Under SECURE Act 2.0, part-time employees become eligible to make 401(k) salary deferrals after completing at least 500 hours of service in each of two consecutive 12-month periods, provided they are at least 21 by the end of the second period. That shortened window replaces the three-year requirement from the original SECURE Act and applies to plan years beginning after December 31, 2024, so the earliest eligible workers could start deferring on January 1, 2025.1Federal Register. Long-Term Part-Time Employee Rules for Cash or Deferred Arrangements Under Section 401(k)
How the Two 12-Month Periods Are Counted
The first 12-month period always starts on your hire date. After that, the plan is allowed to switch to measuring by plan year rather than by your work anniversary, which is why two people hired a month apart may hit the 500-hour mark inside different tracking windows. Employers pick one method and stick with it.1Federal Register. Long-Term Part-Time Employee Rules for Cash or Deferred Arrangements Under Section 401(k)
Five hundred hours works out to roughly ten hours a week across a full year. If you fall short in either of the two periods, the counter resets. Seasonal and intermittent workers who log a strong year followed by a light one will need to string together two qualifying years in a row before eligibility opens.
There is also a separate track for people who qualified under the older three-year rule. Hour tracking for that version began with the 2021 plan year, and workers who cleared 500 hours in 2021, 2022, and 2023 became eligible on January 1, 2024.2Internal Revenue Service. Notice 2024-73 Anyone qualifying under the two-year rule with 500 hours in both 2023 and 2024 became eligible starting in 2025.
When You Actually Enter the Plan
Meeting the hours threshold does not put money into a retirement account the next payday. Federal law requires plan entry no later than the earlier of the first day of the next plan year or six months after you satisfy the requirements.3Office of the Law Revision Counsel. 29 USC 1052 – Minimum Participation Standards For a calendar-year plan, that is the next January 1 or July 1, whichever comes first. Hit 500 hours in September 2025, and the latest you enter is January 1, 2026.
Who the Rule Does Not Reach
Two groups are carved out. Employees covered by a collective bargaining agreement, if retirement benefits were the subject of good-faith bargaining, are excluded. So are nonresident aliens with no U.S.-source earned income.4Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans – Section: Special Rules for Participation Requirement for Long-Term, Part-Time Workers Governmental and non-electing church 403(b) plans sit outside ERISA and are not required to comply either.
What Eligibility Gets You, and What It Doesn’t
Being eligible means you can defer your own wages into the 401(k). It does not automatically entitle you to employer money. SECURE 2.0 lets the employer exclude long-term part-time participants from matching contributions, nonelective contributions, and safe harbor contributions, even when other participants in the plan receive them.4Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans – Section: Special Rules for Participation Requirement for Long-Term, Part-Time Workers Some employers still choose to extend a match; others will not. The plan document governs.
Your own contributions are always 100% vested from day one. That protection is not waivable, so any money coming out of your paycheck stays yours regardless of how long you remain with the employer.
Vesting for Any Employer Contributions You Do Receive
When an employer does put money in for a long-term part-time employee, those contributions vest on a more accessible schedule than the plan uses for typical full-time staff. Instead of the standard 1,000-hour threshold for a year of vesting service, you earn a year of vesting credit for each 12-month period in which you complete at least 500 hours.4Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans – Section: Special Rules for Participation Requirement for Long-Term, Part-Time Workers Year for year, you build ownership at the same pace a full-time colleague would.
There is a cutoff on backward-looking credit. For 401(k) plans, service before the 2021 plan year does not count toward vesting, because 2021 is when hour tracking under the original SECURE Act began.2Internal Revenue Service. Notice 2024-73 If you worked steady 500-hour years from 2015 through 2024, only the years from 2021 onward count toward vesting employer-funded amounts.
If You Move to Full-Time Hours
Work 1,000 or more hours in a plan year and you meet the plan’s ordinary eligibility rules. Starting with the first plan year after you cross that mark, the long-term part-time label drops off and you are treated as a regular participant, which means the employer must offer matching and nonelective contributions on the same terms as other full-time employees.4Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans – Section: Special Rules for Participation Requirement for Long-Term, Part-Time Workers
One benefit follows you: the 500-hour vesting standard stays in place permanently. Even after your hours climb, you continue to earn vesting credit at 500 hours per year rather than 1,000.
Automatic Enrollment in Newer Plans
Any 401(k) plan established on or after December 29, 2022, must include automatic enrollment. IRS proposed regulations issued in January 2025 confirm that long-term part-time employees are covered by that requirement. If the plan auto-enrolls its eligible workers, it must auto-enroll you once you clear the hours threshold. You can still opt out, but the default is participation.
Older plans, those in existence before December 29, 2022, are not subject to mandatory auto-enrollment. If one of those plans has a voluntary auto-enrollment feature, though, the same logic reaches long-term part-time participants once they become eligible.
Plan Document Amendment Deadlines
Employers have to update the written plan document to reflect the new rules, even if they have already been running the plan the right way in practice. The general deadline for adopting SECURE 2.0 amendments is December 31, 2026, for most qualified plans. Collectively bargained plans have until December 31, 2028, and governmental plans have until December 31, 2029. A mismatch between plan language and plan operations can create qualification problems in an IRS review.
What Happens If an Employer Misses Enrolling You
Where this most often breaks down is identification. In large part-time workforces, an employer may not notice that a worker crossed the 500-hour mark in two straight years until well after the entry date has come and gone. The IRS treats this the same as any failure to offer an eligible employee the chance to defer. The employer generally has to make a corrective qualified nonelective contribution equal to 50% of your missed deferral, calculated using the average deferral percentage for your employee group multiplied by your compensation for the excluded period.5Internal Revenue Service. 401(k) Plan Fix-It Guide – Eligible Employees Were Not Given the Opportunity to Make an Elective Deferral Election
The corrective contribution has to be fully vested and comes with the same withdrawal restrictions as regular elective deferrals. Employers who catch the problem quickly can bring the correction down to 25% of the missed deferral if you are still employed, correct deferrals begin within set time limits, and you receive a required notice within 45 days of enrollment. If the whole failure lasts less than three months and you begin participating within that window, no corrective contribution for the missed deferral is required.5Internal Revenue Service. 401(k) Plan Fix-It Guide – Eligible Employees Were Not Given the Opportunity to Make an Elective Deferral Election If you believe you should have been enrolled and weren’t, raise it with the plan administrator in writing so the correction window can start running.