PSCA RELEASES ELIGIBILITY MINISURVEY

Data shows faster eligibility for profit sharing and 401(k) plans

CHICAGO (January 10, 2005) - PSCA has released its newest eligibility minisurvey, 401(k) and Profit Sharing Eligibility Survey 2004, which investigates the eligibility practices among 512 401(k) and profit sharing plans.

401(k) plans often available to workers right away
According to the findings, sixty percent of 401(k) plans permit workers to participate within three months of their hire date, up from fifty-one percent a year earlier. This is good news for workers, says David Wray, president of the Profit Sharing/401(k) Council of America. “Workers benefit from having early eligibility,” says Wray. “Not only do they have a greater opportunity to save for retirement with fewer gaps in coverage, they are able to begin contributing without feeling the pinch that sometimes affects workers who enroll later on,” he says.

Profit sharing plan eligibility also improving
Eligibility waiting periods also improved for profit sharing plans. Immediate eligibility is present in eighteen percent of profit sharing plans, up from fifteen percent of plans in 2003 and only nine percent of plans in 1998. Twenty-eight percent of profit sharing plans offer eligibility within the first three months of service, up from twenty-two percent of plans in 2003 and seventeen percent of plans in 1998.

401(k) eligibility trends and legislation, 1998 to 2004
Between 1998 and 2004, 401(k) eligibility periods of three months or less increased from thirty-two percent of plans to sixty percent of plans. Much of this increase is likely due to new employer incentives that took effect in 1999. Beginning in 1999, companies were allowed to exclude employees who were in their first year of employment from the ADP discrimination tests. Previously to 1999, granting early eligibility could easily result in difficulty passing the ADP discrimination tests, since new hires traditionally participate at lower rates than other workers.

The Profit Sharing/401(k) Council of America (PSCA), a national non-profit association of 1,200 companies and their 6 million employees, advocates increased retirement security through profit sharing, 401(k) and related defined contribution programs to federal policymakers and makes practical assistance with profit sharing and 401(k) plan design, administration, investment, compliance and communication available to its members. PSCA, established in 1947, is based on the principle that “defined contribution partnership in the workplace fits today’s reality.” PSCA's services are tailored to meet the needs of both large and small companies with members ranging in size from Fortune 100 firms to small, entrepreneurial businesses.