The cost of covering short-tenured employees may be reduced by eligibility requirements and vesting.
With the SEP-IRA, only employees who are at least 21 years old and have been employed in three of the last five years must be covered.
The SIMPLE IRA must cover employees who have earned at least $5,000 in any prior two years and are reasonably expected to earn $5,000 in the current year.
The 401(k) and defined benefit plan must cover all employees who are at least 21 years of age and who worked at least 1,000 hours in a previous year.
Vesting is immediate on all contributions to the SEP-IRA, SIMPLE IRA and 401(k) employee deferrals, while a vesting schedule may apply to 401(k) employer contributions and defined benefits.