PSCA recently released a new mini-survey, 401(k) and Profit Sharing Plan Eligibility Survey 2007. This survey looks at eligibility practices in 405 profit sharing and 401(k) plans. The full report is available free to PSCA members at www.psca.org.

In the fall of 2007, the Profit Sharing/ 401k Council of America collected defined contribution plan eligibility data from 405 companies. 400 of the plans permit employee contributions to an employer-sponsored defined contribution plan, and 86.2 percent of the plans offer employer matches. 64.4 percent of the responding companies make employer contributions other than matches. Respondent companies represent a diverse range of sizes, industries, and geographic locations. Data was collected for three different eligibility categories: participant deferrals, company matches, and company profit sharing.

This is the tenth year that PSCA has collected defined contribution plan eligibility data. The changes over time have been significant. In 1998, only 24 percent of plans allowed employees to begin contributing to their 401(k) plans immediately upon employment. This percentage more than doubled by 2007. 51.0 percent of all plans and 63.8 percent of plans with 1,000 or more employees now permit immediate participation in their 401(k) programs. Employees are eligible to participant within the first three months of employment at 70.5 percent of companies and at 82.5 percent of large companies. Only 17 percent have a one-year waiting period.

There are only three years of comparable eligibility surveys for matching and non-matching company contributions. However, for matching contributions there is a trend away from one-year eligibility requirements. In 2007 only 35.8 percent required one year of service or longer for matching contribution eligibility. By a slight majority (51.7 percent), most employers still require that employees work for the company one year or longer to be eligible for non-matching company contributions.

A large percent of plans (42.1 percent) have no minimum age requirement for plan participation, though a slightly smaller number (37.5 percent) have no age restriction for non-matching company contributions. The most prevalent age requirement is 21 (36.6 percent), though 20.8 percent require a person to be 18 before they can participate in the plan.

Exhibit 2: Matching Contribution Eligibility by Company Size

Short                     42.5%    38.5%     48.5%       66.3%         53.0%    51.0%
    Less Than 3 Months                      

Moderate                17.2%    13.8%     21.2%       10.2%         7.6%      13.2%
    More Than 3 Months, but Less Than 1 Year      

Long                       40.2%    47.7%     30.3%        23.5%        39.4%     35.8%
    1 Year or Longer                                           

                                                                                       Company Size (Number of Employees)

Eligibility Category   <100       100-499       500-999     1,000-9,999       >9,999         All Plans

Total                       99.9%   100.0%     100.1%     100.0%        100.0%      100.0%

Minimum Age Requirements
Minimum age requirements do not vary much by contribution type. 57.9 percent of plans specify a minimum age requirement for participant deferrals. The most common ages specified are age 21 (36.6 percent of plans), and age 18 (20.8 percent of plans).

Further Information
The adoption of shorter eligibility practices has been an ongoing trend that PSCA has reported since we first began conducting eligibility surveys in 1998. For more information on trends, as well as for more elaborate eligibility reporting, please visit the complete report at www.psca.org.