Eventually, it may become easier to think of service tracking under the new rule as a largely set-it-and-forget-it process. However, for now, employers will likely want to continue revisiting, reviewing and refining their eligibility-tracking processes around the new rule. This will help ensure that hours are accurately aggregated over relevant periods of time to facilitate timely plan entry.
In doing so, it will be important for employers to establish procedures for periodically reviewing eligibility data to ensure that their tracking systems are working as expected. This approach will allow employers to timely identify and correct eligibility errors when things don’t go quite as planned. Going forward, employers may also want to talk with their human resources information system (HRIS) providers and recordkeepers to see if they offer additional services that might make service tracking easier under the new rules.
As an alternative, given the added complexity around hours counting and tracking, some employers may want to explore design changes that would help reduce the administrative burden associated with complying with the new rules. This might include eliminating eligibility waiting periods for making elective deferrals or eliminating waiting periods altogether, even those that can still be applied to receipt of employer contributions. Although eliminating waiting periods for employer contributions could increase total plan cost, for employers with small part-time employee populations, that increase in cost might prove a relatively small price to pay for avoiding the administrative complexity of the new rule.
For the same reasons, some employers may also consider whether the use of equivalencies or moving away from the hours-counting method to the elapsed-time method of tracking eligibility service might prove an effective way to ease or eliminate the compliance burden. That said, employers with large part-time, seasonal or continent workforces often find these methods of tracking service less desirable, as they don’t align as well with how employers think about the hours-based work performed by employees in those positions. In addition, use of equivalencies and elapsed-time methods for tracking service can accelerate plan entry for individuals who have otherwise performed very little work for the business.
Ultimately, the options available to help reduce the administrative burden of complying with the new rules will not make sense for every employer, as plan eligibility criteria has as much to do with the goals of the business and the makeup of an employer’s workforce as it does with minimum legal requirements. But with the added complexity of the new rules, it is worth taking a little time to consider what measures might be a good fit. Even where such measures are not available, employers may still find ways to lean on their HRIS providers and recordkeepers for additional support.
For any questions regarding the proposed regulations or SECURE 2.0, please contact your regular McDermott lawyer or one of the authors.
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Read First Article: A Long-Term, Part-Time Employee or Not a Long-Term, Part-Time Employee, That Is the Question
Read Second Article: A Long-Term, Part-Time Employee or a Former Long-Term, Part-Time Employee, That Is the Question
Read Third Article: Under Long-Term, Part-Time Employee Rules, Some Things Change, and Some Things Stay the Same
Read Fourth Article: IRS Confirms Same Hours-Counting Rules Still Add Up for Long-Term, Part-Time Employees
Read Fifth Article: When It Comes to Vesting, IRS Says Once a Long-Term, Part-Time Employee, Always a Long-Term, Part-Time Employee
Read Sixth Article: This Is Not a Test! IRS Confirms Long-Term, Part-Time Employees Excludible From Certain Nondiscrimination Testing
