Flexibility on Open Enrollment Dates for a 401(k) Plan

June 25, 2009 2:13 PM

401(k) Question: I've been offered a job where new employees are eligible to enroll in what the company calls its "401(k)/Profit Sharing plan" after a year on the job. The firm has open enrollment for the plan twice a year - Jan. 1 & July 1. They've asked me to start working in the middle of next month, which means I wouldn't be eligible to participate in the plan until Jan. 1, 2011 - just under 1.5 years away. Is it worth asking if they can grant me slightly early eligibility for the July 1, 2010 enrollment date?

If you have any experience with these sorts of plans, do you know if companies typically retain any flexibility in terms of enrollment eligibility? Or is this kind of thing usually set in stone in company policies or bylaws? Obviously, I'm only going to miss the July 1, 2010 enrollment date by a couple of weeks. While I can ask my liaison at the company about this, I'd like to know if my request has any hope at all before I consider doing so.

In case it helps, this is a small (~20 attorney) law firm, with its main offices in NY and NJ. I don't know where the firm is incorporated, or what structure (LLC, LLP, etc.) it is. This issue is by no means a dealbreaker (or anything remotely close) - I just want to understand it better before taking any action.

posted by Conrad Cornelius o'Donald o'Dell to work & money (18 comments total)

Of course it's worth asking. The answer may be "No," but that's pretty much the worst that can happen. Law firms generally have a bit of flexibility here, but whether or not they decide to use it is entirely up to them. The smaller the firm, and yours is pretty small, the better your odds, but the only way to find out is to ask.
posted by valkyryn at 2:16 PM on June 25

You definitely have hope. This seems like a completely reasonable request; they may end up saying "sorry, no," but it definitely won't, for example, seem absurd, or arrogant, or in any way strange. Go for it.
posted by Tomorrowful at 2:18 PM on June 25

When I got my job, after six months of searching, I asked for an additional week of vacation to the standard offered. "OK," they said.

Just ask.

In the meantime, you can make an IRA contribution (check IRS rules first).
posted by Midnight Skulker at 2:19 PM on June 25

I'm sure it depends on the company. When I was hired at my current job, they waived the my eligibility waiting periods for the health/dental/retirement plans because I'd freelanced for them for more than a year at that point.
posted by scody at 2:21 PM on June 25

401K plans are federally regulated. They have to be, simply because of the tax benefits.

To this end, your employer has vanishingly little or darn close to zero latitude in many decisions; the rules will be defined and enforced by the service plan provider (folks with a 401K; you really didn't think your employer did this in house, did you?).

So everyone upthread is correct in that it doesn't hurt to ask. But you could simply read the prospectus and find out for yourself what the rules are.

Bottom line: if the plan says you're eligible in six months, you're eligible in six months and that's about it.

They can't bend the rules, 'cause they don't make the rules.
posted by Mutant at 2:49 PM on June 25 [1 favorite]

Yes definitely ask. If you are starting mid-July, they might be able to fudge it to make it look like your start date was July 1 or something so you could be eligible for the July 1 enrollment.
posted by rmless at 3:00 PM on June 25

Pretty sure it's a governmental rule. However, at least in IL, I believe the rule is you need to work 1000 hours to be eligible. Perhaps you'll hit 1000 hours by the January eligibility date?
posted by sarajane at 3:04 PM on June 25

Open Enrollment at my company means the time of year when existing employees can choose to make changes to their benefits. So if I didn't sign up for the 401k when I was hired, I'd have to wait until Open Enrollment until January. Since I signed up when I was hired my first 401k contribution came out of my first paycheck in March.
posted by IanMorr at 3:15 PM on June 25

Yes it's worth asking. Everything is negotiable.

FWIW, I was hired by my employer a week or so after the "anniversary date" that normally is used to calculate eligibility for the employer match component of the 401k plan, bonus pay, etc. As part of salary negotiations I asked whether they would make an exception, they did and I hired on.

Just make sure, if you get any exceptions made, to get them in writing. Not necessarily because anyone is going to try to screw you, but just because if your situation is different than everyone else's in some way, you may find yourself continually having to explain and justify that difference down the road.
posted by Kadin2048 at 3:35 PM on June 25

The one-year and/or 1000hrs delay is not required by law, it's just that if the delay is less than a year they can't have an hours requirement. I'm pretty sure that the open enrollment restrictions are merely for HR and the plan administrators' convenience.
posted by rhizome at 3:59 PM on June 25

Just ask. I know any number of examples where people had an appointment date established that was not the day they actually started working or getting paid.
posted by grouse at 4:04 PM on June 25

Heck, ask them to put you on the payroll starting July 1 but then give you an unpaid 2-week furlough in August. There are a lot of possibilities.
posted by megatherium at 4:53 PM on June 25

With regard to employment, everything is negotiable. Ask.
posted by JuiceBoxHero at 6:37 PM on June 25

If the requirements are part of plan rules (what the "plan document" specifies), there's no fudging without risking legal trouble to the employer.

Your employer could "amend" the plan by paying the document provider or administrator a few hundred bucks to change the eligibility or enrollment date requirements, but the new rules (immediate eligibility, or 6 months of employment, or monthly enrollment instead of 2x/yr, or whatever) would apply to all new hires after you.

There's no law that says you have to have a minimum number of hours for eligibility (there may be a maximum in some cases, but that's irrelevant here since we want them to reduce the waiting period). The company gets to choose when establishing the plan. Once they make a choice, they have to follow the rules they agreed to until they amend the plan.

You can always ask... I'd say your best bet is something along the lines of what grouse and megatherium said.
posted by powpow at 8:23 PM on June 25

Definitely ask, but there is the chance that your predicament was intentional. I was in a similar situation a few years back (though it was an entry level service industry position). In order for the first year of employment to count as a "year" with regards to vacation and seniority, your start date had to be July 1. My start date was July 2, along with about a dozen others. There were no new hires in June. The average tenure of an employee at that company was 14 months. I wasn't the only one of that hiring class to never see a vacation day...
posted by the christopher hundreds at 8:39 PM on June 25

powpow's correct. However, your employer may have yet to have the plan documents rewritten this year (something that is legally required periodically and that must be done for 401(k) plans this year). It may be that your future employer would be willing to consider having the amendment rolled into the rewrite for your (and other's) benefit.

If they decline to amend the plan, consider opening a traditional IRA and depositing the amount that you would otherwise contribute to the 401(k), the drawback being that you won't receive any employer match. It may be that when you're finally eligible for the 401(k), you can do a rollover from the IRA into the 401(k).
posted by Cats' Concert at 9:43 PM on June 25

Thanks to all for the answers. I will be sure to report back after I ask the firm. Cats' Concert, if you should happen to read this, I didn't know that you could (potentially) temporarily stash money in an IRA and later roll it over to a 401(k). What would affect whether or not I can do this? The firm plan?
posted by Conrad Cornelius o'Donald o'Dell at 1:12 AM on June 26

Follow-up: I spoke with my contact at the firm. He was apologetic and told me that there are only two things he doesn't have control over with new hires - and the 401(k) enrollment date is one of them. He said that even he had to wait when he was hired. I did not try the grouse/megatherium route - the issue, as I said, is far from a dealbreaker for me, and I just didn't want to push things.

Thanks again to all.
posted by Conrad Cornelius o'Donald o'Dell at 1:40 PM on June 26