With the turn of the year fast approaching, companies need to be aware of new regulations regarding long-term part-time employee eligibility due to the impending SECURE Act measures. This foreseen change will require modification of 401(k) plans in order to accommodate the new rules, prompting an urgency for compliance by sponsors.
Originally passed in 2019, the SECURE Act’s long-term part-time employee rule had set the compliance date for January 1, 2024. Despite the seemingly distant due date, we find that its initiation is now right around the corner. This forthcoming change mandates 401(k) plan sponsors to permit long-term part-time employees to partake in their plans starting from the beginning of the new calendar year.
A detailed overview of the legislation can be found on JD Supra.
As the law currently stands, employers are not required to include part-time employees working less than 1,000 hours per year in their 401(k) plan. However, once the new SECURE Act measures take effect at the start of 2024, employers will be mandated to include part-time staff who have completed at least 500 hours of service for three consecutive years.
Companies sponsoring 401(k) plans are urged to ensure compliance by amending their plan’s specifications, updating administrative procedures and ensuring employee communication materials appropriately reflect these new requirements. The impending changes should prompt action to ensure a smooth and legal transition into the new measures.
Long-term part-time employees stand to benefit significantly from these forthcoming changes. By becoming eligible for 401(k) plans, these employees will now have the opportunity to build up their retirement savings, bringing a profound impact to retirement plans for part-timers across the nation.
While the future implications of the SECURE Act changes in the corporate world are extensive, focus should remain in making sure these vital changes occur in a compliant and timely manner. With the new year growing ever closer, now is the time for companies to prepare.