What Do You Need To Know About “Long-Term, Part-Time Employees”?
First – Who is considered a Long-Term, Part-Time Employee (LTPTE)?
Under current law, LTPTEs are any employee who, in each of the last three consecutive years (beginning in 2021), worked between 500 and 999 hours. And, this currently only applies to 401(k) plans.
However, effective in 2025, SECURE 2.0 revised the LTPTE requirements:
- Eligibility will be shortened from three consecutive years to two consecutive years if the employee is at least 21 years of age (eligibility and vesting service prior to 2023 are excluded).
- These laws are broadened to include ERISA covered 403(b) plans.
Importantly, some key provisions are not changing:
- LTPTEs that become eligible for elective deferrals can still be ineligible from other types of contributions (e.g., employer matching or nonelective contributions) until they meet the plan’s eligibility requirements.
- LTPTEs who are otherwise excluded from the plan will not be included in required nondiscrimination testing.
What should you consider regarding LTPTEs?
- Maintain Accurate Records of all employees and share that data with us (as well as your payroll provider) so that we can help track employees’ statuses.
- Consider Plan Design opportunities to help manage this new requirement. If you are concerned about LTPTEs’ participation in your plan, contact your Alliance consultant to review your plan specifications.
- Form 5500 Requirements and the chance that you may require an audit if you grow to become a “large” employer. LTPTEs would only count towards filing status if they actively participate and have a balance in the plan.