Reminder: Track Hours Now for All Workers

Starting January 1, 2021, part-time employees at your cooperative have another path to eligibility in the NRECA-sponsored 401(k) Pension Plan. The SECURE Act, passed in 2019, added this new method.

You should already be tracking hours so that you know when a part-time employee has worked 1,000 hours and it becomes time to offer him or her participation in the 401(k) Plan. If you aren’t doing so already, begin tracking service hours during 2021 and beyond for all workers, including those in flexible staff categories such as part-time, temporary, seasonal, leased and independent contractors, so that you can also offer participation under the new rule when appropriate.

Eligibility under the new rule
A part-time employee who works 500 or more hours during three consecutive years (and is age 21, if your co-op’s plan has that age requirement) is eligible to make elective contributions even if he or she doesn’t meet the 1,000-hour requirement.

You don’t need to count hours worked before 2021 for purposes of the new rule. For this reason, the earliest any employee would become eligible under the new method would be in 2024 (unless he or she becomes eligible sooner under the 1,000-hour rule). For example, a part-time or seasonal non-union employee could work more than 500 but less than 1,000 hours during 2021, 2022 and 2023, in which case that employee would be eligible to make deferrals in 2024.

Your co-op doesn’t have to make employer matching or base contributions for employees who become eligible under the new rule and may also exclude them from IRS-required nondiscrimination testing.

Additional tasks
Review your plan’s eligibility requirements and excluded classes found in Sections 1.B and 3 of your 401(k) plan adoption agreement. Continue to enroll employees when they meet your Plan’s service requirement. If an employee doesn’t meet the service requirements during their first year of employment, continue to track hours and monitor eligibility using the months of service, 1,000 hour and 3-year, 500 hour methods. When an employee becomes eligible during a subsequent eligibility computation period, enroll them in the plan at that time. The counting hours flowchart on the Compliance & Eligibility page of the BA Guide has been updated to reflect both new rules.

If further guidance is issued by regulatory authorities, NRECA will provide updates. In the meantime, if you have questions about eligibility under the new rule, contact the benefits compliance team at 866.673.2299, option 7, or pension.compliance@nreca.coop.