Outdated 401(k) Rules Are Shortchanging Americans

Many company 401(k) retirement savings plans could use a swift kick into the 21st century, according to a new report from the U.S. Government Accountability Office.

A number of longtime 401(k) plan designs fail to reflect a new, more mobile workforce, hurting employees’ ability to save, according to the report (PDF). Among the arguably outmoded practices: a requirement at some plans that workers be 21 before becoming eligible to join a 401(k), that employees finish one year of service before being eligible to join a plan and then wait an additional year to be eligible for company matching funds, and that employees wait up to six years before laying claim to all those contributions.

Some of those practices save companies administrative hassles when workers leave after only a short time, and others help reduce turnover, employers and retirement experts told the GAO. But as the report notes, Bureau of Labor Statistics data show the median tenure for private sector workers in 2014 sits at 4.1 years, and federal data found that for workers aged 18 to 48, the average number of jobs held was more than 111479781411608.