TomTX - An employee CANNOT negotiate getting waiting periods waived. The waiting period must be applied to all employees equally. One might be able to get prior service credit for purposes of years of service or vesting credit, but that requires a plan amendment and must be applied uniformly.
kkbmustang-- this is very helpful! Would it make any difference if a person had been previously employed by the same employer? That is, would the prior years of employment count toward the waiting period?
Yes, it could. Here is the language directly from Code section 410(a)(5):
"(A) General rule
Except as otherwise provided in subparagraphs (B), (C), and (D), all years of service with the employer or employers maintaining the plan shall be taken into account in computing the period of service for purposes of paragraph (1).
(B) Employees under 2-year 100 percent vesting
In the case of any employee who has any 1-year break in service (as defined in section 411 (a)(6)(A)) under a plan to which the service requirements of clause (i) of paragraph (1)(B) apply, if such employee has not satisfied such requirements, service before such break shall not be required to be taken into account.
(C) 1-year break in service
In computing an employee’s period of service for purposes of paragraph (1) in the case of any participant who has any 1-year break in service (as defined in section 411 (a)(6)(A)), service before such break shall not be required to be taken into account under the plan until he has completed a year of service (as defined in paragraph (3)) after his return."
Link here:
https://www.law.cornell.edu/uscode/text/26/410Keep in mind that these are the minimum standards required by the Code. The plan document itself could be more generous. If you request a copy of the Summary Plan Description (SPD) from HR, it should summarize the provisions in the plan.
If employee had previously completed one year with the employer and is re-hired, that does count I believe. At least for our plan, once eligible, always eligible - I am assuming that has to be standard.
We also have a one year waiting period. The reason is we have a lot of hourly employees who turn over a lot. The year is supposed to help with the management of this constant churn. 401K plans are required to be uniformly applied, which both helps & hurts, depending on each individual. Though if you ask me, the biggest loophole is the % matching system. Higher paid executives get more employer match, since their salary is higher.
CrazyWorld - There isn't a loophole in the percent matching system. And the statement that "higher paid executives get more employer match, since their salary is higher" is, quite frankly, absurd. Of course, 3% of $50,000 is going to be less than 3% of $150,000. It's called math, not a loophole. Even given this math, there are other limitations on the contributions highly paid employees can get.
Each plan must meet strict nondiscrimination requirements each year. Nondiscrimination being determined as between Highly Compensated Employees (HCE, defined term) and Non-Highly Compensated Employees (NHCE, also defined term). The only plans that do not have to perform the nondiscrimination testing are plans called "Safe Harbor" plans. These plans have to meet even more requirements, including a specific matching contribution formula and 100% immediate vesting for all participants.
Regardless of the type of plan, there are also these limits:
1. If the contributions of all of the non-highly compensated employees are a certain amount less than highly compensated employees, plans must remove contributions from the HCEs until these tests are satisfied. This applies to both elective deferrals (pre-tax deferrals) AND matching contributions.
2. Only a certain amount of compensation can be considered. So, if an HCE makes $500,000, the match or profit sharing contribution can only be calculated based on, for 2015, $265,000. This is in Code section 415 See here:
http://www.irs.gov/uac/Newsroom/IRS-Announces-2015-Pension-Plan-Limitations-1 and also here:
http://www.irs.gov/Retirement-Plans/401k-Plans-Deferrals-and-matching-when-compensation-exceeds-the-annual-limit3. There are more, but I'm not going to list them all out.