We've got testing options ... otherwise, we'd exclude you

Anyone who prepares nondiscrimination testing for defined contribution plans is used to dealing with the statutory eligibility and entry requirements of age 21 and one year of service (12 months with 1,000 hours of service) with entry dates set semi-annually. In fact, if a new client comes to you looking to set up a 401(k) plan, the author would be willing to bet that your standard suggestion is to implement those statutory eligibility requirements. And, most often, the plan sponsor will accept that suggestion. However, some prefer to allow their employees to join earlier, perhaps to coincide with eligibility for company health benefits or because they expect low turnover. At one time, especially in 401(k) plans in which the owners' elective deferral contributions are limited based on the rate of staff deferrals, you might have urged them to reconsider. There are certainly other factors to consider when establishing eligibility requirements that are less strict than the statutory maximums.