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thepensionmaven

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I can't think of any employer wanting to offer part-time, barely subsisting employees the "opportunity" to reduce a meager salary and contribute to the company 401(k).

That being said, suppose an eligible PT (500-100 hours in the last three years) employee does not elect to contribute, or completes an election for with 0% or $0 deferral.  Wouldn't that suffice, assuming the employee had 30 days notice prior to 1/1/24?

OR, effective 1/1/24, the Plan Sponsor elects to use Elapsed Time with no hours.  One year eligibility, enter the plan on the anniversary date coincident with or next following completion of the 12 months;  contribution would be based on the one year of service (12 months) during the plan year (?)

Vesting would be based on year of service with no hours.

But, wouldn't such an amendment to the plan need to have been signed by 1/1/24 and all (not just LTPT) be notified at least 15 days in advance of 1/1/24.

The whole concept of LTPT is mind boggling.

 

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It's not an unreasonable strategy to say that you are going to deal with the LTPT rule by modifying the plan's normal eligibility requirements such that no employee ever enters the plan as a LTPTE. One way of accomplishing this might be to redefine a year of service as a 12-month period during which an employee is credited with 500 hours of service, as opposed to 1000. Other ways are certainly possible as well.

Defining a year of service as a year of elapsed time should do the trick as well in most cases. However, it could be possible for an employee to be credited with 500 hours of service during two consecutive 12-month periods and not complete 1 year of elapsed time in certain re-hire situations, if they have a period of severance greater than 12 months. I'm hopeful that this will be addressed when the regulations are finalized.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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Employers are not required to make non-elective or matching contributions on behalf of participants who are eligible to participate solely by reason of the LTPT rules. If the plan sponsor removes the “hours of service” exclusion, then part-time employees become eligible without regard to the LTPT rules.  My concern is that the non-discrimination (and top-heavy) rules would now apply to this otherwise excludable classification.

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From above "That being said, suppose an eligible PT (500-100 hours in the last three years) employee does not elect to contribute, or completes an election for with 0% or $0 deferral.  Wouldn't that suffice, assuming the employee had 30 days notice prior to 1/1/24?"

Then he/she would not be in the plan, with the 1,000 rule still in effect for the safe harbor/profit sharing potions.

OR am I way off base here?

 

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It's the same as any other employee who is eligible and elects not to defer. They still have to receive all of the various notices going forward, and have the right to change their deferral election according to plan procedures. They still count as an active participant on the 5500.

They don't have to receive any safe harbor contributions (if the plan is safe harbor) or a top heavy minimum (if the plan is top heavy).

To JRN's point, SECURE 2 changed the top heavy rules such that otherwise excludable employees no longer have to receive the DC top heavy minimum at all, regardless if they are eligible solely because of the LTPT rules or because the plan has more lenient age/service criteria than the maximum. And you can always disaggregate the otherwise excludable employees for coverage and nondiscrimination testing purposes; typically that group would contain no HCEs (since anyone with less than a year of service is unlikely to have prior year compensation above the limit) so it would satisfy testing automatically. 

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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