Blog
October 26, 2023
Long-Term, Part -Time Employee Rule Begins January 1, 2024. Are you Ready?
In the year 2019, congress passed the SECURE Act, one of the many changes that allowed long-term, part-time (LTPT) employees to join 401(k) plans starting January 1, 2024.
Under this long-term, part-time employee rule, part-time employees who work at least five hundred hours, during three consecutive 12-month periods, must be eligible to participate in the plan for purposes of elective deferrals (employee funds only). The 12-month period began as of January 1, 2021, however the first time an employee could become eligible under this rule is January 1, 2024.
We highly recommend you look back to January 1, 2021, to see if you have any eligible long-term part-time employees (LTPT).
For employees becoming eligible under this new rule, this required eligibility is only to make employee deferrals. Employers are not required to give these participants employer contributions.
The decision whether or not to expand eligibility for employer contributions to eligible employees is an option this year of the CARES SECURE Amendment being provided by Benefit Equity Inc. If you do allow employees to get employer contributions, those employees will receive vesting credit from their date of hire based on a 500-hour threshold.
Employers should count eligible hours on the date that an employee’s employment begins. If the employee does not complete the required hours of service during the initial 12-month period of employment, employers would then use the first day of the plan year for hour-counting purposes going forward.
Congress also passed SECURE 2.0 that shortened the eligibility for LTPT to two years, and this begins on January 1, 2025.
If you have questions about the rules for LTPT employees under either the original SECURE Act, or the new SECURE 2.0 Act, please contact your administrator at Benefit Equity Inc. at (714) 480-1364 or message us at www.benefitequity.com/connect.
Author: Robert Gorelick, APA, and Founder Benefit Equity Inc
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