401(k) employee eligibility and entry dates.

The federal maximum eligibility requirements

A 401(k) plan may set its own eligibility rules, but IRC Section 410(a) caps how restrictive they can be. For elective deferrals, a plan may require no more than age 21 and one year of service. A year of service is generally a 12-month period in which the employee completes at least 1,000 hours. A plan may use shorter requirements, or none.

Since SECURE 2.0, a 401(k) plan must also let long-term part-time employees defer: for plan years beginning after December 31, 2024, employees who are at least 21 and have two consecutive 12-month periods with at least 500 hours. Employer contributions can still require the plan's regular service rule.

Eligibility date vs entry date

Meeting the requirements is not the same as entering the plan. Plans admit newly eligible employees on entry dates, commonly monthly, quarterly, semiannual (the first day of the plan year and the first day of the seventh month) or immediate.

Section 410(a)(4) sets the outer limit: an employee who meets the maximum age and service requirements must enter no later than the earlier of the first day of the first plan year beginning after they meet them, or six months after the date they meet them. Semiannual entry dates satisfy this for a 21-and-one-year plan. A plan with a single annual entry date at the start of the plan year can only satisfy it if its requirements are shorter, for example age 20½ and six months of service.

A worked example

Model other cases in the eligibility and entry-date checker. It uses calendar months of service, so confirm hours-based rules against the plan document.

Common eligibility mistakes

• Using the date of hire anniversary when the plan measures service on plan years after the first year, or the reverse.
• Not counting hours for part-time and seasonal employees, so long-term part-time eligibility is missed.
• Missing dates of birth or rehire dates in the census.
• Excluding a class of employees the plan document does not exclude.
• Entering employees late because entry dates are tracked by hand.

A missed deferral opportunity is one of the most common plan errors. The IRS 401(k) Plan Fix-It Guide describes how to find and correct it, including corrective contributions for affected employees.

Data a TPA needs for every employee

• Date of birth, hire date, termination date and rehire date.
• Hours of service by computation period, for all employees including part-time.
• Employee classification, if the plan excludes any class.
• The plan's eligibility rules, service computation period and entry dates.

Validating these fields at intake is the subject of automating 401(k) census processing.