In addition, more plans are also shortening or eliminating vesting schedules. The plan s eligibility period had already been eliminated in a previous plan re-design. We wanted to attract and retain more mid-career employees and an enhanced DC plan helps us do that, Miklatek says. Avon maintains a one-year eligibility period for the 500 employees of its retail division, formed in late 1998. These participants also enjoy immediate vesting once they are eligible to join the plan.
New employees appreciate immediate eligibility and vesting.
Mass. Most of my clients are reducing their eligibility periods from one year to six months, three months or immediate eligibility, Brambley reports. Firms with one-year eligibility periods are starting to look like dinosaurs. Eligibility periods were originally adopted by companies because of the relatively high turnover rate among first-year employees compared to the rest of the work force. These employees also tend to defer small percentages of pay when they do participate. The enhanced public relations message of immediate vesting along with the enthusiasm it can help generate for a plan outweighs extra expense it may create, Brambley says.