Plans Have Options To Comply With New Mandate For Part
The SECURE Act was passed in late 2019, in what seems like another era, with the goal of increasing participation in 401 plans. One way to reach that goal was a new mandate, starting in 2021, to track long-term, part-time employees and require that they be given the opportunity to make salary deferrals.
Now in the midst of an ongoing pandemic, employers need to manage the implementation of that mandate, but there are some options that may be simpler to use and even more favorable for participation by part-time employees.
SECURE Act 401 Rules for Part-Time Employees
The SECURE Act requires that part-time employees be allowed to participate in salary deferrals under their employer’s 401 plan if they complete three consecutive 12-month periods, each with at least 500 hours of service. Although not required, an employer could choose to let part-time employees share in employer contributions too.
Since plans can require no more than 1,000 hours in a 12-month period to participate, part-timers working 500-999 hours are the target group.
For eligibility purposes, 12-month periods beginning before January 1, 2021, are not taken into account, so targeted part-time employees need not actually be enrolled until January 1, 2024, at the earliest. However, employers implementing this provision must track hours worked starting in 2021, and also retain those records over a period of years, rather than determining eligibility one year at a time.
FOOTNOTE
Coffee & Bagel Brands
Available for all positions, depending on eligibility, Coffee & Bagel Brands offers competitive benefit packages to choose from, including medical, dental and vision. After working at any of the company’s franchises for three months, employees age 21 and older have access to a 401 program, for which the company will match 25 cents for every dollar contributed. And, of course, each employee receives a discount at all company-owned locations.
What To Know About Offering Employment Benefits To Part
Determining what benefits small-business owners may want to offer part-time employees can be confusing. Due to minimal federal laws and regulations on the matter, U.S. employers have some flexibility when deciding what employee benefits to offer their part-time workers. However, employers should also ensure they understand and comply with applicable state and local laws and regulations.
This article will cover the following topics about offering part-time employment benefits:
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Are There Maximum Hours For Part
There are no set requirements for maximum part-time hours. As previously mentioned, the FLSA doesn’t have any parameters around maximum part-time hours. It’s the employer’s responsibility to outline what the maximum hours for a part-time worker would be, although the maximum number of hours should be less than those of a full-time employee.
New Rules For Including Part
In late December 2019, the SECURE Act became law and made significant changes to several longstanding retirement plan rules. The coronavirus-related pandemic has overshadowed the SECURE Act changes since early last year.
As employers begin to focus on the SECURE Act requirements, one change has confused employers who have part-time employees. Guidance issued by the IRS last September has added to the confusion.
The 401k plan eligibility rules have for many years permitted employers to exclude employees from making their own 401k payroll-deducted deferral contributions and receiving employer contributions until they complete a year of employment with at least 1,000 hours of service. Employers could relax this waiting period for employee and/or employer contributions.
This maximum waiting period for eligibility to make employee 401k deferral contributions was modified by the SECURE Act. Now, beginning with plan years that start in 2024, an employer cannot require part-time employees to complete more than 3 consecutive 12-month periods with at least 500 hours of service. Of course, if the 1-year-1,000-hour requirement is satisfied first, the waiting period is satisfied earlier.
Why do we believe that is possible? Because the IRS has already taken an expansive approach to interpreting the law changes.
ACSI is available to help you learn more about the long-term part-time employee rules.
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Employee Participation Standards Must Be Met
In general, an employee must be allowed to participate in a qualified retirement plan if he or she meets both of the following requirements:
- Has reached age 21
- Has at least 1 year of service
- plan may require 2 years of service for eligibility to receive an employer contribution if the plan provides that after not more than 2 years of service the participant is 100% vested in all plan account balances. However, the plan must allow the employee to participate by making elective deferral contributions after no more than 1 year of service.)
A plan cannot exclude an employee because he or she has reached a specified age.
Leased employee. A leased employee is treated as an employee of the employer for whom the leased employee is providing services for certain plan qualification rules. These rules apply to:
- Nondiscrimination requirements related to plan coverage, contributions, and benefits.
- Minimum age and service requirements.
- Vesting requirements.
- Limits on contributions and benefits.
- Top-heavy plan requirements.
Certain contributions or benefits provided by the leasing organization for services performed for the employer are treated as provided by the employer.
Reducing Work Hours As You Near Retirement
Pre-retirement transition leave is a special working arrangement where you may request to have your workweek reduced by up to 40% or up to 2 out of 5 working days if you are within 2 years of being eligible to retire with an unreduced pension.
Please note that you will be considered on leave without pay during the hours and days not worked, rather than becoming a part-time employee.
To learn more about pre-retirement transition leave and the conditions that apply, please visit the Directive on Leave and Special Working Arrangements and the Leave without pay information package.
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Benefits Must Not Be Assigned Or Alienated
The plan must provide that its benefits cannot be assigned or alienated. A loan from the plan to a participant or beneficiary is not treated as an assignment or alienation if the loan is secured by the participant’s account balance and is exempt from the tax on prohibited transactions under IRC 4975 or would be exempt if the participant were a disqualified person. See Publication 560 for additional information on prohibited transactions. A loan is exempt from the tax on prohibited transactions under IRC section 4975 if it:
- Is available to all such participants or beneficiaries on a reasonably equivalent basis,
- Is not made available to highly compensated employees ) in an amount greater than the amount made available to other employees,
- Is made in accordance with specific provisions regarding such loans set forth in the plan,
- Bears a reasonable rate of interest, and
- Is adequately secured.
Also, compliance with a qualified domestic relations order , does not result in a prohibited assignment or alienation of benefits.
Their Paid Time Off Policy Doesnt Suck
Paid Time Off is a big deal and this Costco benefits is nothing to scoff at.
After youve been employed for 1 year and have accrued at least 2,000 paid hours, youll start to accumulate paid time off.
Specifically, PTO is earned based on years of employment and breaks down like this:
1 year of employment: 1 week PTO
2-4 years: 2 weeks PTO
5-9 years: 3 weeks PTO
10-14 years: 4 weeks PTO
15+ years: 5 weeks PTO
If you work less than 2,000 hours your PTO is pro-rated accordingly.
Also, its important to note that you can ONLY roll-over your PTO to the following year and it cant be carried over from year to year.
Costco WANTS you to use your vacation hoursso use it before you lose it.
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Us Bureau Of Labor Statistics Report
In a 2018 article titled “The benefits of working for a small business,” the U.S. Bureau of Labor Statistics reported that defined contribution plans, such as 401-style plans, were available to 47% of workers in small businesses while access to defined benefit plans, like pension plans, was lower at 7%. While small businesses offer a wide variety of benefits, retirement plan options generally aren’t one of them.
Some companies used to offer 401 plans but decided to drop them. This sometimes happens because a company is losing money and scrambling to reduce expenses. Other times, it’s because new management came in and is looking for a different option, or because workers aren’t participating in the plan and it’s no longer sensible to keep it open.
Not having the option of a 401 can pose a big problem for mid-career and older workers, says Stephanie Genkin, CFP®, founder of My Financial Planner, LLC, in New York. This is typically the time people try to play catch-up with retirement savings. Even though workers 50-plus can contribute an additional $1,000 to an IRA, its still quite small in comparison to the $19,000 an employee can make to a 401 or 403, not to mention the catch-up for 50-plus , which is $6,000. Note that for 2020 and 2021, the 401 contribution limit is $19,500, with a $6,500 catch-up contribution for those 50 or older.
My Employer Doesn’t Offer A 401 Should I Care
Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.
Millions of American workers don’t have access to 401 retirement plans. Many of these people are self-employed or younger workers others work for smaller companies without established benefit packages. Sometimes, other employee benefits are offered in lieu of a 401. Whatever the reason, such workers need to find alternative ways to save for retirement and, in some cases, could consider switching to another company.
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Contributions Or Benefits Must Not Discriminate
Under the plan, contributions or benefits must not discriminate in favor of highly compensated employees. Generally, employees with compensation of $130,000 or more from the employer in the prior year are considered highly compensated for 2021 and for 2020 . In order to satisfy this requirement with regard to elective deferrals and employer matching contributions, 401 plans may provide minimum employer contributions or meet the Actual Deferral Percentage and Actual Contribution Percentage tests.
Plan Sponsor Next Steps
These law changes will require some administrative changes for employers to track eligibility requirements for part-time employees. Your recordkeeper and/or TPA can help make sure you are ready to begin tracking as of January 1, 2021 and meeting any compliance requirements. And, even though you have three years before these employees will be eligible to enter the plan as participants, you might want to start discussions with your financial advisor and plan design expert now to explore how these changes could affect your plan. A plan design expert can create projections using your employee demographic information to illustrate how plan design changes can impact testing results and plan costs.
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May Not Have Impact Until 2024
Unlike certain other provisions of the Secure Act, this one will take a while to come into effect. The text states that it shall apply to plan years beginning after December 31, 2020 and that for the purposes of meeting the 3 years of service requirement, 12-month periods beginning before January 1, 2021, shall not be taken into account. Unfortunately, this suggests that not only will the legislation not come into force until 2021 in most cases, but then as a part-time employee working between 500 and 1,000 hours, you may still have to wait effectively a further 3 years to qualify. Therefore, unless employers chose to act more quickly than the law requires, the impact may not felt until 2024 when some part-time workers will have qualified as long-term under the new rules.
Cost Plus World Market
After you have worked for at least 20 hours per week at the Cost Plus World Market, you become eligible for a health benefit plan for preventative care. Once you have been working with the company for 180 days, you can get a basic dental care plan. You can also use employee discounts for in-store purchases.
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How Much Is The Average Ups Pension
The monthly pension for employees with 35 years of part-time credited service at any age will increase to $2,275 for 30 years of credited service at any age the increase is to $1,950 for retirement at age 60 with 25 years of credited service the pension is increased to $1,625 and for retirement at any age with 25
Parental And Critical Caregiving Leaves
These paid leaves provide you with time away from work to help you care for the ones you love. Wells Fargo provides up to 16 weeks of paid parental leave for a primary caregiver and up to four weeks for a parent who is not the primary caregiver to care for a new child following birth or adoption . In addition, one regularly scheduled workweek per year of paid critical caregiving leave is available to care for a spouse, partner, parent, or child with a certified serious health condition. Additionally, employees are eligible for up to five days per calendar year of in-home, back-up adult care for yourself, your elderly parents or parents-in-law, an ill spouse or partner, or a child who is age 18 or older.
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You are leaving wellsfargo.com and entering a website that Wells Fargo does not control. Wells Fargo has provided this link for your convenience, but does not endorse and is not responsible for the content, links, privacy policy, or security policy of this website.
At Wells Fargo, employees are our most valuable resource and a key competitive advantage. We want to be an employer of choice a company where people matter, teamwork is rewarded, everyone feels respected and empowered to speak up, diversity and inclusion are embraced, and how our work gets done is just as important as getting the work done.
Our belief in this strategy puts strong emphasis on engaging our employees. Engagement is an emotional connection with, and commitment to, Wells Fargo where we feel included, valued, and supported to do work that energizes us, and where we are inspired to go farther together for one another, our customers, and our communities.
Wells Fargo provides all eligible full- and part-time employees with a comprehensive set of benefits designed to protect their physical and financial health and to help them make the most of their financial future. Employees may also participate in a stock purchase plan and take advantage of discounts on financial products, home mortgages, and more.
Is Providing A 401 Plan To Interns And Part
From a recruiting and retention standpoint, its worth it to offer part-time employees and interns the option to participate in your companys 401 plan. The alone are very cost-effective, but providing this type of benefit demonstrates your commitment to all employees, regardless of their title or classification. Given todays , many people just entering the workforceor working fewer hoursare worried about their retirement in a way that previous generations werent.
At the same time, its more likely that part-time employees and interns wont be earning as much discretionary income that they can use to make investments in their 401. According to the United States Department of Labor, interns in the for-profit private sector who qualify as employees rather than trainees typically must be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek. While most interns are being paid for their time, the amount they can contribute to their retirement may be minimal after deducting standard living expenses.
Employers can support employees regarding these issues in a few ways:
-
to help employees learn how they can budget and save for their retirement
-
so that employees dont have to contribute out of their own paychecks. This is a good way to raise employees pay thanks to tax savings, while also being cost-effective for the company due to tax deductions.
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Solid Health & Dental Insurance
If youve worked for Costco for at least 180 consecutive days, and work more than 24 hours per week, youre eligible for health benefits.
You actually get to choose your own provider and out-of-pocket costs are low compared to the competition.
Also, since there is a pharmacy inside the warehouse, you get access to a solid in-house prescription drug plan.
Co-pays are $5 for generic drugs and 5-15% for for brand name medications.
Plus, all employees get access to a low cost dental plan which covers teeth cleaning and some basic procedures like cavity fillings.
New Eligibility Rules For 401 Deferrals
Under the existing eligibility rules, employees can be required to perform 1,000 hours of service in a 12-month period and be at least age 21 to be eligible to make salary deferrals into the plan. An employer may set lower requirements than this or set none and allow all employees to participate.
Beginning in 2024, employers must allow an employee who has worked at least 500 hours per year for three consecutive years to make salary deferrals into the plan if they are at least age 21 by the end of the three-year period. Once a part-time employee has satisfied the service and age requirement, they will enter the plan according to the entry dates selected in the plan document. Plans may be designed to allow entry immediately upon satisfying eligibility requirements, or monthly, quarterly, or semi-annually.
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