I hate the waiting period for deferrals

When I was an employee, one of the knocks that I would see in another potential employer is the waiting period for salary deferrals. When you currently work for a company that has a 401(k) plan, one of the last things you want to do in getting a new job is having to wait 6 months to a year without being able to defer your salary.

I had a relative who just switched jobs and one of the drawbacks of the new job was a 6-month wait. I don’t understand the wait because people should be allowed to defer and not have to wait a year, and the testing rules allow the plan sponsor to test the salary deferrals as if the plan has a one-year wait and age 21 requirement. I understand a plan sponsor may have issues with small account balances, but small account balances are an indication of turnover issues, and that’s a bigger problem than a 401(k) plan.

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