PLANSPONSOR - February/March 2020 - 12

UPFRONT
When Part-Time Employees Join the Plan
would make relatively small contributions,
could have on a retirement plan
and made provisions to pre-empt this. For
one, Curtin notes, plan sponsors may let
part-time employees share in employer
contributions of all types, but the sponsor
is only required to let these employees
make employee deferrals. " The law is
not burdening employers with the costs
of making additional employer contributions, "
she says.
Second, plan sponsors do not have
to count part-time employees for nondiscrimination
testing. " This includes actual
deferral percentage [ADP], coverage and
top-heavy testing, so including parttime
employees in the plan won't do any
damage to testing, " Curtin says.
She says another component of the
law is that part-time employees will receive
vesting credit for each year they worked
500 hours or more, rather than the 1,000
hours needed by full-time employees.
Plan sponsors should pay attention to
this because even if part-timers do not
share in employer contributions, if one
of these employees switches to full time
and becomes eligible for employer contributions,
he will get vesting credit for
previous years he worked 500 or more
hours, starting with 2021.
The provision for enrolling partNOT
ALL communities that will gain
from the Setting Every Community Up
for Retirement Enhancement (SECURE)
Act are geographical. The act requires
401(k) plan sponsors to let a segment of
underserved employees-their long-term
part-time workers-participate in the
company plan.
Specifically, explains Jessica Curtin,
compliance analyst at Paychex, if a parttime
employee has worked at least 500
hours for three consecutive years and
meets the minimum age requirement for
eligibility to enroll, he must be offered the
opportunity to do so. This requirement
12 PLANSPONSOR.COM February - March 2020
goes into effect for plan years beginning
after this December 31.
This does not mean part-time
employees get enrolled in the plan in
2021; rather, 2021 is when employers
must start counting hours for eligibility
purposes. " The practical effect is that it
won't be until after 2023 that plan sponsors
will have their first batch of longterm,
part-time employees covered in
their plan, " says Randall Tracht, a partner
with Morgan Lewis & Bockius LLP.
Lawmakers foresaw the negative
effects that adding a potentially large
number of lower-income workers, who
Art by Luyi Wang
time employees will appear on a remedial
amendment list (RAL) issued by the IRS,
so plan sponsors have until the end of the
year that list is published to make sure
their plan is amended, Tracht says.
Tracht adds that there may be higher
turnover among part-time employees,
making them a more difficult population
to administer.
" Staying in tune with any additional
guidance is important, " Curtin observes.
" There are a number of pieces of guidance
requested from the IRS and Department
of Labor [DOL] to clarify some rules in the
new law. " -Rebecca Moore
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PLANSPONSOR - February/March 2020

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