The below chart shows the 401k plan customization options allowed by 401k Easy Docs and typically recommended for a first-time plan.
Understanding the potential effect each option has on a 401k plan's popularity and thus its worth cannot be universally mapped out, as such vary with company size, worker preferences and other company-specific parameters. We are happy to discuss potential effects with you. We recommend that interested parties submit the appropriate Order Form and use the "Unsure. Please contact..." buttons to indicate about which items you need more information. As explained in the No Money Due at This Time: The Order Fulfillment Process section, submitting an Order Form in no way obligates your company to placing an order.
| 401K PLAN PARAMETERS | IRS ALLOWS... | RECOMMENDATION FOR MOST Small 401k PLANS* |
|---|---|---|
| PARTICIPANT ELIGIBILITY: Age Requirement |
Anything from none to 21 years of age | 21 years of age (we recommend that participation begin on the first day of the first month after the person meets the plan's eligibility requirements) |
| PARTICIPANT ELIGIBILITY: Length of Service Requirement |
Anything from none to 1 year of service | 3 months of age (we recommend that participation begin on the first day of the first month after the person meets the plan's eligibility requirements) |
| PARTICIPANT ELIGIBILITY: Union Membership |
OK to exclude employees whose service is governed by a collective bargaining agreement | Exclude union employees |
| EMPLOYER CONTRIBUTIONS (Matching, Profit-Sharing and/or Qualified Nonelective) |
Cannot make total contributions to any employee account over the annually-adjusted total allowed contribution amount. For more information, see "401k Contribution Guidelines and Limitations" within our 401k Basics page. | Allowed in all forms but not mandatory. Contact us to discuss your particular situation. |
| VESTING OF EMPLOYER CONTRIBUTIONS | Full, immediate vesting OR anything less stringent than either: (a) No vesting earned until the person has participated in the plan for five years, then 100% vesting after five years, or (b) Seven Year Formula: 0% vested for the first 2 years of participation 20% vested after 3 years 40% vested after 4 years 60% vested after 5 years 80% vested after 6 years and 100% vested after 7 years of participating in the plan. |
Full, immediate vesting OR Five Year Formula: 20% vested after 1 year of participating in the plan 40% vested after 2 years 60% vested after 3 years 80% vested after 4 years 100% vested after 5 years of participating in the plan. |
| INVESTMENT OPTIONS | Almost anything goes (stocks, bonds, annuities, company stock, GIC insurance contracts, and more), but selection offered MUST fulfill plan sponsor's "fiduciary responsibility" with respect to offering ample variety, among other things, of 401k investment opportunities | Both individual no-load mutual fund families (including no-load institutional mutual funds) and self-directed brokerage accounts are allowable; see our Investments pages for information that will help you determine which (perhaps both) best suit your 401k needs. |
| 401K LOANS | Inclusion or exclusion is allowed. | Allowed but not mandatory. Not recommended for a plan's first year of operation. |
| AUTOMATIC (aka, Passive) ENROLLMENT | Allowed by the IRS, but the legal system has not yet had occasion to rule on possible infringements upon employee rights. | Allowed but not mandatory. No recommendation; consult your legal advisor. |
*Understanding the potential effect each option has on a 401k plan's popularity and thus its worth cannot be universally mapped out, as such vary with company size, worker preferences and other company-specific parameters. We are happy to discuss potential effects with you and recommend that interested parties submit the appropriate order form and use the "Unsure. Please contact..." buttons to indicate about which items you need more information. As explained within "No Money Due at This Time: The Order Fulfillment Process" (see above), submitting an order form in no way obligates your company to placing an order.