What is the result if a participant in a 401(k) plan does not complete a period of service exceeding one year?

In a 401(k) plan, if a participant does not complete a period of service exceeding one year, they may still be eligible to receive employer contributions, depending on the specific rules of the plan. Many plans have a provision for employer contributions, known as "matching contributions," which can occur regardless of the employee's service tenure, provided the employee has made at least one contribution during their time in the plan.

It's essential to understand that while an individual might not vest fully in employer contributions if they leave before a specified period of service, it does not mean they are ineligible to receive those contributions altogether. Instead, the vesting schedule determines how much of the employer contributions the participant can keep if they leave the plan early. If the plan offers contributions without requiring a minimum period of service or matches before a year is complete, the participant can still benefit from those contributions.

This perspective aligns with common practices in retirement plans, as employers often seek to incentivize participation and retention through contributions, even in cases where total service may be less than one year.