A 401(k) plan provides eligible plan participants the opportunity to choose to contribute a portion of their earnings, commonly called elective contributions, to their own individual account in a retirement plan. These contributions may be taken out of an employee’s salary before taxes. Some employees affirmatively enroll in their plan and elect how much of their pay they want to contribute. These employee contributions can be a set dollar amount or a percentage of pay, within annual contribution limits set by the IRS. Some employees are automatically enrolled in employers’ plans and their contributions set at a default rate, though they can opt to adjust the contribution level later. Under federal law, an employee’s own contributions and any returns on those contributions always belong to the employee and are not forfeitable to the plan if they leave their employer. An employer may also contribute to a participant’s account, though not every plan includes an employer contribution. Generally, employers’ contributions to participants’ 401(k) accounts are voluntary, though once incorporated into plan documents contributions must be made as described. Unless the plan is a “Safe Harbor 401(k)”, “SIMPLE 401(k)” plan, or a “SIMPLE IRA”, plan sponsors have flexibility to decide whether to provide employer contributions and how quickly these contributions become vested, to the extent permitted by federal law. Formulas used to calculate employers’ contributions vary across plans. One form of employer contribution is called a match, which is based on the amount that an employee contributes to the plan. Alternately, employers may provide non-matching contributions based on employer profits. Employer contributions may be made solely at the employer’s discretion or may be required by plan documents. Unlike an employee’s own contributions, employer contributions can be forfeited when an employee separates from their job if the employee is not vested in the plan. The Employee Retirement Income Security Act of 1974 (ERISA) provides the legal framework for eligibility policies used by workplace retirement plans, including minimum-age and minimum-service policies. The rules were designed, in part, to help sponsors provide profit sharing contributions, but after 401(k) plans were introduced, employer matching contributions became common. Under ERISA, the maximum age that plans may require as a condition of plan eligibility is 21. The maximum period of service—or length of tenure with an employer—a 401(k) plan may require for plan eligibility is 1 year. (See table 1.) In addition to using eligibility policies, plans can extend the waiting time by taking up to 6 months or until the end of the plan year, whichever comes first, to enroll a newly eligible worker. A 401(k) plan’s vesting policy can require participants to work for a certain period of time with an employer before they can keep all or some of their employer’s contributions to their account and investment returns on that money when they leave their job. Federal laws require that a minimum percentage of employer contributions are vested after a certain period of time; however, plans can choose to allow employer contributions to vest faster or even immediately. The shorter the period of service required for 100 percent vesting, the “faster” the vesting. The minimum percentage that must be vested at a given time depends on the type of vesting policy used by the plan, either cliff or graduated (see table 2). Employer contributions that are vested are considered “nonforfeitable,” which means a participant has an unconditional and legally enforceable right to keep that portion of their account if they separate from their job. When a vesting policy’s required period of service is not fully met, some or all of an employee’s account balance that is attributable to employer contributions is forfeited to the plan. (See figure 1.) Forfeited money can be used by the plan to offset plan expenses and to offset employer contributions. Once the full vesting period is complete, all employer contributions made both before and after that point are fully vested and nonforfeitable. All of a participant’s own contributions, rollovers, and earnings on those contributions are always immediately vested and nonforfeitable. Similarly, in addition to a minimum-service policy required to receive employer contributions, plans may use a “last day policy,” which can require up to an additional year of employment to earn the employer contribution for that year. When used, a last day policy applies to the employer contributions made each plan year, year after year (see fig. 2). According to recent industry data, plans offer matching contributions more commonly than non-matching contributions, which include profit sharing contributions. ERISA also governs the timing of employer contributions. Employers may delay making contributions until their tax return due date for a given year, including extensions. Under federal law, plan sponsors must provide participants with a basic description of the plan, called a summary plan description (SPD), that explains participants’ rights and responsibilities under the plan as well as the plan’s key features, including eligibility and vesting policies. Table 3 provides some key features of an SPD and other required plan documents. Treasury and IRS, an agency within Treasury, share responsibility for overseeing provisions of ERISA applicable to eligibility and vesting in 401(k) plans. IRS has primary responsibility for overseeing eligibility and vesting policies and has promulgated regulations in these areas. For example, IRS regulations state that plans risk losing their tax qualified status if they impose policies that 1) do not specifically refer to service but have the effect of requiring service as a condition for plan participation, and 2) ultimately result in employees being excluded from participating in the plan for a period of time that exceeds the plan’s stated minimum service policy. IRS has also promulgated regulations for rules relating to “year of service.” Additionally, IRS regulations and federal law address the timing of employer contributions–when they must be deposited into participants’ accounts in a defined contribution plan. Treasury is responsible for developing proposals for legislative changes, which could include changes regarding eligibility and vesting requirements. In fulfilling this duty, Treasury prepares the “General Explanations of the Administration’s Revenue Proposals,” referred to as the “Greenbook,” which accompanies the President’s annual budget submission and outlines the President’s tax-related legislative proposals. DOL is responsible for prescribing regulations governing retirement plans in a variety of areas, including reporting, disclosure, and fiduciary requirements. According to DOL officials, DOL could issue guidance on best practices to plan sponsors to help them better communicate plan policies in the summary plan description (SPD). With regard to eligibility, vesting, and related policies, DOL regulations impose certain requirements, such as the requirements that plans: Transmit employees’ own contributions into their account no later than the 15th day of the month following the month in which the money comes out of their pay. Report and disclose certain information to participants regarding eligibility and vesting policies. ERISA specifically grants DOL the authority to prescribe the format and content of the SPD and other statements or documents which are required for plan participants and beneficiaries receiving benefits under a plan. In addition, DOL may prescribe regulations covering the format of these disclosures. U.S. workers are likely to have multiple jobs throughout their careers. Each time an employee begins a new job where a 401(k) plan is offered, the plan’s eligibility policy may affect the employee’s ability to participate. Likewise, every time a plan participant leaves a job, the plan’s vesting policy may affect the participant’s ability to retain employer contributions to their account. According to workforce data collected by the federal government, from 1978 to 2012, the average number of total jobs held by men and women workers from age 18 to 48 was more than 11 (see table 4). The mobility of the U.S. workforce is also reflected by the median tenure, which was 4.1 years for private sector workers in January 2014, according to Bureau of Labor Statistics (BLS) data. Since these data indicate that many U.S. workers switch jobs multiple times during their career, eligibility and vesting policies may affect their accumulated retirement savings multiple times as well. The President’s Fiscal Year 2017 Budget Proposal encourages efforts to better ensure that workers’ job changes do not harm their retirement savings in a package of proposals aimed at increasing workers’ access to retirement plans and increasing the portability of their retirement savings and benefits. The proposal tasks DOL with evaluating existing portable benefits models and examining whether changes are needed. Information from our non-generalizable survey of 80 plan sponsors ranging in size from fewer than 100 participants to more than 5,000, and our review of industry data, show that many 401(k) plans have minimum- age policies that do not allow workers to save in plans until they reach age 21 instead of immediately upon employment. Our survey data found that 43 of 80 plans surveyed have minimum-age policies for plan eligibility, with 21 being the most frequently used minimum age, used by 33 plans. Industry data from the Plan Sponsor Council of America (PSCA), which primarily cover large plans, also show that 376 out of 613 plans have minimum-age policies, with 21 the most frequently used minimum age. According to our analysis of 2008 Survey of Income and Program Participation (SIPP) data from the Census Bureau, an estimated 405,000 workers whose employers offer 401(k)-type plans said they were ineligible to participate in the plan because of a minimum-age policy. This is equal to about 2 percent of workers nationwide who were not participating in 401(k)-type plans offered by their employers that year. Minimum-service eligibility policies require employees to work for an employer for a certain period of time before they can enroll and participate in a 401(k) plan. Fifty of the 80 plans we surveyed reported they have minimum-service eligibility policies. Twenty plans use a 1-year minimum.