PLANSPONSOR - October/November 2020 - 10

UPFRONT
Expanding Plan Access to Part-Timers
THE PEW Research Center reveals that
over one-third of employed Americans
(35%) today work for an organization that
has no employer-sponsored retirement
plan, says Ty Stewart, CEO and president of
Simple Life Insure. " This is a huge reason
legislation such as the SECURE [Setting
Every Community Up for Retirement
Enhancement] Act is increasingly looking
to address retirement security. "
The SECURE Act's requirement for
including part-time employees in 401(k)
plans is akin to the universal availability
rule for 403(b) plans, says David Swallow,
managing director of consultant relations
at TIAA. The universal availability rule
says, with respect to elective deferrals, if
one employee of an employer that maintains
a 403(b) may participate, then all of
its employees must be able to participate.
Except collectively bargained plans,
the SECURE Act demands that 401(k)
plans have a dual-eligibility requirement
under which an employee must either
work at least 1,000 hours in one year or 500
hours in each of three consecutive years.
Next year is when employers must start
counting hours for eligibility purposes, the
act stipulates. Plan sponsors may choose to
let part-timers share in employer contributions
of all types, but they are required only
to let them make deferrals. The SECURE
Act also says plan sponsors " may elect to
exclude " these employees from nondiscrimination
and coverage testing, as well
as from the application of top-heavy rules.
Sponsors will have some administrative
challenges to work through, Swallow
observes. For industries where part-timeworker
turnover is an issue, there will be
more small account balances to deal with,
and missing participants could become a
problem. He says sponsors should redetermine
what solution for handling small
balances-i.e., retain, automatically cash
out, or automatically roll over-would best
suit their plan. Plus, now is a good time to
review their procedure, if they have one, for
finding missing participants, he says.
Lisa A. Tavares, a benefits and
10 PLANSPONSOR.COM October - November 2020
Art by Claudi Kessels
executive compensation partner at Venable
LLP, and a former attorney with the IRS
Office of Chief Counsel, agrees that the
issue of missing participants may grow-
" kind of the same as with automatic enrollment. "
She notes that when employers
in retail or other industries began autoenrolling
employees, it produced an uptick
in small accounts. Short-term workers
might forget they had a 401(k) account or
not call the recordkeeper to request a distribution
or rollover, she says.
Administration could be easier if all
employees deferred into the plan, says
Swallow. However, while some sponsors
may find tracking hours for three consecutive
years to be complicated, to provide
employer contributions to part-timers-
and count hours for vesting-gets even
more complex. And newly eligible parttime
employees may now get vesting credit
for years before 2021.
Such time must be accounted for,
notes Tavares. Some plan sponsors do
not track exact hours toward eligibility
http://www.PLANSPONSOR.COM
PLANSPONSOR - October/November 2020

Table of Contents for the Digital Edition of PLANSPONSOR - October/November 2020
