Employers often assume that 401(k) plans are reserved only for full-time employees. However, federal rules allow many part-time employees to participate in an employer-sponsored retirement plan when certain eligibility requirements are met.

Recent legislation, including the SECURE Act and SECURE 2.0 Act, expanded access to 401(k) retirement plans for long-term part-time employees. Understanding these rules can help employers create a more competitive employee benefits package while remaining compliant.

In this article, we’ll explain how 401(k) eligibility works, when part-time employees may enroll, and what employers should know when administering retirement benefits.

What is a 401(k)?

A 401(k) is a common retirement plan offered by employers that allows employees to set aside a portion of their pay for retirement, typically through payroll deductions. These contributions are invested within the plan, allowing employees to build retirement savings over time.

Depending on the plan, employers may also contribute to employees’ accounts through matching employee contribution amounts or other employer contribution strategies. Offering a 401(k) can be one way employers strengthen and create a competitive employee benefits package, helping efforts to increase employee retention.

However, employees must meet the eligibility requirements outlined by the plan before they can participate.

Can Part-Time Employees Participate in a 401(k) Retirement Plan?

The answer is ultimately yes; certain part-time employees who are considered long-term employees can participate in an employer-sponsored 401(k) retirement plan if they meet the applicable eligibility requirements.

The SECURE Act first expanded 401(k) access for long-term part-time employees by requiring plans to allow employees who work at least 500 hours during each of three consecutive 12-month periods to make elective deferrals. SECURE 2.0 Act later reduced this requirement from three consecutive years to two consecutive years, for plan years beginning in 2025 and later.

Under the current rules, a long-term part-time employee generally must:

• Be at least 21 years of age
• Complete at least 500 hours during each of two consecutive 12-month periods

For employees who meet these requirements, an employer generally cannot exclude them from making elective deferrals, or a portion of their pay, to the 401(k) solely because they work part-time. Employers should still review their specific plan documents and applicable requirements when determining employee eligibility.

This means working part-time does not automatically prevent an employee from participating in a 401(k). Instead, employers need to consider an employee’s age, hours of service, and the eligibility provisions of the plan.

The SECURE 2.0 Act also outlines the minimum requirements for 401(k) eligibility for full-time employees. Depending on the part-time employee’s period of service, they may also qualify under the full-time rules.

General Eligibility Requirements

Federal law establishes minimum eligibility requirements that generally apply to employer-sponsored retirement plans for full-time employees, which include 401(k) retirement plans. 

In order to be eligible, an employee must:

• Be at least 21 years of age
• Complete at least a “year of service,” which is defined as 1,000 working hours in 12 months before enrolling in a 401(k)

These rules are targeted towards full-time employees; however, it is possible for part-time employees to become eligible if the individual meets the hour requirements.

Employers also may choose to make their plan’s eligibility requirements less restrictive than the federal rule if they wish.

How Employers Should Manage 401(k) Eligibility for Part-Time Employees

Because eligibility can depend on an employee’s hours and length of service, employers should have processes in place to identify when part-time employees become eligible to participate.

Below is a list of considerations to help guide your overall 401(k) strategy:

• Review the 401(k) plan document and understand its eligibility requirements
• Track employee hours and service to identify employees who may become eligible using effective time and attendance tools
• Communicate enrollment information to employees when they become eligible
• Consider how retirement benefits fit into the company’s overall part-time employee benefits strategy

Managing retirement benefits involves more than simply offering a plan. Employers should understand eligibility requirements, track employee service hours, communicate enrollment opportunities, and coordinate retirement contributions through their payroll solution and benefits administration processes.

Taking a proactive approach can help employers support eligible employees while maintaining accurate and efficient plan administration.

Frequently Asked Questions

Making Employee Benefits Accessible to Your Workforce

Part-time employees can play an important role in an organization’s workforce, and retirement benefits may be an important part of a competitive employee benefits package. Employers with a significant part-time workforce should consider how their retirement plan accommodates eligible part-time employees and how eligibility is tracked as employees’ hours change.

If your business is evaluating 401(k) options or looking to enhance its employee benefits strategy, contact us to speak with a benefits professional who can help you determine which retirement offerings best fit your workforce.