The Long-Term Part-Time (LTPT) rule is a provision of the Secure Act 1.0 and 2.0 that addresses the retirement security of part-time employees. Starting on 1/1/2024, the LTPT rule requires 401(k) plan sponsors to allow employees who meet the following requirements to participate in their employer retirement plan:
- 500 hours of consecutive service annually for the prior three consecutive years
- Attain the plan’s eligibility age
Plan sponsors are not required to provide a match or non-elective contribution to LTPT employees. However, if the plan sponsor decides to provide a match, the contribution will be subject to the plan’s vesting schedule, similar to full-time employees.
Effective 1/1/2025 under the Secure Act 2.0, the Long-Term Part-Time eligibility requirement will be shortened from three consecutive years with 500 hours worked to two consecutive years and will apply to both 403(b) plans and 401(k) plans.
It is important for plan sponsors to understand whether their plan currently excludes any classes of employees and if the exclusion will apply to any LTPT employees. In addition, plan sponsors should verify if their recordkeeper, TPA, payroll provider, or internal systems can track employee hours worked to manage eligibility for LTPT employees. We are waiting for additional regulatory guidance on the LTPT provision and are anticipating that information sometime in December of 2023.
If you would like a review of how this provision or the Secure Act may impact your plan, please contact the team at Innovative Investment Fiduciaries by calling (856)-242-3343 or email resources@iifria.com and we will be happy to assist.