Long-term part-time employees (LTPT) can present unique challenges for plan sponsors when it comes to their retirement plans. Especially now that the SECURE Acts have introduced important changes to the eligibility requirements and participation options for LTPT employees. Plan sponsors must understand these rules to ensure their retirement plans comply with the new legislation. Ready for guidance? We’ve broken down what you need to know about long-term part-time employees.
Understanding Long-Term Part-Time Employees
Long-term part-time employees are individuals who work at least 500 hours per year, but less than 1,000 hours per year. Originally, employers were not required to offer any retirement savings options to LTPT employees. However, with a growing trend of employers hiring part-time employees to supplement their workforce, a need to provide these employees with greater access to retirement savings arose. Enter the SECURE Acts. As of 2024, the law requires employers to allow LTPT employees to participate in 401(k) plans if they have worked at least 500 hours per year for two consecutive years.
Contribution Options for LTPT Employees
LTPT employees who participate in 401(k) plans can now contribute to the plan if they meet the eligibility requirements. Employers are NOT required to offer a safe harbor match or non-elective contribution to eligible LTPT employees who contribute to the 401(k) plan. Plan Sponsors may elect to provide these contributions to LTPT participants, but they are not obligated to do so under the law.
Benefits of Including Long-term Part-time Employees
Including LTPT employees in retirement plans can have many potential benefits for both the employee and the employer. It can help attract and retain talent and promote greater retirement security for employees. However, employers need to be aware of potential challenges and strategies for managing LTPT employee inclusion.
Navigating LTPT Challenges and Ensuring Compliance with the Rules
Tracking hours and determining eligibility can be more complex for LTPT employees who do not work a standard 40-hour workweek. Thus, best practices for tracking hours and determining eligibility need to be established to ensure compliance and reduce the risk of penalties and legal consequences.
At RPCSI, we specialize in providing comprehensive retirement plan consulting and administration services. We understand the complexities of retirement plan regulations and assist plan sponsors in navigating the specific regulations and compliance requirements associated with LTPT employees.
We’ll help identify and implement best practices for tracking hours, determining eligibility, and calculating employer contributions (if elected) for LTPT employees. Through our expertise, plan sponsors can feel confident in their ability to include long-term part-time employees in their retirement plans while meeting all legal obligations.
If you need further assistance or would like to schedule a consultation, please contact us today. Our team is here to support you in designing, implementing, and managing retirement plans for your organization's needs.
