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The company that wants to change my employment status from self-employed freelance contractor (contributing to my Keogh) to part-time employee, told me today that their 401K program has a min. no. of hours = 1000/yr. to receive annual returns. If you don't have 1000 hrs/hr working for them, at end of year you get YOUR contribtions to 401K back, without interest. they don't contribute to it at all, anyway.

Is this legal?

Thanks, meowiz

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Meowiz asks:

The company that wants to change my employment status from self-employed freelance contractor (contributing to my Keogh) to part-time employee, told me today that their 401K program has a min. no. of hours = 1000/yr. to receive annual returns. If you don't have 1000 hrs/hr working for them, at end of year you get YOUR contribtions to 401K back, without interest. they don't contribute to it at all, anyway.

Is this legal?


Yes, it is. The 401k plan has defined eligibility for participation as a minimum of 1000 hours of work in the year, which is perfectly legal. In fact as long as you are not a 1099 employee or a W-2 employee in an excluded class of employees, they couldn't by law prevent your participation after you had worked that number of hours in the year.

Regards….Pixy
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Pixy said, The 401k plan has defined eligibility for participation as a
minimum of 1000 hours of work in the year, which is perfectly legal


Thanks, Pixy for your response.....another 3 questions..1).if I am classified by this co. as a 'part-time' employee, and they are taking out taxes and paying half of FICA, can I choose not to participate in their 401K and instead contribute to my own Keogh? I ask this because I would prefer to keep the independence of not HAVING to work 1000 hours for only them. 2) Also, if we were to move before I work 1000 hours, wouldn't I lose all the annual returns? 3) And do they legally have to return all my contributions if I don't work 1000 hours in a year? thanks meowiz
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Meowiz asks:

Thanks, Pixy for your response.....another 3 questions..1).if I am classified by this co. as a 'part-time' employee, and they are taking out taxes and paying half of FICA, can I choose not to participate in their 401K and instead contribute to my own Keogh? I ask this because I would prefer to keep the independence of not HAVING to work 1000 hours for only them.

Yes, but you'll receive wages from them as a W-2 employee. That precludes using that money as wages for the Keogh contribution because those don't count as self-employed income.

2) Also, if we were to move before I work 1000 hours, wouldn't I lose all the annual returns?

Yes, you would. All you will get back is the ineligible contribution money because you failed to work the 1000 hours necessary to become a plan participant.

3) And do they legally have to return all my contributions if I don't work 1000 hours in a year?

Yes they do or the plan will be disqualified because you are not an eligible participant unless you complete at least 1000 hours of work.

Regards….Pixy
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Pixy, thank you so much! This resource and your input are a blessing! Have a wonderful weekend. meowiz
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