LONG-TERM PART-TIME EMPLOYEES
Creating Clarity for Your 401 ( k ) Plan in 2024
Welcome to 2024 , a pivotal year for 401 ( k ) plan sponsors , shaped significantly by the Secure Act passed in late 2019 . Understanding the nuances of this Act , particularly regarding Long-Term Part-Time Employees , is essential for plan sponsors .
Who Qualifies as a Long-Term Part-Time Employee ?
An employee is considered long-term and part-time if they :
• Never Worked 1000 Hours in a Calendar Year : But have consistently been part of your team .
• Work 500-999 Hours Over Three Consecutive Years : Important to note : Years before 2021 are not included in this calculation . However , in 2025 , the consecutive number of years will be reduced to two years .
Implications for Plan Sponsors
Understanding these criteria is key . Here ’ s what you need to know :
• Employer Contributions Are Optional : You ’ re not obligated to make contributions for these employees , but you have the option to do so .
• Exclusions from Testing : These employees are not required to be included in the plan ’ s non-discrimination testing .
• Top-Heavy Plan Flexibility : They can be excluded from Top- Heavy minimum contribution requirements .
• Age Consideration : Eligibility requires the employee to be at least 21 years old .
Feeling a bit overwhelmed ? Here are some strategies to streamline the process :
• Rethink Service Requirements : Allowing earlier deferrals to 401 ( K ) can be advantageous in a competitive job market .
• Job Class Exclusions : While you can apply these exclusions , ensure they ’ re not indirectly excluding part-time workers . For example , excluding all janitorial staff regardless of their status is acceptable .
Navigating Complexities with Confidence
The intricacies of these regulations can be challenging . Ensuring eligible employees are not excluded is crucial for compliance and employee satisfaction . Regular consultations with third-party administrators and plan recordkeepers are recommended to stay on track .
If the specifics seem daunting , that ’ s where Rea & Associates steps in . Our expertise in navigating these waters can bring peace of mind and clarity to your 401 ( k ) -plan management . Let ’ s talk ! Rea is here for tailored advice and support , ensuring your plan not only meets compliance standards but also serves the best interests of your employees .
Together , let ’ s embrace 2024 as a year of proactive planning and strategic opportunities for your 401 ( k ) and your team .
Additional Resources :
• For further insights on the long-term part-time rules under the Secure and Secure 2.0 Acts , explore John Hancock ’ s detailed viewpoint . [ John Hancock Retirement Viewpoints ]
• The American Society of Pension Professionals & Actuaries ( ASPPA ) provides an extensive analysis of the regulations impacting Long- Term Part-Time Employees . [ ASPPA News ]
Steve Renner
Principal - Retirement Plan Services 122 Fourth Street NW
New Philadelphia , OH 44663 steve . renner @ reacpa . com
( 330 ) 308 – 6849