With the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, long-term, part-time employees, who might otherwise be excluded from participation in their Employer’s 401(k) Plan, must now be given the opportunity to participate, beginning on January 1, 2024, provided the part-time employee meets certain requirements. Prior to passing the SECURE Act, employers were able to elect to exclude part-time employees who failed to work at least 1,000 hours of service in a designated period. The SECURE Act now requires employers offer participation in the plan to their part-time employees, who complete at least 500 hours of service, in three-consecutive 12-month periods (counting only periods of service completed on or after January 1, 2021), thereby allowing these employees the chance to enroll on or after January 1, 2024.
While employers are not required to make any matching or discretionary contributions, it could still mean additional expenses for the company. Generally, Employers are required to include audited financial statements with their Form 5500 submission if the number of eligible employees reaches 100 or more. If a business owner has enough long-term, part-time employees, it could mean thousands of dollars a year on an annual audit that was not previously required.
While this change doesn’t go into effect until January 1, 2024, it’s important to begin planning now as the clock is already running on the hours worked for these types of employees. If you feel like your business may fall into this situation, please contact our office with any questions or assistance.