Can a plan allow employees to make rollovers into the plan before they become participants?

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The assertion that some plans permit employees to make rollovers into the plan before they become participants is correct. While not universally allowed, there are specific provisions in the tax code and plan regulations that enable certain 401(k) plans to accept rollovers from eligible retirement plans even from individuals who are not yet active participants in that specific 401(k) plan.

For example, if a plan is designed to accept rollovers, it can allow incoming funds from an employee’s previous retirement accounts, provided the plan's terms explicitly allow this practice. This can be beneficial for individuals who may want to consolidate their retirement savings or ensure that their funds are already positioned in their intended plan prior to formally becoming a participant.

It's crucial to note that while this is permitted in some cases, not all plans opt to include this feature. The plan document and summary plan description will detail whether rollovers are accepted prior to participation, so plan sponsors must clearly communicate these provisions to employees.