What every small business owner needs to know about part time employees, 401(k) planning and the SECURE Act

by | Feb 10, 2020 | Uncategorized

401(k) planning

If you are small business owner, and you have part time employees, you might have heard that you need to start 401(k) planning this year.

In late 2019, the U.S. Congress passed the SECURE Act, which will change the way Americans save and plan for retirement – including 401(k) planning.

However, small business owners don’t need to worry! The SECURE Act does have provisions for certain part-time employees and benefits – including 401(k) planning – but you DO NOT have to start covering them this year.

While you will need to start working toward the goal – eligible employees will be able to start benefits in 2024 – you do have time.

The ultimate goal of the SECURE Act is to make retirement plans, like 401(k) plans, available to more U.S. workers. Basically, employers will have to offer plans to part-time workers who meet certain provisions, such as working three consecutive years, of at least 500 hours each.

So, these provisions are for long-term part-time employees – not seasonal workers, temporary workers or workers under the age of 21.

And since these eligible employees have to work three years to get access to these benefits, the earliest anyone could request them is 2024.

401(k) planning: Good news for business owners

Good news for business owners as well: These employees won’t impact employer contribution requirements.

Business owners: You have time to prepare for this. So, for this year, make sure you have a way to keep track of your part-time employees: How much they work and for how long. That way, you’ll know who is – and who isn’t – eligible in 2024.

A bit more about the SECURE Act. SECURE stands for: Setting Every Community Up for Retirement Enhancement and was signed into law by President Trump.

Its goal is to help helping Americans save more for retirement. It does a few things, including make it much easier for small business owners to set up cheaper and easier “safe harbor” retirement plans. It also allows part time employees to take part in employer-sponsored plans.

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If you have other questions about retirement plan loans, email us or call 937.308.0758.