Can Part-Time Employees Contribute to a 401(k)?

In previous years, part-time employees weren’t eligible to receive the same 401(k) options as full-time employees. Fortunately for part-time workers, times have changed.

Now, employers can incentivize employee retention and provide part-time employees with the opportunity to plan for their retirement by offering 401(k) enrollment. This is thanks to the Secure Act 2.0, enacted on January 1, 2023.

This guide will provide you with everything you need to know about part-time employee eligibility for enrollment in an employer sponsored 401(k) plan.

What are the eligibility requirements for part-time employees?

If an employee has worked between 500 and 1,000 hours per year during a three year period, they are considered long-term, part-time employees. These employees are eligible to participate in the employer-sponsored 401(k) plan once they meet the plan’s minimum age. Note than employees who worked 1,000 or more hours in a year would be full-time qualified.

When can long-term, part-time employees begin participating?

Though the Secure Act states that employers must provide qualified workers with the option to participate in an employer-sponsored 401(k) by 2024, employers may allow long-term, part-time employees to participate sooner.

How can employers begin to implement the change?

With this change now on the horizon, employers need to be prepared. A few ways employers can get ahead and prepare part-time workers for this opportunity are as follows:

• Communicate with your employees: It is essential that eligible part-time employees are aware of their 401(k) enrollment options, whether an employer chooses to send out a companywide newsletter, an email, hold a meeting, or all of the above. Ensure that all of your employees are aware of their enrollment options and eligibility requirements.
• Adjust onboarding practices for incoming employees: Now that part-time employees who meet the eligibility criteria can participate in a company-sponsored 401(k) plan, this is something that will need to be communicated to new employees during the onboarding process. Communicating to incoming part-time employees their retirement savings options can also support employee retention.
• Work with your 401(k) provider: Communicating with your company’s 401(k) provider can prove beneficial when it comes to changes in 401(k) eligibility criteria. If your plan administrator has questions about eligibility for your employer-sponsored 401(k) plan, they can reach out to the 401(k) provider. The provider can also help add new employees to the plan.

Gone are the days when only full-time employees were eligible for 401(k) plan participation. Now, companies are choosing (and required) to provide eligible part-time workers with the chance to save for their retirement. Now is the time for employers to inform their employees of their options and for employees to be aware of the eligibility requirements.

If you have questions about part-time employee eligibility requirements for 401(k) enrollment, don’t hesitate to visit the ePlan Help Center or reach out to our support team.

This content is for educational purposes only, is not intended to provide specific legal or financial advice and should not be used as a substitute for the legal advice of a qualified attorney or financial professional. The information may not reflect the most current legal developments, may be changed without notice, and is not guaranteed to be complete, correct, or up to date.