We wanted to put together some FAQs and examples for Plan Sponsors to better understand the mandatory retirements under SECURE 2.0 to better help Plan Sponsors fulfill their duties.

FAQs about Long-Term Part-time (LTPT) employees:

• Does this apply to union or non-resident aliens? No.
• Do I need to count eligibility computation periods (most commonly calendar years) for years of service prior to 2021? No.
• How old does my employee need to be to have this apply? Age 21.
• What about employees entering in 2024? Those employees would need to have worked 500 hours in 2021, 2022, and 2023 and be age 21 to enter for deferrals only as of 1/1/24.
• What about employees entering in 2025? For 401(k)s, those employees would need to have worked 500 hours in two consecutive years in 2021, 2022, 2023, or 2024 and be age 21 to enter for deferrals only as of 1/1/25. For 403(b)s, those employees would need to have worked 500 hours in 2023 and 2024 to enter 1/1/25.
• What about if an employee entered the plan under our normal eligibility requirement? Then LTPT employee eligibility is moot.
• What about vesting? Vesting for LTPTs is based on earning a year of service for 500 hours if receiving Employer contributions.
• If I have an auto enrollment plan, do LTPT employees need to be auto enrolled? No.

Examples:

Plan Sponsor ABC, Inc. sponsors a 401(k) plan and employs Employee A who is 26 years old, is hired 1/2/23 works 500 hours in 2023 and 700 hours in 2024. They enter the plan for purposes of deferrals only as of 1/1/25. The Plan Sponsor gives the participant the proper notices, however, the employee (now a participant for deferrals only) decides not to defer. The Plan Sponsor has satisfied their duties for the LTPT employee.

Plan Sponsor ABC Inc. has a normal eligibility requirement in their Plan Document of age 21, 1 year of service (1000 hours/plan year switch), and semi-annual entry. Their vesting is 6-year graded for Profit Sharing contributions and each year of vesting service normally requires 1,000 hours of service in a given plan year. Employee A had entered the plan as a LTPT employee in 1/1/25. During 2025, Employee A worked 1,200 hours and entered the plan under the regular conditions 1/1/26 (now a Former LTPT employee). The Plan Sponsor routinely makes a Profit Sharing contribution each year. Employee A, now being eligible for all contributions in the plan, starts receiving a Profit Sharing contribution each year for the 2026 plan year and following. Employee A works 1,500 hours in 2027 and only 400 hours in 2028 before terminating employment. Because Employee A entered as a LTPT employee, their hours for purposes of vesting are 500 (not the normal 1000 hours). As such, when terminating employment, Employee A is 60% vested. Had Employee A entered under the Plan Document eligibility requirement, Employee A would have only been 20% vested instead.

ABC Inc. hires Employee B mid-year on 7/2/25. Employee B works 600 hours from 7/2/25 to 7/1/26 and then works 501 hours from 1/1/26 to 12/31/26. Employee B enters as a LTPT employee as of 1/1/27.

ABC Inc. hires Employee C when they are 18 years old. Years under the age of 21 are disregarded. Employee C worked 400 hours in the year turning age 21 in 2025. Employee C then works 600 hours in 2026 and 505 hours in 2027. Employee C enters as a LTPT employee 1/1/28.