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.
