For restaurants there are some unique issues that you face due to typical high turnover, younger age demographic, lower wages and part-time status. It was pretty standard to be able to exclude these employee’s if they worked less than one year and/or 1000 hours. With the SECURE Act now in full motion it is important that you are aware of your responsibilities as a plan sponsor and how the long term part-time 401(k) rules under the SECURE ACT may impact your plan and making sure you have the right partners in place to assist you with these new rules.

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First let’s review what the long-term part-time rules under the SECURE Act are:

• Tracking period started January 1, 2021
• The SECURE Act will require those that maintain a 401(k) plan to have a dual eligibility requirement that now includes eligibility for those employees who have three consecutive years of service and completed between 500-999 hours of service each consecutive year
  • Years prior to 2021 shall not be taken into account
• May still impose age requirement not to exceed age 21
• Only applies to elective deferrals
• Are excluded from top heavy and present employer-contribution rules

What should you be doing now:

• Consult with your TPA and/or retirement plan consultant on best optimal plan design
  • There are plan design options to consider easing the need to track hours
• Establish payroll integration with your payroll provider and your recordkeeper so they can assist with all eligibility tracking, specifically hours for all employees
  • Full payroll data should be submitted to recordkeeper every pay period

Keep in mind these new provisions were created to provide a more universal retirement savings opportunity for all through an employer sponsored 401(k) plan. This is an especially positive change for younger part-time employees who would like to take advantage of the saving and the compound effect of saving early in their working career.

Know the rules, set a plan of action and you’ll be set to go!

I you have any questions or concerns regarding long term part-time 401(k) rules, consult with your Henry+Horne advisor.

Andrea Donaldson

Provided as information only and should not be considered investment, tax or legal advice or a recommendation to buy or sell any type of investments. M. S. Howells & Co. does not offer tax or legal advice. Please consult with your tax or legal advisor regarding your situation.