Revised 401(k) Eligibility Criteria for Long-Term Part-Time Employees

The SECURE 2.0 Act expands 401(k) plan eligibility for Long-Term Part-Time (LTPT) employees.

Nov 30, 2023

On December 29, 2022, President Biden signed into law the SECURE 2.0 Act of 2022 (SECURE 2.0). This Act expands the eligibility provisions of 401(k) plans for Long-Term Part-Time (LTPT) employees beginning January 1, 2024.

Note: the information provided below is intended for existing BPAS plans.

Who is eligible?

Under the SECURE Act, LTPT employees are defined as:

• Employees who are at least 21 years old and have worked three consecutive 12-month periods in which they performed at least 500, but less than 1,000, hours of service during each period.

• Plan years prior to January 1, 2021, are disregarded when determining whether an employee is an LTPT employee, which means the earliest an LTPT employee could become eligible to participate in a plan is January 1, 2024.

• LTPT employees must complete at least 500 hours of service in each 12-month eligibility service period.

• This eligibility period must happen over three consecutive years.

If your plan document excludes a certain classification of employees, the exclusion cannot be applied to LTPT employees. It is your responsibility to offer these LTPT employees the ability to participate in the salary deferral portion of the plan.

What are they eligible for?

This provision allows LTPT employees to make salary deferral contributions to the 401(k) plan. To comply with this provision, your 401(k) plan will need to be amended to include a dual eligibility requirement under which an employee must complete either a one-year service requirement (1,000 hours of service during the 12-month eligibility service computation period) or three consecutive years of service where the employee completes at least 500 hours of service in a 12-month eligibility service computation period. As a plan sponsor, you still have the option to require an employee to satisfy the minimum age and service requirements to become eligible to receive any employer contributions.

Are there changes we can make to our plan to avoid this requirement?

Some plan designs will not be affected by the LTPT employee provision. For example, if a plan allows immediate eligibility or requires a short service requirement, such as three months or less, the LTPT employee provision will not apply since employees will be eligible before completing 500 hours of service. Alternatively, the LTPT rules will not apply to a plan using the “elapsed time method” for determining eligibility. A one year eligibility service requirement under the elapsed time method means that the employee does not need to work a certain number of hours but must still be employed on their one-year employment anniversary date to satisfy the plan’s eligibility service requirement. The LTPT employee provision will not apply to those employees since they will be eligible to participate in the plan after they satisfy the plan’s age, service, and entry date requirements.


We realize that the regulations regarding LTPT employees are complex. To help you understand the provisions more fully, we encourage you to view a six-minute video that provides a more in-depth explanation.