Part-time employees may now qualify to participate in your company’s 401(k) plan—even if they don’t meet the traditional 1,000-hour eligibility rule—thanks to provisions introduced under the SECURE Act and SECURE Act 2.0. As a plan sponsor, it’s important to understand how eligibility is determined, who qualifies as a Long-Term Part-Time (LTPT) Employee, and what actions you may need to take.

Who This Applies To

This information applies to for 401(k) plan sponsors and administrators responsible for determining employee eligibility and submitting complete annual census data.

Standard Eligibility Requirements (and How They Can Vary)

While many 401(k) plans follow a common standard eligibility formula, each plan sponsor can choose their own eligibility rules within IRS guidelines. The most typical requirements are:

  • Minimum age (often age 21), and
  • Minimum service (often 1,000 hours of service within a 12-month period)

However, your plan may be more or less restrictive. For example, some plans allow immediate eligibility, meaning an employee can enroll and begin contributing as soon as they are hired, regardless of age or service.

To confirm what eligibility requirements apply to your plan:

  1. Log in to your Ubiquity plan sponsor portal.
  2. Navigate to 401(k) Plan > Plan Overview.
  3. Scroll to Eligibility to see your plan's service requirements for eligibility.
  4. Or visit 401(k) Plan > Documents + Forms to review your Adoption Agreement or Summary Plan Description (SPD), which outline your plan's specific eligibility rules.

Eligibility vs. Entry

It’s important to understand the difference between eligibility and entry:

Eligibility: When an employee meets the age and service requirements.

Entry: When the employee is actually allowed to begin making contributions to the plan.

Plans may have different entry schedules, such as:

  • Immediate entry – Participation begins as soon as the employee is eligible.
  • Monthly, quarterly, or semi-annual entry – The employee must wait until the next scheduled entry date after meeting eligibility.

Example:
If your plan allows immediate eligibility but monthly entry, and an employee is hired on April 10, they become eligible on that date. However, they won’t be able to begin contributing until the next entry date—May 1.

How Eligibility Periods Are Tracked

  • The initial 12-month period begins on the employee’s date of hire.
  • After that, eligibility is based on hours worked during the plan year (calendar year for Ubiquity plans).

Make sure to track hours for all employees, including seasonal and part-time, even if they are not currently deferring.

A good rule of thumb: your census should match your company’s W-2s for the year.

Who Qualifies as a Long-Term Part-Time (LTPT) Employee

Under SECURE Act and SECURE Act 2.0, employees who work part-time may still become eligible to make elective deferrals into your plan—even if they don’t meet the 1,000-hour standard.

An LTPT Employee is defined as:

  • Someone who has worked at least 500 but fewer than 1,000 hours in each of the following periods:
    • Three consecutive 12-month periods (effective January 1, 2024, under SECURE Act)
    • Two consecutive 12-month periods (effective January 1, 2025, under SECURE Act 2.0)
  • Is at least age 21
  • Had service starting on or after January 1, 2021 (service before this date is disregarded)

Example Scenarios

  • Under SECURE Act: Jane works 500+ hours in 2021, 2022, and 2023 and turns 21 by 1/1/2024. She becomes eligible on January 1, 2024.
  • Under SECURE 2.0: Jane works 500+ hours in 2023 and 2024 and turns 21 by 1/1/2025. She becomes eligible on January 1, 2025.

Entry Timing for LTPT Employees

Employees who meet LTPT eligibility requirements must enter the plan on the January 1st following the year they become eligible, regardless of your plan’s regular entry schedule.

What LTPT Employees Are Eligible For

  • Elective deferrals only. Employer contributions (e.g., safe harbor, matching, profit sharing) are not required.
  • LTPT employees are excluded from top-heavy minimums, nondiscrimination testing, and minimum coverage testing, but included in the top-heavy ratio test.
  • Once an LTPT employee satisfies your plan’s standard eligibility, they become a former LTPT employee. They may then be eligible for employer contributions and must receive vesting credit for prior LTPT service.

Vesting Rules for LTPT Employees

  • LTPT and former LTPT employees vest using a 500-hours-of-service rule.
  • Elective deferrals are always 100% vested.

How to Avoid LTPT Compliance Requirements

Plans may avoid the LTPT rules by adopting less restrictive eligibility provisions, such as:

  • Allowing immediate eligibility for plan participation, or
  • Removing the hours of service requirement

This makes the LTPT tracking and compliance unnecessary and simplifies plan administration.

Upcoming Deadlines and Amendments

  • Plans must adopt LTPT amendments by December 31, 2025.
  • Ubiquity will provide the necessary amendment language once available.

Action Items for Plan Sponsors

  • Verify your plan’s current eligibility provisions.
  • Track and include hours for all employees in your annual census—even part-time and seasonal.
  • Monitor your payroll and timekeeping systems to ensure accurate hour tracking.

Need Help?

If you have questions about the eligibility requirements of your plan, please contact us.