Federal law requires that when an employer sponsors a plan, all employees must have an equal opportunity to save for retirement.
However, before you can participate in your employer’s 401(k) plan, you have to meet the plan’s eligibility requirements. Your employer can impose two restrictions: that you must work for a full year—usually at least 1,000 hours over 12 months—and be at least 21 years old before you enroll.
Once you’re eligible, plans often have specific start dates for new participants, such as once a quarter or twice a year, or during an open enrollment season. For example, if you’ve been on the job for a year in August, you might have to wait until October 1 or January 1.
It’s a good idea to familiarize yourself with contribution limits and matching benefits your employer might offer before you sign up.
With many employers, you have to sign up before you can contribute part of your earnings to your plan account. You have to choose how much to put away. And you must decide where to invest your contributions, selecting among the investment choices offered in the plan.
But a growing number of employers automatically sign up eligible employees. In that case, your employer chooses an automatic contribution rate, known as the default rate, and an automatic investment alternative, known as the default investment, for plan participants.
When you’re automatically enrolled, you have the right to change the default rate and default investment to help you meet your personal retirement goals at a level of risk you’re comfortable taking. You also can opt out of the 401(k) plan, either when you’re initially enrolled or at a later date.
You’re not alone when it comes to managing your 401(k). Your plan administrator and representatives from 401K Generation are available to answer questions that can help you get the most out of your 401K plan.