Eligibility

It can be difficult to know when a newly hired employee is eligible to participate in your company’s retirement plan, but it is very important as it can help you avoid administrative hassles and mistakes that will need to be corrected at the end of your plan year. That is why we have a couple simple steps to help you determine not only when your employee is eligible, but when they may actually enter the plan.

  1. Open up your Adoption Agreement: This document can be found in your Fiduciary Audit File Binder and is also available 24/7 on your plan sponsor website under Forms/Documents/Reports, the Forms sub tab.
  2. Go to Section B: 11a. This section will tell you how long an employee must work for your company before being eligible to withhold money from their paycheck and defer it into the retirement plan.
    1. Your plan will either note a number of hours needed to be completed, or an amount of time to be completed.
  3. Go to Section B: 11b. This section will tell you whether your plan utilizes “Hours of Service” or “Elapsed Time”.
    1. Hours of Service means that once the employee has worked the hours necessary to participate, they are eligible to defer money into their retirement plan.
    2. Elapsed Time means that service is measured strictly by the time that has passed. If the employee has completed 12 months of service, the employee is credited with a year of service, regardless of the number of hours worked.

Now that you have determined whether your employee is eligible to defer (Have they worked the necessary hours? Have they been with the company the appropriate length of time?), you are ready to determine when they are able to enter the plan.

  1. Go to Section B: 13a. This section will tell you whether your employee can enter the plan immediately when they become eligible, or if they must wait until the first day of the calendar month, plan quarter, semi-annual dates, or plan year.
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