Exploring Employee Benefit Plans
Part 2: De Minimis Balances of Terminated Employees
Part 3: Maintaining Documentation
Part 5: Long-Term Part-Time Employees
The long-term part-time employee is a SECURE Act and SECURE 2.0 Act change which goes into effect after December 31, 2024.
Long-term, part-time employees that complete two consecutive years of service with 500+ hours worked must be offered participation into a company’s 401k Plan. In addition, Plans that have had employees work three consecutive years of 500 – 1000 hours since 2021 should also be allowed to participate in the Plan. This could mean that the part-time employee is eligible in 2024.
This change will impact Plans who have eligibility provisions requiring employees to work a certain number of hours per year to become eligible to the retirement plan. Typically, Plans set a 1000-hour requirement to exclude part-time employees from the Plan. The new requirement will particularly be of interest to those who have many part-time employees, such as in the hospitality or construction industries.
If your Plan does have an hour’s requirement and employs part-time employees who work between 500 – 1000 hours, it’s important to reach out to your Third-Party Administrator (TPA) as soon as possible and determine how your Plan will track these hours. Once employees meet the service requirement, the Plan must permit the part-time employee to participate in the Plan no later than the following January 1st or July 1st (whichever is sooner), after the employee reaches the 500-hour requirement. Minimum age and class of employee requirements are still permitted when determining eligibility.
Another option Plans should consider is a potential amendment to the Plan. If your Plan currently excludes employees working under 1000 hours, the Plan could consider amending the Plan provisions to include such employees. The amendment would help alleviate the burden of tracking hours and the risk of the Plan improperly excluding eligible participants.
