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What the SECURE Act Means for Your Business in 2021

January 15, 2021

SECURE Act

Happy 2021! 

Like everyone else, we are thrilled to welcome in a new year. Just like last year, we’ll be sharing helpful tips and insights each month to keep your retirement plan administration compliant and on track.

Back in November, we wrote about our top 7 insights from the 2020 audit season. We do this each year, recapping the pitfalls we see the most so you can avoid them in the coming year.

One of the biggest is that the SECURE Act flew a bit under the radar last year, and it’s important to take steps now to make sure you and your company are prepared for the new federal guidelines.

What is the SECURE Act?

The Setting Every Community Up for Retirement Enhancement Act (or SECURE Act) was passed at the tail end of 2019. At a high level, the SECURE ACT stipulates that employees who are 21+ years of age and who have completed 1,000 hours of service in a 12-month period cannot be excluded from a company’s retirement plan.

What does this mean for you? The biggest change is that long-term part-time (LTPT) employees are now eligible to participate in their employer’s benefits plan.

LTPT employees are also covered by the SECURE Act if they complete at least 500 hours of service for 3 consecutive 12-month periods—which is why it’s critical to start tracking hours now.

Depending on how long they were gone, re-hired employees who were previously eligible to participate in a benefits plan may be eligible to participate immediately on the date of their re-hire. This would make them exempt from the waiting period that applies to new hires.

Similar rules apply for employees who formerly worked for you via a temp agency. You may need to credit them with the amount of time they worked as a temp, as though they were a permanent hire at the time.

What should you do to prepare?

Although provisions for LTPT employees and others won’t take effect until 2024, it’s critical to start tracking their hours now

Companies must begin tracking hours of service for part-time employees starting this month—specifically, starting on January 1, 2021—to determine whether employees are eligible for contribution to their 401k plan. This is because of the provision for employees who complete a requisite number of hours for 3 consecutive 12-month periods prior to January 1, 2024.

Between LTPT employees, short-term part-time workers who might stay on, and temporary workers who could onboard long-term, this can be a lot to manage. 

The best way to keep on top of employee eligibility is to track time logged for eligible temporary employees as well as permanent employees, ensuring they get the appropriate benefits if they do join the team.

What’s the best tracking method?

In general, there are two methods for tracking hours of service:

  1. Counting the number of hours worked in a 12-month period.
  2. The “elapsed time” method: measuring a year of service based on the total time period during which a worker is employed.

The second method relieves you of the burden of recording hours worked, but alas—it’s not specifically mentioned in the SECURE Act.

Therefore, you should plan to track actual hours of service for part-time employees from January 1, 2021 onward.


If you aren’t sure how best to track your employees to stay compliant with the new guidelines, give us a call! Contact us today for more information and to schedule your virtual appointment with Cassell Plan Audits at 630.886.7669.

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