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Govt 401(k) and SECURE LT/PT Rule


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Hi.  Does section 112 of the SECURE Act (401(k) plans must allow long-term employees working more than 500 hours but less than 1000 hours per year to participate) apply to grandfathered 401(k) plans?  I don't think so, but would greatly appreciate additional perspectives.

New section 401(k)(15)(A) says the 3 years with 500+ section (i.e., 401(k)(2)(D)(ii)) “shall not apply to an employee unless the employee has met the requirement of section 410(a)(1)(A)(i)” [i.e., age 21].  But governments are exempt from all of 410 by 410(c)(1)(A), and the result is that no governmental 401(k) employee ever meets the requirements 410(a)(1)(A)(i), strictly speaking.  If 401(k)(15)(A) were intended to apply to governmental plans, then it could have specified the age 21 requirement directly rather than through cross-reference.

Governments don’t have a history of excluding part-timers unfairly and plan eligibility is typically very liberal.   As public policy, there doesn’t seem to be a strong argument that SECURE now wants to apply a part of 410 to governmental plans contrary to 410’s blanket exemption and create a new minimum participation requirement for them.  And many government EEs are covered by collective bargaining agreements, so those EEs are clearly exempt.  It doesn’t seem apparent that Congress intends to complicate state and local government plan administration by applying this new part-time eligibility section to nonunion EEs, who are exempt from 410, 401(a)(4), and 401(a)(5).



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Except for a Native American Tribe and its subdivision, agency, or instrumentality, or a rural cooperative, not many governmental employers maintain a retirement plan with a § 401(k) arrangement.  After the Tax Reform Act of 1986 created the Internal Revenue Code of 1986, a State or local governmental employer may maintain a § 401(k) arrangement only if the employer adopted the § 401(k) arrangement before May 6, 1986.


Of the many SECURE Act ambiguities on which some hope for guidance, one doubts your question gets near the top of the Treasury department’s list.


If a sponsor prefers not to change its plan to allow elective deferrals of long-term part-time employees, the sponsor might want its lawyer’s written advice that the new condition’s non-application is a good-faith interpretation of the statute.


Beyond your reasoning that governmental plans have different minimum-participation, coverage, and non-discrimination rules than those that apply for a non-governmental plan, here’s another bit.  Unlike other provisions for which Congress provided a different applicability date for governmental plans, SECURE Act § 112(b) provides only one general applicability date.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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