The biggest change with the SECURE Act is that long-term part-time employees will be eligible to partake in the deferral component of the plan. Employees who complete 500 hours of service or more for 3 consecutive years will be eligible, even if the plan’s eligibility had previously excluded them.
Plans have had to start counting hours for these part-time employees in 2021 with the idea that these part-time employees will start participating in 2024.
The cost of this new inclusion will be that some plans will have to get an audit for their plan, which they may not have had if there was no change. Generally, plans with at least 100 participants on the first day of the plan year must engage an independent accountant to perform an audit of the plan’s financial statements. The audit report, financial statements, note disclosures, and supplementary schedules are filed as an attachment to the plan’s Form 5500 filing. A transitional election is available that allows growing plans to postpone the audit if the participant count is between 80-120 on the first day of the plan year, and the sponsor elects to continue filing a Form 5500 for the same size plan as they did in the previous year.
The problem is that the change allowing part-timers to partake in the plan may make certain plan sponsors cross that 120 threshold. That’s a cost that will only start in 2024, but that is something to consider.
