Retirement Plans Open to 18-Year-Olds: New Bill Lowers Minimum Age for 401(k) Eligibility

The “Helping Young Americans Save for Retirement Act” is straightforward: it lowers the minimum age for certain employees to join employer-sponsored retirement plans, like 401(k)s and pensions, from 21 down to 18. This change applies specifically to plans that use a service requirement—meaning the employee must have worked at least 500 hours during two consecutive 12-month periods—to determine eligibility. Essentially, if you’re 18, working steady hours, and meet the plan’s minimum service time, you can start saving for retirement three years earlier than before. The provisions in this bill update both the federal labor law (ERISA) and the tax code (Internal Revenue Code) to make sure these rules align, and they take effect one year after the bill becomes law.

The Power of Starting Early

For the average young American, this is a big deal. Right now, if you graduate high school at 18 and start working full-time or even steady part-time (like in retail, trades, or hospitality), you usually have to wait until your 21st birthday to access your company’s 401(k) match. This bill changes that. For example, a student working summers and holidays who hits that 500-hour mark two years in a row could start contributing and receiving matching funds at 19. That’s three extra years of tax-advantaged savings and, more importantly, three extra years of compounding interest. Over a 40-year career, that early head start can translate into tens of thousands of dollars in extra retirement savings, simply because the money had more time to grow.

Keeping Track of the Young Savers

While the goal is to get young people saving, the bill includes a specific administrative detail for plan sponsors. If a retirement plan has participants who join only because of this new lower age rule (meaning they are under 21), plan administrators get a bit of a break. For reporting purposes, these specific young participants won't be counted as official participants until five years after the first of them joins. This provision seems designed to ease the administrative burden on companies, giving them a five-year grace period before they have to fully integrate and report on this new, younger cohort of savers. For the employee, this delay doesn't affect their ability to save or receive matching funds—it only pertains to how the plan reports its numbers to the government.

What to Expect When the Rules Change

This legislation is a clear win for young workers and the concept of early financial planning. By lowering the entry age, it recognizes the reality that many 18-to-20-year-olds are already in the workforce and should have access to the same key benefit as their older colleagues. The impact on everyday life is simple: more options, sooner. However, since the changes apply to plan years that begin one year or more after the Act is signed, employees won't see this option immediately. It’s a change that requires plan documents to be updated, so expect the new eligibility rules to roll out gradually across employer plans starting in late 2024 or 2025, depending on when the bill becomes law.