There’s good news for long-term part-time employees when it comes to retirement savings. The Setting Every Community Up for Retirement Enhancement (SECURE 2.0) Act of 2022 increased options for long-term part-time employees to make elective deferrals to an employer’s 401(k) plan.
A part-time employee’s eligibility to start contributing to an employer’s 401(k) will depend on his or her start date and the number of hours worked. “Employers maintaining a 401(k) must offer it to any employee who either works 1,000 hours throughout the year or 500 hours per year for three consecutive years,” says Scott Green, a financial advisor with Mot Financial Services.
The requirements for participation will be even lower next year. Starting in 2025, SECURE 2.0 reduces the work requirement to 500 hours per year for two years instead of three.
Experts recommend that HR professionals inform employees, both full and part-time, of their plan’s options and encourage them to set the annual limit as their contribution goal for next year. While not everyone will fund retirement accounts up to the maximum, the contribution cap is a good goal to pursue. Some have noted that despite the sharp declines in stock and bond funds this year, 401(k) plans continue to see steady contributions.
With the expanded access for part-time employees and an annual increase in contribution limits for 2024, a good message for plan participants is that increasing your contribution rate, even a little, can make a big difference in your long-term retirement savings.