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Hi all,
I did a quick search and didn't find the answer to my question, sorry if you've disussed before...

I am considering a new job and I would have to wait the standard one year before becoming eligible to participate in the 401. My question is: Is it a law that companies are required to make employees's wait a year before they start to contribute, or can I negotiate this with the potential employer? I hate to miss out on a year and would like to be able to contribute ASAP. I already max out my Roth as well as to my personal equity fund. Any suggestions on how to broach this?

TIA,
hershop
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My question is: Is it a law that companies are required to make employees's wait a year before they start to contribute, or can I negotiate this with the potential employer?

No, ERISA does not require this but the law does allow it as a rule of an employer's plan. You really have no room for negotiation about this with a potential employer as the same rules must be applied to everyone. The best you could hope for is convincing the employer to modify their plan to allow contributions sooner than one year, but that would be for everyone, not just you.

Shy
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You may have a chance here. Many employers are lowering the employee eligiblity limits. This is being done for employee contributions and rollover contributions, It is not uncommon for a plan that used to have a 1 year eligibility requirement to now allow for iimediate employee contributions and retain the 1 year eligibility for employer contributions. This will allow you to roll money into the plan from your previous employer and begin contributing right away. The employer matching or profit sharing contribution will begin once you've been there for a year. Ask your employer to lower the limit on at least the employee contributions.

Bill
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I am considering a new job and I would have to wait the standard one year before becoming eligible to participate in the 401.

Did you ask the potential new employer? Not all plans have a waiting period before you can participate, or it might be shorter.

can I negotiate this with the potential employer?

Alas, no. The 401k plan document rules the plan, and exceptions are basically impossible.

Your best bet would probably to be to negotiate for a few $K signing bonus to cover the taxes and then save what you would have put in your 401k in a regular ol' taxable account. Not perfect, but it'll get you most of the way to where you want to go.

Good Luck,
JDOyster
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I am considering a new job and I would have to wait the standard one year before becoming eligible to participate in the 401. My question is: Is it a law that companies are required to make employees's wait a year before they start to contribute, or can I negotiate this with the potential employer? I hate to miss out on a year and would like to be able to contribute ASAP. I already max out my Roth as well as to my personal equity fund. Any suggestions on how to broach this?

What I know for a fact: It is not a law that you have to wait a year.

What I understand based on what I know: The purpose behind the year wait is because there is a law that requires that a certain percentage of elligible employees participate in the 401K. Many companies (particularly those industries with high turn over or low base base salary) make their eligibility requirements tougher so that they can minimize the eligible group of employees. (Similarly many companies have their employees automatically signed up for the 401K at 2% into a conservative account to help beef up the numbers of participating members.)

What I believe based on experience: They will not be able to make an exception for you. My last employer closed its Denver office on August 31st. There were 4 employees who would have celebrated their 5th anniversary on Sept 3 (EG The monday after Memorial Day weekend.) Employees would be fully vested on their fifth anniversary, but because the company closed 3 days before their fifth anniversary they fought to see if they would be considered vested. The answer from the corporate lawyers was that the laws surrounding retirement benefits are so strict that if they made an exception for one they would have to do so for all. Thus, while I can't cite any legit sources, my understanding based on those four employees was that the law would prevent your new employer from budging on its written policy.
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Even if they do make you wait one year, you still may be able to front load your deferrals when you become eligible.

Assume you are hired 2/1/02, the plan makes your wait a year and then lets you enter on first of the next quarter. So on 4/1/03, you start deferring, plenty of time to defer the max.

But what about 2002? Many plans have raised the deferral percentage limit to 100%, so starting 1/1/02, defer the largest percent of yout pay you can stand.

Not a perfect solution, but if you take advantage of the dates of both plans, a one year wait can become meaningless.
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<<I am considering a new job and I would have to wait the standard one year before becoming eligible to participate in the 401.>>

1 year? It's only 3 months at my company, same as the insurance. I think it must vary from company to company, if bad comes to worst, just roll the previous into an IRA. If it's a better job with better pay and a better chance to move forward, it would be worth it in my opinion.

Kathy
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