Offering a retirement plan program to your employee’s is essential to your overall benefits program. 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.
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.
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.