Eligibility requirements for long-term part-time (LTPT) employees were initially established under section 112 of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act). These requirements pertain to eligibility for contributing to CODAs under 401(k) plans, effective for plan years beginning after December 31, 2020. The first potential 401(k) LTPT employee became eligible in the 2024 plan year under the SECURE Act, provided they completed three consecutive 12-month periods, each with at least 500 hours of service. Sections 125 and 401 of SECURE 2.0 lowered these LTPT eligibility requirements and expanded them to include ERISA-covered 403(b) plans starting in 2025.

• Beginning with plan years after December 31, 2024, LTPT employees will be eligible to participate in a 401(k) qualified CODA or ERISA-covered 403(b) plan if they have completed at least 500 hours of service in each of two consecutive 12-month periods and have attained age 21 by the end of the second 12-month period.

On November 27, 2023, the IRS issued proposed regulations related to LTPT employees in 401(k) plans, applicable to plan years beginning on or after January 1, 2024. These proposed regulations define LTPT employees and former LTPT employees and specify methods for crediting their service. Upcoming final regulations related to these employees will not apply earlier than plan years beginning on or after January 1, 2026. Until final regulations are released, 401(k) plan sponsors may rely on guidance in the proposed regulations related to 401(k) LTPT employees.

On October 3, 2024, the IRS issued guidance on LTPT employees in ERISA-covered 403(b) plans, applicable to plan years beginning after December 31, 2024. The IRS plans to issue proposed regulations specific to LTPT employees in ERISA-covered 403(b) plans, which are expected to be similar to the 401(k) LTPT employee rules.

Plan amendments related to SECURE 2.0

Plans must be amended to incorporate any changes related to SECURE 2.0 by December 31, 2026. For collectively bargained plans, the deadline is December 31, 2028, and, for most governmental plans, it is December 31, 2029. This is contingent on the plan having operated in compliance with such changes as if the amendment was in effect from its applicable effective date (or, if later, the date optional SECURE 2.0 provisions were put into place operationally). A full summary of the amendment deadlines is available here.