When the original SECURE Act was passed in 2019, compliance with its new long-term part-time employee rule seemed far in the future—way out to January 1, 2024. Well, that time is nearly upon us, so sponsors of 401(k) plans should be ready to let these long-term part-time employees start participating in their plans with the start of the New Year.

Under this long-term part-time employee rule, part-time employees who work at least 500 hours during three consecutive 12-month periods must be eligible to participate in the plan for purposes of elective deferrals (subject to any applicable age requirement). The 12-month periods began as of January 1, 2021, so the first time an employee could become eligible under this rule is January 1, 2024.

 Plan sponsors should have started counting and tracking part-time employee hours as of January 1, 2021. Now is the time to look at that data to determine which employees may be required to be eligible to make elective deferrals as of January 1, 2024. Don’t forget that certain employees may be excluded from this new eligibility rule (such as employees subject to a collective bargaining agreement) and that these employees can be excluded from certain nondiscrimination testing.

 While these long-term part-time employees may be newly eligible for elective deferrals, the IRS has clarified that employers generally must include all years of services with the employer to determine the employee’s vesting rights to employer contributions. To be clear, the employees becoming eligible under this new rule are only required to be eligible to make employee deferrals—they are not also required to qualify for employer contributions. Whether to expand eligibility for employer contributions to these employees is up to the plan sponsor. As with eligibility, a year of vesting services for these employees is based on a 500-hour threshold.

 To help with the administrative burden of tracking these periods of 500 hours, plan sponsors should count hours on the date the employee’s employment begins. If the employee does not complete the required hours of service during the initial 12-month period of employment, plan sponsors may then use the first day of the plan year for hours-counting purposes going forward.

 As a reminder, SECURE 2.0 created a variation to the long-term part-time rule set forth in the original SECURE Act, as we wrote about here. Plan sponsors should ensure compliance with both the original SECURE Act rule and the SECURE 2.0 rule.