Eligible employees
Definition
Employees who have met the plan’s eligibility requirements for participating in the plan.
The eligibility requirements vary among plan types. The following chart provides some examples.
Feature/ | SEP IRA | SIMPLE IRA | SIMPLE 401(k) | Solo-k/ | Traditional 401(k) | Money Purchase | Profit Sharing | Defined Benefit Plan |
Age Requirement | Can exclude employees under age 21 | N/A | Can exclude employees under age 21 | Can exclude employees under age 21 | Can exclude employees under age 21 | Can exclude employees under age 21 | Can exclude employees under age 21 | Can exclude employees under age 21 |
Service & compensation requirement | Must include employees who work 3 of the 5 preceding years. A year of service is any period during the year, however short. Can exclude employees who earn less than $500 | Must include employees who received at least $5,000 in compensation from the employer during any two preceding years and who are reasonably expected to receive at least $5,000 in compensation in the calendar year | Must include employees who have performed at least one year of service. A year of service can be up to 1,000 hours during the plan-year | Must include employees who have performed at least one year of service. A year of service can be up to 1,000 hours during the plan-year | Must include employees who have performed at least one year of service. A year of service can be up to 1,000 hours during the plan-year | Must include employees who have performed at least two years of service. A year of service can be up to 1,000 hours during the plan-year | Must include employees who have performed at least two years of service. A year of service can be up to 1,000 hours during the plan-year | Must include employees who have performed at least two years of service. A year of service can be up to 1,000 hours during the plan-year |
Referring Cite
Governing plan document or agreement
Additional Helpful Information
The statutory eligibility requirements for employer sponsored plans vary among plan types. For instance:
- A 401(k) plan cannot require more than one year of service for eligibility purposes
- A SEP cannot require more than 3-years of service for eligibility purposes.
- For qualified plans, an employer can require no more than 1,000 hours of service during a 12-month period for purposes of determining 1-year of service .
- For SEP IRAs, a year-of-service is any period, however short.