Reminder: Track Hours for All Workers

As the new year begins, your cooperative may be relying more heavily on flexible staff such as independent contractors and part-time, temporary, seasonal, and leased workers. Remember that as of January 1, 2021, part-time employees gained another path to eligibility in the NRECA 401(k) Pension Plan under the SECURE Act of 2019. For this reason, track every worker’s hours so that you can offer participation under the new rule when appropriate.

How eligibility works 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 standard 1,000-hour requirement.

For purposes of the new rule, you don’t need to count or include hours worked before January 1, 2021. The earliest any employee would become eligible under the new method would be in 2024. 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 the 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.

Re-familiarize yourself with your plan’s eligibility requirements and excluded classes if needed. These are 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 will step you through both rules.

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