Health Insurance Daily

More Firms Shorten 401(k) Eligibility Period

To help workers get a head start on retirement savings, more firms are embracing an earlier eligibility for 401(k) enrollment. The standard three-month waiting period for eligibility is slowly fading away, according to the Profit Sharing/401(k) Council of America (PSCA).

About 69% of 401(k) plans allowed employees to make elective deferrals to their plan within three months of their hiring date in 2006, up from 65% in 2005, PSCA reports. Among large employers with 1,000 or more workers, nearly 85% offer eligibility within the first three months, up from 79% in 2005.

In addition, eligibility periods rose slightly for company contributions, with 49% of plans offering a company match within the first three months of employment in 2006.

“Shorter eligibility periods are good news for workers,” says PSCA President David Wray. “Not only do they have a greater opportunity to save for retirement with fewer gaps in coverage, [but also] they are able to begin contributing without feeling the pinch that sometimes affects workers who enroll later on. At the same time, there is no single right approach for everyone, which is demonstrated by the continuing range of response.”

Article provided by Benefit News 1-30-07.

posted by Mike @ 4:15 PM