401(k) Compliance: Understanding Employee Eligibility Rules
- Bruce & Company, PSC
- Apr 12
- 1 min read
If your organization sponsors a 401(k) plan, you already know that plan administration comes with extensive regulatory responsibilities. One of the most critical areas to monitor is employee eligibility — specifically, when your workers must be allowed to participate.
Under federal law, full-time employees become eligible to participate once they:
Are at least 21 years old, and
Have completed one year of service, generally defined as 1,000 hours worked during a 12-month period (usually the plan year).
Recent legislation has also expanded participation rights for part-time workers. To comply, you must allow part-timers to participate if they:
Are at least 21 years old, and
Have worked at least 500 hours per year for two consecutive plan years.
Failing to follow these rules can lead to IRS audits, penalties, and potentially retroactive plan contributions to make affected employees whole.
Staying compliant isn’t just about avoiding penalties — it’s also about fostering trust and fairness among your workforce. Contact us today for help reviewing your 401(k) plan procedures and ensuring your eligibility rules meet all legal requirements.
About Bruce & Company, P.S.C.
Founded in 1976 by Gregory T. Bruce, Bruce & Company, P.S.C. is a full-service accounting firm proudly serving clients regionally, nationally, and globally, with our central office located in Madisonville, KY. For more than four decades, we’ve delivered trusted expertise in tax, financial planning, and auditing. Our knowledgeable team is dedicated to providing personalized service and practical solutions to help individuals and businesses achieve their financial goals. Contact us to learn more about how we can support you!
