they can enroll in the next January/July.  So, depending on when someone starts they have to wait a year and a half to contribute to a 401k.  We have a new lateral hire who wanted to roll over his old employer's 401k and can't until he is eligible, and it got me thinking that we should maybe shorten our eligibility period.  It seems like a long time to expect new hires to wait.  What does your company do?

[AdaraMarie]

Ours you are eligible right away. It used to be that you weren't fully vested in the company match portion until 5 years, but I think they changed that when we were bought a few years ago.

ETA: I work for a large company, but this has been the case the entire time I've worked here (17 years). I would find a year wait very offputting. What is the purpose of the waiting period?

[steamboat185]

I’ve never worked someplace that made you wait more than 30 days- with most opening the plan on day 1. I can’t imagine waiting a year to save my own money.

[mtngirl]

I don't know the purpose of the long waiting period! other than to save money for the match and/or admin. for if people weren't going to stick around.  But, we have low turnover, and I think the expense is outweighed by attracting talent who expect the benefit sooner. I was thinking of doing a six month eligibility, but now I'm thinking shorter after these responses, going to see what we can do with our plan administrator.  

[jlt19]

DH works for a small company and they have the same as you. I thought it was absolute insanity he had to wait so long but he came from an hourly labor job so anything was better than nothing.

I’ve had two jobs with 401k options and both were immediate and the match was vested immediately as well.

In this job market, there is no way you’ll get too talent for less than that. Same with any benefit really. I would expect everything is available on day one (save maybe prorated PTO or bonuses for the first year).

[Susie]

I'm also a partner in a small firm, but I've been there so long that IDK! Back when I started, we offered a SIMPLE IRA, and we have since switched to offering a 401k. I think there is a waiting period, but it's more like 6 months. Definitely not 18 months.

[plutosmoon]

My employer allows you to contribute your own money on day 1, the match begins after 1 year. The one year waiting period for the match is waived if you are coming from another higher ed institution and can verify your enrollment in their plan. My wait period was waived and I was also fully vested in my employer contributions from day 1. 12-18 months is a really long wait.

[sadlebred]

Where I work you can contribute and get the match on Day 1. I think it's 2 years until the match is vested.

Edit: I think it's now 2 years til vested. It used to be 5.

[ellipses84]

That’s a ridiculously long wait. All my employers have been: eligible immediately, within 30 days or within 90 days. 5 years has been typical for 100% vested. I’m sure your accounting could figure out a way to let new employees contribute, even if they don’t start receiving a match for 3-6 months…or a year+ if they really want to keep it that but it’s probably not competitive for your industry.

[1yeartogo]

I think any waiting period should be tied to probation period so like if there is a 90 day then you get it then and don’t wait any longer.

[marie]

We can contribute right away, but the company match does not kick in until one year later.

That is a really long wait and I am sure is a contributing factor if choosing between two jobs.

[brooke77]

I have always been eligible to contribute within the first 30 days. One firm did not have any matching at my level. Two matched immediately and fully vested at 5 years. I worked at one very small firm that did not offer any benefits.

I think since you offer a 401K, you should look into seeing how you can make it so new employees can contribute much sooner.

[Deleted]

I think having a waiting period before the employer match is implemented is a common, but not desirable by any stretch. At the very least, you should allow your employees to contribute their own money on day 1. My current company, you are eligible immediately, the 3% match is immediate as is the annual 6% base contribution and you are fully vested right away. My new company you are eligible immediately, but the match doesn't start until year 2.

[midwestmama]

Typically I've seen maybe a one month waiting period for an employee to begin contributing to a 401k. Some companies may delay the employer match for a year, although it's more typical that the employer match would be deposited either biweekly or quarterly, but the vesting schedule is set in a way where the match/employer contributions don't vest for one or more years. (My current company has employer vesting of 20% after 2 years (then 40%, 60%, 100%, each year after) and DH's company used to vest 100% after 3 years, now they vest 20% each year, years 1-5).

If you can, you may want to suggest that this practice is reviewed/revised, as it may impact employee attraction.

[wildrice]

I strongly believe you should be able to contribute your own money from day 1. Most people do not save enough money for retirement, and your employer essentially preventing you from being able to do so is really crappy. If you have to wait a year to start giving a match, fine, but I honestly think it should be right away too.

Every job I have worked up until my current job started contributing to retirement on day 1. Some were immediately vested (higher ed) and one had a graduated 5 year vesting period, where after 1 year you were 20% vested and added 20% each year until the 5 year mark.

My current employer allows you to start contributing right away (or really after 30 or so days because it takes that long to get you set up to do so) and then starts an automatic contribution from the company after 1 year. I am not thrilled about the latter part but they pay well so I just put my own money in to replace that loss for the next year. This would have been a bigger sticking point for me when I was making less money and couldn't have afforded to do that, though.

[Poppy]

I think the waiting period is really obnoxious and would be a factor if I were considering a job. But FWIW, I'm in an industry with generous benefits and high pay (and therefore high tax rates).

I did work for a company with a very generous match that had a vesting period. I think that's fair, although I imagine that it complicates the accounting.

[moonpie]

I’ve worked for 4 corporations (2 really big, 1 small, and 1 mid-sized) and all allowed contributions immediately.

2 had a vesting period for the employer match, and the other 2 did not.

I would probably not accept a job at this point in my career that made me wait 18 months to contribute.

[dragon's breath]

My son works at Walmart. He was eligible to contribute almost right away (it might have been immediate or three months, can't remember for sure). However, he was not eligible for the 6% match until one year of service.

When I was hired with the feds, it was long enough ago that I was also required to wait about a year, or a year and a half. That pretty much sucked. Now you are eligible to contribute immediately.

[k3am]

I've never had to wait to invest in a 401k or for the match. I'd probably steer clear of a company that wouldn't even allow me to invest my own money in a 401k because I don't consider that to be employee friendly. I'd wonder where else they'd be willing to treat me like that.

[sometimesrunner]

Employees can contribute on day 1. This is to both attract employees and to make it easier on me. It's nice to hand people a 401k signup form with their other employment docs rather than keeping track of when they're eligible.

ETA: Employer match is vested immediately, but any profit sharing contributions are vested over a period of 5 years. 

[mokes]

I work for myself now but my previous company was January or July following 6 months. I started in October so I couldn't start until the following July. I thought that was a lot. Timing-wise it worked out OK for me since I was able to contribute to my former employer's plan until October and then make up the next year's contributions July-December.

So 1 year+ definitely sounds way too long. I totally get not wanting an administrative burden if people are turning over often, but seems like whatever eligibility period there is for other benefits should apply.

[jlt19]

I am really shocked that so many make you wait for the vested match. My first job for 15 years was an employer paid pension, so that I understood had a vesting period. But I’ve since worked for 2 publicly traded companies and both matches were immediately vested. My current employer’s match is 166%, so basically 10% on your 6%. They also contribute an amount to our HSA and dependent FSA and both were immediate.

Guess I’m starting to realize why it took around 50 applications over 2 years to get hired on….(most we’re during Covid while I was unemployed and desperate and they were on a hiring slowdown).

[mae0111]

At my old company (worked there for 15 years) you could contribute right away, but you vested after a year. They also had a pension when I started, and you were vested in the pension on day 1.

When they got rid of the pension, they did away with the vesting schedule and started vesting on day 1. They also improved the match from 50% on 6% to 100% on 6%.

[dr.girlfriend]

It seems like you've gotten plenty of responses, but I remember my sister was hired for a new job with an original start date on July 1st, but they were having a company-wide event off-site that day so they suggested she start July 2nd, saying something along the lines of "It would be a little weird if your first day was at x event..." She agreed, and then once she started she found out that she had to wait a whole year for her 401k benefit (can't remember if that was contributions or matching) because it could only be started on 07/01, whereas if she had come to the fun company event she would have been eligible that day. It's like 15 years later and was notable enough that even I'm still mad about it and it wasn't even me!

[WinterWine]

My husband and I own a small business that I administer our 401k plan for. The business is in manufacturing, which often doesn’t have these types of benefits so helps us differentiate. I set it up to encourage as high of participation as possible. All employees have a 90 day probationary period (if ppl aren’t a fit they never hit that, so reduces benefit admin time). Beyond that, you just have to be 16yo (part or full- time are both eligible). We contribute 3% as a safe harbor from day 1 (no vesting wait is allowed with those).

It’s a hot job market, I’d rework the plan to be how you’d want it to be if you were a new hire. We do enter ppl only on the 1st of the month following their 90 days, which reduces admin time.

[mich1]

My last employer allowed 403b contributions, but they did not add their match until you had been there 1 year. Their match was 10% of your yearly income.

[SusanBAnthony]

Immediately.

Waiting that long would be a HUGE turnoff for me. Like I might not take the job. That's 30k of tax advantages money I miss, not counting employer contributions.

[definitelyO]

Eligibility = 1st of the month following or coinciding with 30 days of employment. Fully vested immediately (up to 6% company match). Auto enrollment at 3% with 1% escalation annually to 6% (can opt out at any time)

example:
if you're hired February 1 - eligible April 1.
hired March 1 - eligible April 1.

global manufacturing company - HQ in the US. ~2500 US employees

[chpmnk1015]

Its a year where I am.

My old company 1 day 1