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Waiting period for 401k
Old 08-01-2011, 05:35 PM   #1
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Waiting period for 401k

Why do companies have 401k plans that have 1 year waiting periods for new employees. That is way to long to wait.

That's not a very good selling point for a company looking for talent.


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Old 08-01-2011, 05:50 PM   #2
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I haven't heard about one of those recently. I know long waiting periods used to be more common but the more recent trend were improving. All based on my own anecdotal observations.

I agree with your point though!

I'm not obsessed with money, I'm obsessed with work! Er, rather the not doing it anymore part...
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Old 08-01-2011, 06:23 PM   #3
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As ChadR pointed out the trend is for shorter waits. Unfortunately it is very hard to change a plan once the rules are established so for companies with longstanding 401 plans they may be stuck.

At 54% of FIRE target
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Old 08-01-2011, 06:48 PM   #4
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A few years ago I was hired by an employer with a six month waiting period on their 401k. When we negotiated for compensation, I asked to have the waiting period waived. They did it and it wasn't really a big deal. I still wasn't eligible for the 401k match for a year, but at least I could get the tax benefits. This was a small 70 person company.

I assume the waiting period is to simplify things in the case of a bad hire.
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Old 08-01-2011, 06:58 PM   #5
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I had to wait over 6 months to contribute to the TSP when I first worked for the federal government. They no longer require that waiting period, though, AFAIK.
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Old 08-01-2011, 07:55 PM   #6
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The thought on the waiting period deals with administrative costs for high turnover positions and the "testing" that is done with ERISA plans (x # of eligible rank and file employees need to contribute).

A lot of the folks that wash out in the first few months probably won't be the type that contribute to a 401(k) and thus they can cause headaches.

As far as this issue is concerned, remember that everything has a price...including not being eligible for benefits and/or 401(k). It's like I used to say..."if you increase my income, you can keep your insurance and 401k."
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Old 08-03-2011, 07:37 PM   #7
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I always thought companies could make exceptions but I guess not.

The job offer was declined anyway.
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Old 08-04-2011, 12:45 AM   #8
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We required a year but they hired one man who wanted in sooner so they changed the plan. Then he quit after a couple of months. I can see the reason to wait so you don't have to set someone up for a dozen paydays then they quit and you have to distribute the money. We have 13 people who could be in the plan but only 7 contribute. I was maxing mine a few years but last year and this year cut back a little. Now two others are maxing the plan I think they felt bad when they saw me do it on half their income.
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Old 08-04-2011, 10:28 AM   #9
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I once worked in a small revolving door kinda place where the owner adjusted the waiting period based on his opinion of the employees most recently hired. That is a good place to be from.

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