Expert: Allen - 12/19/2007

Question
I just graduated college and started my new job in May. I was waiting till my first pay raise (February) to sign up for the available 401k plan offered through my company.  (I get payed once a month and wanted to get used to budgeting my expenses and living on my own before I started contributing to my 401k plan).  This year my company did great and decided to make a 2007 profit sharing contribution to all employees.  Since I don't have a 401k plan set up, will I be compensated some other way for this contribution? or will I just not be compensated since I don't have a 401k plan set up?

Answer
If the contribution is a profit sharing contribution then in most cases it will be allocated to all eligible employees. Allocation will NOT be dependent on making 401k contributions.

However, the company may define an eligible employee for the profit sharing portion of the plan as one who has been with the company for a certain period of time such as a year. If you are not eligible, you probably will not receive other compensation.