Smart Benefits: Got Part-Timers? Clock Starts on Their 401(k) Eligibility Jan 1

Smart Benefits: Got Part-Timers? Clock Starts on Their 401(k) Eligibility Jan 1

While employers await additional guidance from regulators on certain SECURE Act provisions, there’s one that goes into effect Jan. 1 — and it affects companies with part-time workers.

The SECURE (Setting Every Community Up for Retirement Enhancement) Act allows some long-term part-time employees to make elective deferrals to a 401(k) plan. While these workers can’t contribute until 2024, you’ll need to start tracking their hours in January.

That’s because to be eligible to participate, employees must work at least 500 hours in three consecutive years, making the earliest employees will be able to enter plans 2024 (you’re not required to take into account hours of service before Jan. 1, 2021). Any employee who doesn’t meet these requirements as well as those who belong to an excluded class that isn’t based on service can still be excluded.

While the Act requires that eligible part-time employees be allowed to make deferrals, employers don’t need to making matching or non-elective contributions for these participants who meet the 500-hour rule, nor do they have to include these individuals for the following purposes:

• Nondiscrimination testing
• Coverage testing
• Top-heavy testing

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Joe Vasko is a Director, Retirement Administration, at The Hilb Group of New England. He has more than 25 years of experience in the design and administration of all types of employer-sponsored retirement savings plans, including 401(k), 403(b), profit sharing and defined benefit. His consultative approach to plan evaluation, selection and design ensures a program that’s customized to each client’s specific needs.