News

If you manage a retirement plan, the evolving landscape is something you need to pay attention to. The rules are changing, and it’s crucial to understand how these changes can impact your plan management in the coming years.

The Evolution of Long-Term Part-Time Employees

In December 2019, a significant shift occurred with the introduction of the concept of long-term part-time employees. But what does this mean? Simply put, a long-term part-time employee is someone who, despite not being initially eligible for your plan, has worked at least 500 hours for you during the years 2021, 2022, and 2023. This newfound eligibility allows them to defer in the plan starting in 2024.

Secure 2.0 and the Changes for 2025

Secure 2.0 entered the scene, bringing adjustments to the criteria. For 2025, the required consecutive years of 500 hours each has reduced from three to two. This means that for 2025 eligibility, you should consider the years 2023 and 2024.

Who Qualifies?

To be deemed a long-term part-time employee, the individual must be over 21 and have worked over 500 hours each year between 2021, 2022, and 2023. It’s crucial to note that the neighbor’s dog is not a long-term part-time employee – eligibility is exclusive to human contributors.

Plan Considerations

The distinction between long-term part-time employees and other employees is crucial, especially when it comes to plan considerations. If your plan has a waiting period, you don’t have to provide long-term part-time employees with certain benefits. However, if your plan has a shorter waiting period or none at all, these employees are included in various plan calculations, including testing, contributions, and safe harbor matches.

Counting Hours – No Exclusions

One significant change is that all plans, regardless of size, are required to count hours. Even if you have a small plan with just one employee, you are subject to the new rules. This ensures that no one slips through the cracks.

Vesting and Testing

Long-term part-time employees now receive a year of service for every year they work over 500 hours. This can significantly impact vesting schedules. Additionally, you can set up a plan to exclude all long-term part-time employees from nondiscrimination and coverage testing.

Form 5500 Filing and Auto Enrollment

While there are nuances in the rules regarding Form 5500 filing and auto enrollment for long-term part-time employees, specifics may require further clarification. It’s advisable to stay updated on any additional guidance provided.

In Conclusion

Staying informed about the new rules is more critical than ever. Employers need to track hours diligently, especially for those who may have been overlooked in the past. The evolving landscape demands attention, and the key to successful plan management is knowledge. Stay tuned for more updates, and feel free to reach out with any questions.