This sucks

FDF12389

Diamond Member
Sep 8, 2005
5,234
7
76
I worked my ass off to graduate high school at age 14, now I'm almost done with college and landed myself a really good job, however I cant enroll in my 401K. Both my human resource department and fidelity are telling me the error is caused by my age being less than 21, which is the earliest the IRS will let you open a 401k.

I see no logical reason for the IRS to restrict 401k based on age, I can already save tax free with a Roth IRA, so why not let me open 401k? Im really pissed off about this!
 

BigJ

Lifer
Nov 18, 2001
21,330
1
81
First off, I gotta say congrats on being so successful early on in life.

Now that that's outta the way, I would consider what other options you have. Anything that you actually can participate that's company matching, discounted company stock plans, etc. Stick it out for the 2 years and then start it up.
 

FDF12389

Diamond Member
Sep 8, 2005
5,234
7
76
Originally posted by: BigJ
First off, I gotta say congrats on being so successful early on in life.

Now that that's outta the way, I would consider what other options you have. Anything that you actually can participate that's company matching, discounted company stock plans, etc. Stick it out for the 2 years and then start it up.

Thanks.

3 years actually, 19 was typo which I edited. The only plan my company has is the 401k, in which the match 25%, which is mostly why I'm upset. I would really liek to know the reasoning behind the age limit.
 

TipsyMcStagger

Senior member
Sep 19, 2003
661
0
0
It's not the IRS. I don't think the IRS has an age requirement, if it is, its 18. It's one of the parameters of whatever plan your company adopted.
 

Unheard

Diamond Member
Jan 5, 2003
3,773
9
81
Considered a Roth IRA? I believe you only need to be 18 to be eligible for that.
 

FDF12389

Diamond Member
Sep 8, 2005
5,234
7
76
Originally posted by: TipsyMcStagger
It's not the IRS. I don't think the IRS has an age requirement, if it is, its 18. It's one of the parameters of whatever plan your company adopted.

That makes more sense, I doubted my HR department when they told me that, so then I called fidelity and asked specifically, and they again said it was an IRS stipulation.
 

Reckoner

Lifer
Jun 11, 2004
10,851
1
81
Just utilize a savings account for now. There's a lot of good ones out there that offer anywhere from 4.3 - 5.25% interest. Let the money build, then put it into the 401k.
 

her209

No Lifer
Oct 11, 2000
56,336
11
0
Originally posted by: FDF12389
Originally posted by: tasmanian
Shens?

Yea, I'm trying to gain props on a internet site that I hardly use.

And yet you brag about your achievements yet can't figure out why the IRS won't allow 18-year-olds open 401k. Interesting....
 

sciencewhiz

Diamond Member
Jun 30, 2000
5,885
8
81
I can't find anywhere in the tax code that sets explicitly sets a minimum age, but it does say that plans can exclude people under 21.
 

FDF12389

Diamond Member
Sep 8, 2005
5,234
7
76
Originally posted by: sciencewhiz
I can't find anywhere in the tax code that sets explicitly sets a minimum age, but it does say that plans can exclude people under 21.

Where do i go to view that?
 

TipsyMcStagger

Senior member
Sep 19, 2003
661
0
0
Originally posted by: FDF12389
Originally posted by: TipsyMcStagger
It's not the IRS. I don't think the IRS has an age requirement, if it is, its 18. It's one of the parameters of whatever plan your company adopted.

That makes more sense, I doubted my HR department when they told me that, so then I called fidelity and asked specifically, and they again said it was an IRS stipulation.

Then the fidelity rep doesn't know what they are talking about.

per section 410 of the internal revenue code regarding minimum participation standards in qualified plans, the IRS prohibits any plan from having a minimum age requirement above age 21.

http://www.fourmilab.ch/ustax/...I-B-410.html#_a__1__A_

Plenty of companies with 401(k) plans set the minimum age requirement at 21 (IRS maximum), but I have seen some where employees are eligible at 18.

It's not an issue with the IRS or Department of Labor. It's the plan your company has decided to use and it's perfectly legal.
 

Rip the Jacker

Diamond Member
Dec 29, 2004
5,415
1
76
Uhm. I'm 19 and I have a 401k plan.. I hope no one from my HR department screwed up.. (I have worked for 1 year so far)
 

wyvrn

Lifer
Feb 15, 2000
10,074
0
0
Take at look at index fund investing. Vanguard has a whole bunch of good ones. Those typically have lower fees and mimic major stock indices. Also, there is an article on page 70 of the September issue of Smart Money called 'A League of Their Own', which details how Harvard and Yale have out performed the market with their investment strategies. The best part is the article outlines a mimic set of funds that individual investors can use to take advantage of some of the techniques that Yale and Harvard use. Don't let the lack of a 401K stop you from investing. You have plenty of other choices.
 

FDF12389

Diamond Member
Sep 8, 2005
5,234
7
76
Originally posted by: TipsyMcStagger
Originally posted by: FDF12389
Originally posted by: TipsyMcStagger
It's not the IRS. I don't think the IRS has an age requirement, if it is, its 18. It's one of the parameters of whatever plan your company adopted.

That makes more sense, I doubted my HR department when they told me that, so then I called fidelity and asked specifically, and they again said it was an IRS stipulation.

Then the fidelity rep doesn't know what they are talking about.

per section 410 of the internal revenue code regarding minimum participation standards in qualified plans, the IRS prohibits any plan from having a minimum age requirement above age 21.

http://www.fourmilab.ch/ustax/...I-B-410.html#_a__1__A_

Plenty of companies with 401(k) plans set the minimum age requirement at 21 (IRS maximum), but I have seen some where employees are eligible at 18.

It's not an issue with the IRS or Department of Labor. It's the plan your company has decided to use and it's perfectly legal.

Thanks for clearing that up.

This is probavly a really dumb question, but....... How hard would it be for my company to change the plan or make an exception?
 

TipsyMcStagger

Senior member
Sep 19, 2003
661
0
0
They would need to amend their adoption agreement, but probably not too big of an issue. You'd need to talk with HR, and let them know that you would like to participate, and show them that it's not an IRS rule barring you from participating, but a rule voluntarily adopted by the company.

They could just be using a prototype plan (provided by fidelity or the third party administrator if they have one). Prototype plans are basically plan templates for how the plan operates that have been designed to meet whatever IRS and Department of Labor regulations exist. As a default feature of that plan may be the minimum age of 21. They may have never really thought about letting anyone under 21 into the plan and perhaps the issue has never even come up. If you work at a relatively small company, this is likely.

Another scenario is that they just don't want people under age 21 in the plan (which is perfectly legal). They could have done some analysis or been advised that statistically, individuals under 21 that do participate may have fairly small balances and high turnover. There is a higher ratio of expense to balance on the low balance accounts. The higher turnover would mean more paperwork for HR and more trouble than its worth. In many plans, the plan expenses are paid for out of forfeitures that could otherwise be allocated to active participants or by the employer.

They can't just make an exception specifically for you. One of the reasons why 401(k) plans have the tax exempt status is because they do not discriminate. Allowing you eligibility into the plan and nobody else under 21 could cause trouble with the IRS/DOL.
 

spangenberg

Senior member
Apr 19, 2005
803
0
0
I 20 and I opened my 401 K bout a year and a half ago. Is it an IRS thing or company. Hope I'm not putting money away into nothing...