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401k only for some employees
Old 05-16-2012, 02:49 PM   #1
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401k only for some employees

Am I allowed to offer 401ks to only managers who have worked 2+years or is that against the rules?
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Old 05-16-2012, 02:54 PM   #2
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Am I allowed to offer 401ks to only managers who have worked 2+years or is that against the rules?
I'm thinking "against the rules":

401(k) Resource Guide - Plan Participants - 401(k) Plan Overview
Quote:
Restriction on conditions of participation. Any 401(k) plan cannot require, as a condition of participation, that an employee complete more than 1 year of service.
A business owner who wants to start a retirement plan would probably be wise to lawyer up, IMO, to make sure it's done correctly and legally. This doesn't look like a DIY activity to me.
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Old 05-16-2012, 03:27 PM   #3
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Originally Posted by ziggy29
A business owner who wants to start a retirement plan would probably be wise to lawyer up, IMO, to make sure it's done correctly and legally. This doesn't look like a DIY activity to me.
Probably good advice. But I would think the 401k provider (brokerage, insurance co, etc.) would know the rules in detail, and they would provide the plan document for your employees. Your attorney might want to review it when you initially set it up, if not ongoing.
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Old 05-16-2012, 03:44 PM   #4
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You can certainly set contribution, and profit sharing rules according to years and experience (my company does that, the older you are the more you get... the longer you've been there, the more you get)... but I think if you have a 401K it has to be available for every salary employee to participate in on some level.
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Old 05-16-2012, 04:27 PM   #5
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Am I allowed to offer 401ks to only managers who have worked 2+years or is that against the rules?

I would also say that your comment of 'only managers' would fail....
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Old 05-16-2012, 07:24 PM   #6
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Am I allowed to offer 401ks to only managers who have worked 2+years or is that against the rules?
If you did, it would not be a good recruiting tool to attract new (non-management) employees.
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Old 05-17-2012, 01:53 AM   #7
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Not that I like the OP's idea, but what if you made non managers hourly and the rest exempt and say only the exempt employees can have 401K? Isn't that what places like McDonald's do?
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Old 05-17-2012, 09:33 AM   #8
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Looked at the link provided and there might be a way...

Safe harbor 401(k) plans. A safe harbor 401(k) plan is similar to a traditional 401(k) plan, but, among other things, it must provide for employer contributions that are fully vested when made. These contributions may be employer matching contributions, limited to employees who defer, or employer contributions made on behalf of all eligible employees, regardless of whether they make elective deferrals. The safe harbor 401(k) plan is not subject to the complex annual nondiscrimination tests that apply to traditional 401(k) plans.


But I would get with a plan sponser and ask... that is the only way to know for sure...
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