Long Term & Part Time

The SECURE Act has a number of provisions that will encourage employers to offer retirement plans to employees. But what about those that already offer plans to employees? What is in it for them?

One of the trickier provisions to handle could be the treatment of long term part time employees. Many employers haven’t allowed these employees into their plans in the past because of the effect on testing, audit requirements, matching costs, or perceived lack of potential use by part time employees.

Going forward after December 31st, 2020, employees who have worked over 500 hours a year for 3 consecutive years will be considered long term part time employees (LTPTEs since we need more acronyms). This will extend to deferrals only for those employees. Those deferrals will be excluded for purposes of non-discrimination, top-heavy and coverage requirements.

For implementation,the first 12 month period which must be used to measure satisfaction of the rule begins no earlier then January 1st, 2021. The impact however is significant as Plan Sponsors will have to track this year and hours requirement for all part time employees. If you are a Plan Sponsor that has a large seasonal employee population, Oh Man, this is going to create some headaches.

While the intent of the rule is a great one (more savers, more participation) the side effects are considerable. If you have an employee population that fits this, you will want to speak with your Plan Advisor on possible design changes or platform changes to pursue.