Compliance December 17, 2020

SECURE Act Dictates Long-Term, Part-Time Employees Be Included in Retirement Plans

But there are some options employers have with respect to enforcing this, such as allowing part-time employees to make their own contributions.

 

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The Setting Every Community Up for Retirement Enhancement (SECURE) Act, starting next year, will change the longstanding rule that permitted 401(k) plans to exclude individuals who work less than 1,000 hours in the plan year, as the Society for Human Resource Management (SHRM) notes in its analysis “Who Is a Long-Term, Part-Time Employee? 401(k) Plans Will Need to Know.”

Starting in 2021, the SECURE Act defines these workers as any employee who in each of the past three consecutive years worked between 500 and 999 hours. The employee might need to be at least 21 to participate and at least 18 for vesting. Thus, the first year that any long-term, part-time employee will be eligible to participate in a 401(k) plan is 2024, although plans can allow entry earlier.

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There are some decisions related to this change that employers will want to consider, according to SHRM. To make it easier on themselves so that they don’t have to track hours, an employer could permit part-time employees to make their own contributions.

Employers could also impose a minimum 1,000-hour rule for participants to be eligible for matching contributions, thus excluding long-term, part-time employees from matches.

Imposing restrictions of age 18 for vesting and age 21 for participation are also options that employers may or may not impose. It is also up to employers to revise their company contribution vesting schedule.

Finally, employers will have to update loan documents, summary plan descriptions and other plan communications such as employee handbooks to advise employees of these new rules.

Law firm Sidley says employers should also coordinate with plan administrators and recordkeepers to ensure they are prepared to track hours for part-time employees starting on January 1. Employers need to amend plans by the last day of the first plan beginning on or after January 1, 2022, to provide for long-term, part-time employee participation.

Products December 17, 2020

OneAmerica Launches Simplified Multi-Plan Tool

The feature comes at a time when administering multiple plans at once can be a confusing process for employers with little knowledge of the retirement industry. 

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OneAmerica has released a tool to combat the complexity of administering multiple retirement plans.

Called the ComboPlan solution, the feature allows defined contribution (DC) plan sponsors of tax-exempt organizations to administer several plans at once, including 401(k), 401(a), 403(b) and 457 plans. The solution provides one point of contact and a single website experience for the participant, thereby reducing multiple point of references and account logins.

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According to the Plan Sponsor Council of America, four in 10 employers in the nonprofit and governmental space offer more than one type of retirement plan, and administering multiple plans simultaneously can be a confusing process for employers with little knowledge of the retirement industry. 

Kevin Kidwell, vice president of national tax-exempt sales at OneAmerica, explains to PLANSPONSOR that managing several plans at once can increase regulatory concerns if the plans are not administered correctly. “We want to keep the plans similar in terms of their definition of compensation, eligibility and contribution remittances, so that plan sponsors aren’t involved in a compliance failure,” he says. 

Because the retirement industry increasingly focuses on 401(k)s, the largest DC plan type, other retirement plans such as 403(b)s, 401(a)s and 457(a)s are typically left out. With OneAmerica’s ComboPlan solution, administrators can properly manage different types of plans simultaneously, Kidman says. “[The industry] doesn’t train administrators on 403(b), they train them on 401(k) plans,” he continues. “We built our system so that it’s for all 401(k), 403(b) and 457(a) plans.”

Jennifer Jenkins, regional vice president of tax-exempt markets at OneAmerica, says the ComboPlan solution provides an effective way to streamline plans, especially for employers challenged by COVID-19. Duplicating tasks, such as payroll contributions and census retrievals, increases costs, she tells PLANSPONSOR. “If they’re working with tighter margins and fewer employees, this efficiency is now more important than ever,” Jenkins says.

“At some recordkeepers, the more complex the multiple plans, the more costs the employer faces,” Kidwell adds. For OneAmerica clients using the ComboPlan solution, it’s simply a few additional signatures, he notes.

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