Recent laws have expanded who must be allowed to participate in employer retirement plans. Historically, employers have been able to require employees to complete up to 1,000 hours of service in a plan year to be eligible to participate in a 401(k) plan; however, the two SECURE acts have changed that. The original SECURE Act of 2019 required employers to permit part-time employees to participate in the elective deferral portion of their 401(k) plan if they completed three consecutive years of 500 hours of service, disregarding service before 2021.
SECURE 2.0, enacted in 2023, revised the requirement for covering part-time employees. Effective January 1, 2025, employers must permit part-time employees who complete at least 500 hours of service for two consecutive years to participate in the elective deferral portion of their 401(k) plan, disregarding service prior to 2023. This revised requirement also applies to 403(b) plans. (The SECURE Act of 2019 applied only to 401(k) plans).
While the rules expanding participation to long-term part-time employees do not affect participation until 2024, they do require current action. Because the requirement looks at service completed in prior years, employers should already be tracking employee hours in accordance with both acts. Employers should also coordinate with HR, payroll service providers or another consultant to ensure that hours are being tracked properly and to ensure that tracking will be reflected in retirement plan eligibility beginning in 2024. An illustration of these tracking requirements is below, ordered by the year an employee started working.
Employer Tracking Table for Part-Time Employees
| Start of Employment | Act | Applicable Plan | Hours Needed for Eligibility | Years of Service for Eligibility | First Year of Coverage |
| 2021 or earlier | The SECURE Act of 2019 | 401(k) | 500-999 hours per 12-month period (beginning January 1, 2021) | 3 consecutive years (beginning January 1, 2021) | 2024 |
| 2022 | The SECURE Act of 2019 | 401(k) | 500-999 hours per 12-month period | 3 consecutive years | 2025 |
| 2023 and beyond | SECURE 2.0 | 401(k) or 403(b) | 500-999 hours per 12-month period | 2 consecutive years | 2025 (or later) |
Other Important Considerations
Beyond the counting of hours, there are several aspects of these rules that employers should keep in mind. First, employers do have a choice about who they allow to participate. The SECURE Acts set minimal requirements that allow long-term part-time employees who regularly complete 500 hours or more to be allowed to participate. However, employers can choose to be more generous than required by the SECURE Acts, either by removing the plan’s hours requirement for eligibility, or simply setting the hours requirement at no more than 500 hours (either of which would eliminate the need to track part-time employee hours over multiple years).
Also note that while eligible part-time employees must be allowed to participate in the plan, employers are not subject to traditional non-discrimination testing with regard to long-term part-time employees who participate due to this rule, and employers are not required to make matching or nonelective contributions for these employees.
Finally, note that the new requirements do not apply to nonresident aliens who do not have U.S. earned income, or to employees who are covered by a collective bargaining agreement.
Contact a member of our benefits team with any questions or to discuss these changes.
2023 summer associate Grace Nyikes contributed to this advisory. Grace is currently a student at the Georgetown University Law Center.