SECURE Act Provisions for Long-Term Part-Time Employees
The SECURE Act, passed and signed into law in 2019, contained the most extensive retirement plan legislation since the Pension Protection Act of 2006. One of the goals of this legislation was to provide opportunities for more people to be able to save for retirement, including part-time employees.
One of the provisions included in the SECURE Act requires that 401(k) plans permit long-term part-time employees (LTPT) to make salary deferrals to the plan. An LTPT employee is defined as:
- An employee who has completed 3 consecutive 12-month periods with at least 500 hours of service during each of those periods, and
- Who has reached the age of 21 by the end of the 3-year period.
The law permits plans to ignore years of service prior to January 1, 2021. This means that LTPT employees are not required to be included for deferral purposes before 2024. There is, however, pending legislation that could accelerate the effective date to 2023.
LTPT employees who meet these requirements will be able to make salary deferrals to the plan, but they may be excluded from employer contributions and testing.
What to Do Now
401(k) solo plans that currently do not have a filing requirement and plans whose participant count is close to the audit threshold will need to review their census and participant counts for possible changes in filing requirements.
Please reach out to a member of our Qualified Plan Administration and Consulting (QPAC) team for a further detailed discussion.