What Plan Contacts Need to Know About the New Long-Term Part-Time Rule (SECURE 2.0) 

A key provision of the SECURE 2.0 Act is now in effect, and if you sponsor a retirement plan, it is important to ensure your operations are up to date.

For plan years beginning after December 31, 2024, the eligibility timeline for long-term part-time employees (LTPTs) to contribute to 401(k) plans, and to ERISA-covered 403(b) plans, has changed. For calendar year plans, that means January 1, 2025.

Here’s what plan sponsors need to know — and what steps to take now.

What’s Now Required Under SECURE 2.0?

403(b) Plans Now Included

ERISA-covered 403(b) plans must now track LTPT service for elective deferral eligibility.

However:

• 403(b) plans that are not subject to ERISA are not subject to the ERISA LTPT rule
• Non-LTPT part-time employees may still be excluded
• Student employees may continue to be excluded even if they otherwise satisfy LTPT service conditions

Vesting Rules still matter

If employer contributions are provided to LTPT employees, special vesting counting rules apply.

• For ERISA-covered 403(b) LTPT employees, each 12-month period with at least 500 hours is treated as a vesting year, but periods beginning before January 1, 2023 are not counted
• For 401(k) LTPT employees, IRS materials reflect a different vesting cut-off date, generally allowing pre-2021 periods to be disregarded

Because of this, accurate service tracking remains important even when LTPT employees are given only elective deferral rights at the outset.

Steps to Take Now

1. Confirm Your Plan Is Operating in Compliance

For most nongovernmental 401(k) and 403(b) plans, formal SECURE 2.0 amendments are generally due by December 31, 2026, but operations must already comply. Review your plan’s eligibility provisions and administrative practices to confirm they align with the current LTPT rules.

2. Review Payroll and Time-Tracking Systems

To determine eligibility, you’ll need to confirm whether employees met the 500-hour requirement in both 2023 and 2024. If your payroll provider or third-party administrator (TPA) hasn’t already flagged this, now is the time to initiate the conversation.

3. Prepare Clear Employee Communications

Employees who were previously excluded may now be eligible to participate. Providing timely and transparent information ahead of enrollment periods can support employee engagement and avoid confusion.

4. Decide Whether to Extend Employer Contributions

The law requires deferral access for LTPT employees, but it does not require employers to provide matching or profit-sharing contributions solely because an employee becomes eligible under the LTPT rule. If you decide to extend employer contributions to this group, confirm that vesting service is being tracked correctly and that plan operations follow the document’s contribution and vesting provisions.

5. Coordinate with Your TPA or Recordkeeper

Each provider handles tracking and reporting differently. Best practice is to confirm:

• Who is responsible for tracking eligibility
• Who is responsible for vesting service
• How LTPT employees will be coded in payroll and recordkeeping systems
• Whether employee notices and enrollment materials are being updated consistently

Why It Matters

These expanded 401(k) rules for part-time employees reflect a growing effort to broaden retirement plan access across the workforce. While the administrative requirements are more complex, ensuring compliance will help your company avoid penalties and provide valuable benefits to a wider group of employees.

If you’re unsure whether your plan is in compliance, we’re happy to review your current setup and help you move forward with confidence.

Connect with a specialist.