The United States Government Accountability Office has identified a handful of eligibility- and vesting-related plan design decisions that have a significant long-term effect on employees’ retirement plan account balances. In its recent “401(k) Plans Effects of Eligibility and Vesting Policies on Workers’ Retirement Savings” report, the GAO recognized that employers hold back employees’ savings by:

  • imposing a minimum age (typically 21) for participation
  • requiring lengthy service periods before permitting employees to save
  • imposing a last-day-of-the-plan-year eligibility requirement
  • applying lengthy vesting schedules – particularly one extending out to six years
The GAO’s report provides interesting commentary on the degree to which the United States workforce has become increasingly mobile, which exacerbates the impact of the design decisions listed above. When employees leave jobs more frequently, the vesting provisions hit them harder. The concern is compounded, then, when employees move among multiple employers that apply minimum age and service rules, which serve to keep employees out of the savings game. As a result, the GAO recommends that Congress, Treasury, and the DOL consider an update to ERISA’s plan eligibility and vesting rules. 
That would take some time – and obviously the ability for those in Washington to reach an agreement. In the meantime, we wanted to encourage plan sponsors to think about their plan design choices and to assess whether (within budgetary restraints) they might make small changes that could have a large impact on employees’ long-term prospects.
The GAO report is available here:
Matt Eickman

Matt Eickman

Full Bio

Matthew loves to write. He also loves to think, though he’s probably a better writer than a thinker. He does not like to be on camera or in videos. This blog will allow him to write, challenge his ability to think, and, from time to time, test him with video blog entries.

He has a unique blend of legal and practical experience that helps us to serve our clients well. On the one hand, he has more than 12 years of private legal practice experience focusing exclusively on employee benefits, including time as a partner in an employee benefits boutique where he has represented clients in front of the DOL and IRS. On the other hand, he holds his FINRA Series 7 and 66 registrations and serves as the Director of ERISA Services for Qualified Plan Advisors.

Matthew likes to stay active. He provides fiduciary training, Investment Policy Statement design, and vendor oversight to our clients. He is an active member of the Employee Benefits Committee of the American Bar Association Tax Section, serving as Chair of the Defined Contribution Plans Subcommittee. He also has been appointed to the IRS TE/GE Gulf States Council and is a frequent speaker on regulatory developments, fiduciary responsibilities, and retirement readiness.

Most importantly, he stays active with his family. His wife, Laura, is the founder of REbeL, Inc., a not-for-profit organization. His three young boys are mixed up in far too many sports, and they enjoy traveling, watching college football, running with Dad, and rooting for the Huskers.
Matt Eickman
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