Insights

Select Part-Time Employees Must Be Allowed to Participate in Company 401(k) Plans

Prior to the SECURE Act, a plan could exclude employees who work less than 1,000 hours during a designated 12-month period. The SECURE Act introduced the concept of “long-term part-time employees.” 2024 will be the first year in which 401(k) plans must allow long-term part-time employees to make elective deferrals.

• Under the SECURE Act, long-term part-time employees are those who have worked at least 500 hours during each of the three immediately preceding 12-month periods. So, you will look at hours worked in 2021, 2022 and 2023 to see if you have any long-term part-time employees for 2024.
• SECURE 2.0 expanded the long-term part-time employee definition to reduce the three 12-month periods to two 12-month periods, beginning in 2025. So, in 2025, you will look at hours worked in 2023 and 2024 to identify any long-term part-time employees.

Importantly, plans are NOT required to provide any employer contributions (including, for example, safe harbor contributions or top-heavy contributions) for long-term part-time employees.

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The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.