The Setting Every Community Up for Retirement Enhancement (or SECURE) Act did many things – namely, it expanded retirement plan coverage for part-time, long-term employees.
What does this mean for retirement plan coverage? Under the SECURE Act, part-time employees who work at least 500 hours for three consecutive years can make elective deferrals in 401(k) plans. The tracking period for these deferrals starts after Dec. 31, 2020, so it’s best to brush up on what the SECURE Act means now.
Employers don’t need to let these long-term, part-time employees start to contribute to 401(k) plans until 2024, however, they need to start tracking their hours in 2021.
This is great news for these long-term, part-time employees. In the past, employees had to work a minimum of 1,000 hours a year to qualify.
But for employers (i.e. the retirement plan sponsors) it could be a troublesome.
Under the SECURE Act, there are still limitations, like age requirements (you have to be at least 21 to qualify), collective bargaining and more, so it’s best to talk to your employer about your benefits if you think you may be eligible.
For plan sponsors, hopefully they have something in place to track hours, which can be complicated and labor-intensive. They will also need to reach out to employees and do some education.
For young workers, who might not have had a chance to enroll in a program like this in the past, this is a chance to start saving for the future now, as it is important to start saving early for retirement.
These changes, and the SECURE Act itself, could have a major impact on retirement savings now and in the future.
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