What in the (Retirement Plan) World is LTPT?

Acronyms, come get another acronym! Over the last few years, Congress has passed the SECURE Acts that put LTPT (Long-Term Part-Time) rules into our lives. On November 24, 2023, the Treasury released Proposed Regulations that finally give us some guidance on these rules.

In short, all 401(k) plans must now offer the plan to “long-term part-time” employees to allow them the opportunity to defer employee contributions into the plan. Before we get into the nitty-gritty, let’s first look at your plan provisions. If your plan has more liberal eligibility requirements, you do not need to worry about these LTPT rules because your plan already meets the requirements. Some example plan eligibility requirements that do not need to worry further:

  • Immediate eligibility. This applies even if your plan has different eligibility requirements for Employer Contributions. As long as you allow all employees to contribute employee contributions into the plan immediately, you are in the clear.

  • If your plan requires 500 or fewer hours worked in a year for employees to enter the plan.

Please note, if your plan tracks service requirements based on months worked (instead of tracking hours worked), you will need to have a method of tracking hours in place to ensure proper application of these rules. 

Alright, now what exactly is a LTPT employee? 

  • For 2024 plan years, a LTPT employee is any employee that worked 500 hours or more for 3 consecutive 12 month computation periods, but did not enter the plan due to eligibility requirements. The employee in consideration must be age 21 before the end of the 3rd 12-month computation period for these rules to apply. 

    • If you have an employee that has not entered the plan due to the hours they’ve worked each year over the past 3 years, but they have worked between 500 and 999 hours each year, they will be a LTPT employee and must be given the opportunity to contribute 1/1/2024. 

    • Disregard years before 2021. 

One good thing regarding these rules is that the plan document does not need to be amended for these changes until the end of the 2025 plan year. However, we will need to carefully document how your plan is operating. 

Please reach out to us if you believe your plan may need to make changes for these LTPT rules and we will work with you on the decisions that need to be made and documented. 

Lainey Eddlemon