401(k) Plan Rules for Long-Term Part-Time Employees

The initial SECURE Act created a new class of plan participants called Long-Term Part-Time Employees or LTPT Employees. Employees in this new class must be given the right to make deferrals to 401(k) plans.

Certain plans may need to allow LTPT Employees to enroll starting January 1, 2024. The Treasury Department released proposed regulations to implement rules relating to LTPT Employees on November 27, 2023.

Definitions and Requirements

LTPT Employee: An LTPT employee is an individual who meets the following criteria:

  • Worked three consecutive 12-month periods
  • Worked at least 500 hours of service in each of those three 12-month periods

Hours/Years of Service: Hours and years of service are generally calculated the same as hours and years of service for other plan eligibility rules.

Exclusions: The rule does not apply to employees covered under a collective bargaining agreement and non-resident aliens with no U.S.-source earned income. 

Age 21 Criteria: Plans may also add additional criteria for employees to qualify for LTPT status that requires employees to reach age 21 by the end of the three-consecutive-year period to qualify. 

Election Rights: Plans are required to give qualifying LTPT Employees the ability to make elective deferrals in retirement plans. 

Qualification Timing: The initial 12-month period to determine eligibility for LTPT employees must be based on the employee’s date of hire. Subsequent 12-month periods may be determined by the first day of the plan year.

Entry Dates: Plans may use the same entry date timing for LTPT employees as applied to other eligible employees.

Employer Matching: Plan sponsors are not required to provide matching or non-elective contributions to LTPT employees. However, plan sponsors may elect to do so. This employer discretion is completely independent of whether the plan sponsor makes such contributions to other employees. A differential in matching contributions (between LTPT employees and other employees) would also not cause a 401(k) plan to fail the nondiscrimination tests.

Vesting: LTPT employees obtain a year of vesting service for each 12-month period in which they are credited with at least 500 hours of service. LTPT employees incur a one-year break in service when they have not completed at least 500 hours.

Top Heavy Considerations: Plan sponsors may exclude all LTPT employees from the application of top-heavy testing. However, LTPT employees are not excluded in determining whether the plan is a top-heavy plan.

Three-Year Rule Becomes Two-Year Rule

The duration requirement for LTPT employee qualification drops from three years to two years based on amendments enacted in the SECURE 2.0 Act.

Plan Years Before 2025: For plan years beginning before 2025, LTPT employees must meet the 500-hour threshold for three consecutive years. (As enacted in the initial SECURE Act.) 

Plan Years 2025 and Beyond: For plan years beginning after December 31, 2024, the three-consecutive-year requirement drops to a two-consecutive-year requirement. (Reflecting changes enacted in the SECURE 2.0 Act.)

Employer Action Item

Plan sponsors should review employment records from 2021 through 2023 to determine whether any LTPT employees should be given the opportunity to make elective deferrals in 2024. Note that 12-month periods starting on or after January 1, 2021, would count in determining if an employee qualifies as an LTPT employee.


Notice of Proposed Rulemaking: Long-Term, Part-Time Employee Rules for Cash or Deferred Arrangements Under Section 401(k), 26 CFR Part 1, 88 Fed. Reg. 82796 (Nov. 27, 2023).


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