What happens if a participant meets eligibility rules but opts out when terminated?

When a participant meets the eligibility rules but chooses to opt out of the plan upon termination, they retain their right to rejoin the plan when they are rehired. This is because expressing a choice to opt out does not negate the participant's eligibility status. If they satisfy the eligibility requirements at the time of rehire, they will automatically enter the plan.

In a typical 401(k) plan structure, it is important for participants to know that their earlier decision to opt out does not prevent them from participating again when they return to work. This ensures that employees can take advantage of retirement savings opportunities even if they make a temporary decision to opt out during an employment gap.

Understanding this concept is crucial because it reflects the flexibility that retirement plans often provide and promotes the importance of making informed decisions about participation in retirement savings.