In general, a plan cannot specifically require that employees work for the company at least 1 year or attain the minimum age of 21. For large employers with several divisions, this can happen accidentally.
Here are two examples from the accompanying Treasury Regulations:
Example 1. Corporation A is divided into two divisions. In order to work in division 2 an employee must first have been employed in division 1 for 5 years. A plan provision which required division 2 employment for participation will be treated as a service requirement because such a provision has the effect of requiring 5 years of service.
Example 2. Plan B requires as a condition of participation that each employee have had a driver’s license for 15 years or more. This provision will be treated as an age requirement because such a provision has the effect of requiring an employee to attain a specified age.
Second, the plan cannot exclude an employee who attains a specific age.
Finally, there are minimum participation standards, which must comply with one of the following three rules.
1.) The plan must benefit at least 70% of the “non-highly compensated” employees
2.) The plan benefits—
(i) a percentage of employees who are not highly compensated employees which is at least 70 percent of
(ii) the percentage of highly compensated employees benefiting under the plan.
3.) The company sets up its own classification system approved by the Secretary that benefits at least 70% of the non-highly compensated individuals.
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