It’s hard to believe but January 2021 is right around the corner! For plan sponsors, that means now is the time to make way for part-time employees to participate in 401(k) plans.
Comply With the SECURE Act
Retirement plan sponsors are busily tracking and implementing the various regulations the SECURE Act of 2019 set into motion. Here is a helpful reminder from The Society of Human Resource Management:
For plan years beginning after Dec. 31, 2020, the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 requires employers to allow long-term part-time workers to make elective deferrals to the employer-sponsored 401(k) plan, except in the case of collectively bargained plans.
Eligible employees will have completed at least 500 hours of service each year for three consecutive years and are age 21 or older. Years of service prior to 2021 do not have to be counted; however, employers may choose to have more generous eligibility rules.
Implementing The New Regulations for Part-Time Employees
While plan sponsors await further guidance on some of the details, it is important to get the preparations underway. Tracking and reviewing hours for part-time employees will add to your administrative responsibilities.
As Spotlight on Benefits details:
Going forward, the SECURE Act change will add administrative complexity because it will expand 401(k) plans’ eligibility and enrollment.
Plan sponsors will have to address a number of elated issues under 401(k) plans, including service crediting for vesting purposes, whether part-time employees will also be eligible for employer contributions under the plan (the SECURE Act change requires coverage for elective deferral purposes only, but a plan sponsor may want to align deferral eligibility with eligibility for employer contributions), and whether to exclude the long-term, part-time employees from nondiscrimination and coverage testing (long-term, part-time employees generally can be excluded for testing purposes under the SECURE Act).
Remember ERISA: Update Your Plan Protections
While you are be buried deep in the new regulations, don’t forget these basics of plan management:
- The US Department of Labor requires an ERISA fidelity bond to protect your employee benefit plan against losses caused by acts of fraud or dishonesty.
- With cybersecurity issues on the rise, it’s best to have cyber liability coverage for your plan.
- As a plan sponsor, you have fiduciary responsibility for it. The ERISA fidelity bond protects your plan’s beneficiaries—but not you! That’s why it is strongly recommended that you obtain fiduciary liability coverage for yourself.
Colonial Surety Company is the easy choice for checking all three of these important tasks off your list in this last quarter of 2020. We’re licensed in all 50 states and US territories and make it easy to obtain your I-Bond® (instant, online surety bond).
As a plan sponsor, chances are you are busier than ever. Let Colonial Surety Company help you, via our unique packages. These include up to $1,000,000 of fiduciary liability coverage, providing you—and your plan— with the greatest protection and overall cost savings.
Our 2 or 3-year packages also include cyber liability insurance to safeguard your company and plan against a loss due to cyber attack — plus extended coverage to ensure your Erisa bond remains a US Department of Labor complaint, as your plan grows.
Your efforts to address retirement savings for part-time employees matter!
Even before the disruptions caused by COVID-19, a trend toward part-time employment was on the rise—with challenging implications for earning and saving.
For example, in 2016, the Economic Policy Institute reported:
6.4 Million workers want full-time jobs but are working only part-time hours. Involuntary part-time workers are not only earning less income than they would prefer, but suffer because part-time jobs offer relatively lower wage rates and benefit coverage, and have more variable and unpredictable work schedules.
Colonial Surety Company is here to help you protect the hard-earned savings of your employees. Get Your ERISA Package Now!