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The SECURE Act of 2019 (SECURE 1.0) required that long-term, part-time (LTPT) employees be allowed to defer into 401(k) plans beginning in 2024.
The definition of an LTPT employee is one who has worked 500 or more hours in three consecutive years (but who does not qualify as a full-time employee). The first year for counting hours of service under this provision is 2021. As a result, an employee who worked 500 or more hours in 2021, 2022, and 2023 must be allowed to defer in 2024. However, the plan sponsor is not required to make employer contributions or matching contributions for the LTPT employees even if those contributions are made for full-time participants. If the employer wants, though, matching and employer contributions can be made for the LTPT employees. That is an issue that financial professionals should discuss with plan sponsors and help them make decisions. Most likely, plan sponsors will want to make contributions if the LTPT employees are important to the company’s business.
The views expressed here are those of Fred Reish. They should not be construed as investment advice or as the views of Hartford Funds or the employees of Hartford Funds. They are based on available information and are subject to change without notice. The information above is intended as general information and is not intended to provide, nor may it be construed as providing, tax, accounting or legal advice. As with all matters of a tax or legal nature, please consult with your tax or legal counsel for advice. This material and/or its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Fred Reish.
MFDC074 3313993
JD, Partner, Faegre Drinker Biddle & Reath LLP
Fred Reish is an ERISA attorney whose practice focuses on fiduciary responsibility, retirement income, and plan operational issues. He has been recognized as one of the “legends” of the retirement industry by both PLANADVISER magazine and PLANSPONSOR magazine.