SECURE Act: Changes To 401(k) Plan Eligibility And Vesting For Part-Time Employees

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 contained the most significant legislative changes to the private-sector retirement system in decades. One of the SECURE Act's provisions changes the 401(k) plan eligibility requirements for part-time employees.

Related Read: What You Need to Know About the SECURE Act

UNDERSTANDING THE RULE

Previously, part-time employees could be excluded from participating in their employer's 401(k) plan if they did not work 1,000 hours in a 12-month period. However, effective with plan years beginning after December 31, 2020, the SECURE Act requires employers to include long-term, part-time employees as eligible participants in 401(k) plans, except in the case of employees under a collectively-bargained plan. Under the SECURE Act, part-time employees will be eligible to participate if they have completed at least 500 hours of service each year for three consecutive years and are at least 21 years