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Asked 9/6/2011

401k eligibility

My daughter has been an full time employee of her company in florida for over 8 years. She has contacted her hr office and tried to enroll in the company 401k plan. She was advised that she is part of a group that is excluded from the plan. The reason given was that she is an hourly employee. It is my understanding from reading the irs rules that all employees should be eligible unless they are in a high pay catagory, in which their contributions are limited. She is not in this catagory.

 
 
 
 
 
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Answer 1/1 - Submitted 9/6/2011

Actually a plan can exclude groups of employees such as this. There are two possibilities.

The first is that she does not work enough hours during the year, however you stated she was full time. If she works more than 1000 hours per year this should not be the issue.

The second is that a plan may exclude classes of employees, like hourly employees, as long as it still passes the coverage test. That is basically a test that proves the plan is covering a certain percentage of total employees. If her company is passing that test then they can exclude groups. Have her ask this question in more detail. It should also be clear on the plan' summary plan description who is eligible and who is not eligible, though since she is not eligible she likely does not have a copy of that. Still, she could ask for one.

 
 
 
 
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