Defined contribution plan sponsors are loosening their requirements, with nearly 60% of them permitting their employees to contribute immediately upon employment, a new survey suggests.

The trend shows a sharp contrast to 1998, when 24% of plans allowed their newest employees to contribute, according to a survey by the Profit Sharing/401k Council of America.  The survey, in its 12th year, investigates eligibility practices of 494 profit-sharing, 401(k) and combination plans.

David Wray

“This trend toward earlier plan eligibility is yet another demonstration of employers’ continued commitment to their DC plans and to helping their employees save for retirement,” said David Wray, PSCA’s president, in a statement.

A total of 57.4% of all plans and 71.1% of plans with 1,000 or more employees now permit immediate participation in their 401(k) programs. Employees are eligible to participate within the first three months of employment at three-quarters (75.8%) of companies and at 85.5% of large companies (1,000 or more employees).

Just 11.5% of all plans have a one-year or longer service requirement prior to eligibility.

Exactly 97% of the plans permit employee contributions to an employer-sponsored defined contribution plan, and 72.3% offer employer matches. Meanwhile, 56.1% of the responding companies, representing a cross-section of industries and locations, make non-matching company contributions.

For both matching and non-matching company contributions, there is a trend away from one-year eligibility requirements, researchers found.

However, significantly more companies require one year or more of service to be eligible for non-matching contributions.

Only 28.5% of companies required one year of service or longer for matching contribution eligibility, while 47.1% of employers require one year or more of service to be eligible for non-matching company contributions.

A large percentage of plans have no minimum age requirement for participant deferrals (43.9%) or for non-matching company contributions (44%).

For participants with an age requirement, 21 years old is the most prevalent minimum age. Exactly 30.8% require participants to be 21, while 24.3% require participants to be 18 years old to contribute.