LTPT and Per Diem Employees

[Coleboy1]

Oh, how I wish I was old enough to retire! My old brain can't handle these SECURE 2.0 items!

I have 2 plans that exclude per diem employees. Under the LTPT rules becoming effective soon, would these per diem employees now be allowed to participate in the plan?

[Lou S.]

If they work between 500-999 hours in each of 21,22,23 or 23,24 (S2.0) I think yes, at least for 401(k) only. But I think there is some discussion about whether or not they can still be completely excluded by "job classification" even under the LTPT rules.

[Bill Presson]

And if they don't track hours, there is typically a provision in the plan to allocate hours to those people via an equivalency.

[Lou S.]

I believe the DOL equivalency options are all pretty generous for the employee

10 hours per day

45 hours per week

95 hours semi-monthy

190 hours monthly.

So per diem - 51 days would would put them over 500.

[CuseFan]

I think a per diem classification exclusion may be possible depending on facts and circumstances. These can be very different, in my opinion, than the typical part-time, seasonal or temporary employee that may be routinely/regularly scheduled to work X hours a week, or X full weeks over a summer, or just for the holiday season. Usually, PDs in my experience are on-call for ad hoc employment assignments as needed to fill in various gaps on an as needed basis, covering sick/disability leaves, maternity leaves, vacations or whatever. A PD on a longer term assignment could even work 1000+ hours, and I've seen others that show up with 8 hours worked and still others that may not work at all for a year or two (but not be terminated in payroll). I think this is very prevalent in larger medical services employers, which do not usually like to extend benefits to this group.

Depending the size and scope of your situation, a larger environment may need further analysis of facts and circumstances as well as legal counsel input but a with a smaller company and a less significant PD population it might be easiest and safest to err conservatively and include as LTPT.

[Paul I]

From in-person interaction with IRS and DOL reps, I have the impression there is a lot of concern about a classification that looks like, smells like or acts like a service based classification.  From experience with large medical services employers and with large staffing services employers, they seem to be resigned to considering per diem/ad hoc/on call employees as LTPT employees if the 500 hours/consecutive years requirements are met.  They do intend to exclude LTPT employees from match and nonelective employer contributions, and from all coverage and nondiscrimination tests.

Several companies do not track in their HR/payroll systems hire dates and termination dates for these workers.  Rather, the systems track an original hire date and a last day worked.  This is a PITA for their retirement plans where regulations rely on service definitions based on periods of active employment or hours worked.  These companies are implementing in the employment agreements and in company policies definitely determinable definitions of a termination date to help fix the time periods.  For example, if an employee does not provide services for a period of 6 months, that employee is considered terminated as of the end of the 6 month period.

We have been promised guidance by the end of this year, so it should not be too much longer before we get the big reveal.  Sentiment seems to be leaning towards we will be underwhelmed.

[gc@chimentowebb.com]

Per Diems can be excluded, provided it's a legitimate classification. I even went through VCP to give retroactive relief to a hospital that had always excluded per diems, but whose prototype provider mistakenly treated them as if they were part-time and includible if they were paid for 1,000 hours. We showed IRS communications and salary structures which made clear for this hospital that the per diem exclusion could be applied, regardless of document mistake and even for those with more than 1,000 hours. Don't try this on your own, non-lawyers (and even most of you lawyers). 😏

[CuseFan]

Yes, these situations can be as murky as any, all the facts and circumstances need to be examined and qualified counsel consulted if the situation warrants. Like I said before, if only a small/immaterial population in question, then maybe just take the easy conservative interpretation.

[Coleboy1]

I forgot to mention that eligibility for these 2 plans is age 21 and 2 months of service. Does that make a difference with the per diem situation?