While many companies offer 401(k) plans or similar retirement programs to full-time employees, they extend these benefits to part-time workers at lower rates, research shows.
In fact, only 51% of part-time employees are offered workplace retirement plans by their employers, compared with 77% of full-time workers, according to a report by the Transamerica Center for Retirement Studies.
But that may change with the Secure 2.0 Act which was signed into law at the end of 2022.
Beginning in 2025, part-time employees who have worked two consecutive years and completed at least 500 hours of service each year will be eligible to enroll in their company’s 401(k) or 403(b) plans.
An official summary of the Secure 2.0 Act notes that pre-2021 service is “disregarded for eligibility purposes under current law.”
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Secure 2.0 to make 401(k) auto-enrollment a requirement
Although 69% of private industry workers had access to workplace retirement benefits, just 52% participated in these offerings, according to the latest data by the Department of Labor.
But starting in 2025, the Secure 2.0 Act will require companies with new 401(k) and 403(b) plans to automatically enroll workers into these plans at minimum contribution rates of 3% to 10%. The rates will increase by 1% each year up to 15% and employees can choose to opt out of these plans.
“By passing SECURE 2.0 Act, Congress has taken a meaningful step for the retirement security of all Americans,” Dee Sawyer, T. Rowe Price’s head of Retirement Plan Services and U.S. Intermediaries, said in a statement. “At a time when individuals and businesses are facing competing financial pressures, we are pleased to see legislation that enhances retirement savings opportunities for millions of Americans.”
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Secure 2.0 summarized
The Secure 2.0 Act, a follow-up to the 2019 Secure Act, is a piece of legislation that intends to reshape the retirement plan landscape with more than 90 changes to retirement account laws and administration. Here are some highlights.
- Beginning in 2025, workers between the ages of 60 through 63 will get the option to make special catch-up contributions of up to $10,000 toward their workplace retirement plans like 401(k)s.
- The required minimum distribution (RMD) age will increase to 73 this year and then to 75 in 2033.
- Starting in 2024, employers may provide their employees with 401(k) contribution matches based on their workers’ student loan payments.
- Beginning in 2024, plan sponsors can create “emergency savings accounts” that allow employees to make Roth after-tax contributions to special savings accounts within their retirement plans.
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