Eligibility - What You Should Know

Eligibility is the set of rules, usually a combination of age and service with your company, that determines which employees can participate in the plan when they can enroll, and who is excluded.

We highly recommend keeping your eligibility rules simple and reporting all employees on payroll files each and every pay period.

You can view your employee eligibility through your Vestwell employer portal, under the 'Employees' tab in the 'Status' column. 

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Exclusions

Generally, retirement benefits must be offered to all common-law employees who meet the plan's eligibility requirements. There is no exclusion for employees working less than 30 hours per week or 130 hours per month. Employe's age and service requirements become important if you have part-time employees to whom you prefer not to offer retirement plan benefits.

Vestwell excludes three classifications by default. Unless directed otherwise by your payroll files submitted by you or your payroll company, the following will not be included:

  • Union employees: Included in a unit of employees covered by a collective bargaining agreement, if retirement benefits were the subject of good faith bargaining, and if the collectible bargaining agreement does not provide for participation in this Plan. 
  • Nonresident Alien: A non-citizen who received no earned income. This exclusion means that any nonresident non-citizen, or resident non-citizen, may be eligible for the plan if receiving US-based income. Vestwell requires an SSN and US address to process retirement plan distributions, which may impact your ability to offer the plan to certain employees or create the need to explore different options.
  • Leased employees: a non-employee who, pursuant to an agreement between the Employer and any other person ("leasing organization"), has performed services for the Employer. If you typically use the service of a leasing organization for long-term contracts, we recommend that you obtain advice from counsel regarding the applicability and impact of any leasing terms on your plan.

Eligibility For Plan Participation

You may set certain conditions employees must satisfy in order to participate in the plan, upon meeting those conditions, the employee enters the plan on specified entry dates. The maximum statutory requirements you may apply are:

Age Requirements

This is the minimum age for an employee to become eligible to join the plan. The maximum selectable option is (by statute) age 21; employers tend to choose between age 18 and 21, though it is not mandatory to have any age requirement

Hours Equivalency

Vestwell selects from the following options if you have elected hours-based eligibility requirements:

  • 45 Hours of Service for each week or partial week- if your primary pay period is weekly or biweekly
  • 95 Hours of Service for each semi-monthly payroll period or partial semi-monthly payroll period
  • 190 Hours of Service for each month or a partial month for monthly pay cycles

When working with Vestwell in a bundled capacity, the same eligibility rules will apply to all employee classifications as well as all contribution types, meaning employees eligible to contribute to the 401(k) will also be eligible for matching and profit-sharing contributions if applicable.

Entry Dates

Once employees meet the age and service requirements selected, they must wait until the next entry date to join the plan. Similar to age and service requirements, entry timing is highly dependent on your goals for your employees- allowing employees to join quickly can engage them in saving from their paycheck sooner while lengthening the time between entry dates is less burdensome in higher turnover environments.

Standard options include:

  • First of the month on/after meeting age and service (e.g., January 1, February 1, March 1…)
  • First of the calendar quarter on/after meeting age and service (January 1, April 1, July 1, October 1)
  • First of January and July on/after meeting age and service

To learn more, visit your Plan Adoption Agreement Guide.