SECURE Act - Part-Time Employee Participation

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) includes a provision that would require 401(k) plans to cover certain part-time employees who were previously excludable.

Under prior law, 401(k) plans were permitted to exclude employees who failed to complete at least 1,000 hours of service in a 12-month eligibility period. Section 112 of the SECURE Act provides that, for plan years beginning after December 31, 2020, 401(k) plans must also cover part-time employees who completed at least 500 hours of service each year for three consecutive years and are age 21 or older. The provision also stipulates that service prior to January 1, 2021, is not counted for purposes of this new rule, meaning that January 1, 2024, is the earliest anyone could qualify for participation under the new regulation.

An employer may elect to exclude these participants from safe harbor contributions, nondiscrimination testing, and top-heavy requirements, but if the employer provides matching or non-elective contributions, participants must be credited with a year of vesting service for each year in which they complete more than 500 hours of service.

Interested in learning more about the SECURE Act? Download the SECURE Act eBook from the Schneider Downs Retirement Solutions team for a full overview of provisions and highlights at www.schneiderdowns.com/secure-act-ebook.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2021 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
2022 Retirement Plan Limitations
Approaching Year End, Beware of the Lurking Ninja Tax
SDWMA Financial Planning Video Series Now Available
SDWMA Spotlight: The Voyage Program
Social Security’s Inadequate Cost-of-Living Adjustment
More Potential Changes to the U.S. Retirement System Are on the Horizon. Here’s What’s in Store…
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.

×