Under the SECURE Act and the SECURE 2.0 Act, employers must provide so-called long-term, part-time employees—i.e., those who complete at least 500 hours of service in three consecutive years (reduced to two years in 2025) and are at least 21 years old—the opportunity to make elective deferrals under their 401(k) plans and, beginning in 2025, their 403(b) plans.

Most employers with impacted plans reviewed their eligibility-tracking processes some time ago in anticipation of the initial effective date of the new rule. However, with that new rule now effective—and last-minute guidance now available—it is important for employers to review those processes to determine if further changes are needed or desired.

IN DEPTH

Eventually, it may become easier to think of service tracking under the new rule as a largely set-it-and-forget-it process. However, for now, employers will likely want to continue revisiting, reviewing and refining their eligibility-tracking processes around the new rule. This will help ensure that hours are accurately aggregated over relevant periods of time to facilitate timely plan entry.

In doing so, it will be important for employers to establish procedures for periodically reviewing eligibility data to ensure that their tracking systems are working as expected. This approach will allow employers to timely identify and correct eligibility errors when things don’t go quite as planned. Going forward, employers may also want to talk with their human resources information system (HRIS) providers and recordkeepers to see if they offer additional services that might make service tracking easier under the new rules.

As an alternative, given the added complexity around hours counting and tracking, some employers may want to explore design changes that would help reduce the administrative burden associated with complying with the new rules. This might include eliminating eligibility waiting periods for making elective deferrals or eliminating waiting periods altogether, even those that can still be applied to receipt of employer contributions. Although eliminating waiting periods for employer contributions could increase total plan cost, for employers with small part-time employee populations, that increase in cost might prove a relatively small price to pay for avoiding the administrative complexity of the new rule.

For the same reasons, some employers may also consider whether the use of equivalencies or moving away from the hours-counting method to the elapsed-time method of tracking eligibility service might prove an effective way to ease or eliminate the compliance burden. That said, employers with large part-time, seasonal or continent workforces often find these methods of tracking service less desirable, as they don’t align as well with how employers think about the hours-based work performed by employees in those positions. In addition, use of equivalencies and elapsed-time methods for tracking service can accelerate plan entry for individuals who have otherwise performed very little work for the business.

Ultimately, the options available to help reduce the administrative burden of complying with the new rules will not make sense for every employer, as plan eligibility criteria has as much to do with the goals of the business and the makeup of an employer’s workforce as it does with minimum legal requirements. But with the added complexity of the new rules, it is worth taking a little time to consider what measures might be a good fit. Even where such measures are not available, employers may still find ways to lean on their HRIS providers and recordkeepers for additional support.