If you sponsor 401(k) or 403(b) plans, are you aware of the requirement to provide your long-term part-time (LTPT) employees with the opportunity to contribute?
Previously, you could exclude employees from retirement contribution eligibility because of their part-time classification, meaning they worked fewer than 1,000 hours annually. Due to Section 12 of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), as well as Sections 125 and 401 of the SECURE Act 2.0 of 2022, the rules have changed drastically; it is now necessary for you to provide your LTPT employees with the option to enroll in your 401(k) and 403(b) plans.
Who is classified as an LTPT? Starting in 2024, the SECURE Act allows employees who have worked at least 500 hours over three years and have turned 21 by the end of the third consecutive 12-month period to participate in a 401(k) plan. Additionally, beginning in 2025 under the SECURE 2.0 Act, employees who have completed two consecutive 12-month periods of employment during which they worked at least 500 hours and turned 21 by the end of the second successive 12-month period are eligible to enroll in either a 401(k) or 403(b) plan based on their employer's type.
If you need assistance determining which of your employees would now be eligible, contact our consulting team; we are happy to help!