403(b) Universal Availability and the New Long-term/Part-time Rules

403(b) plan sponsors are required to adhere to the long-term/part-time (LT/PT) participation rules that go into effect Jan. 1, 2025. Many employers ask how these new rules mesh with the universal availability rules already existing for 403(b) plans.

Universal availability – All 403(b) employees must be given the opportunity to make voluntary deferrals into the plan. Certain groups, such as students and employees who typically work less than 20 hours, can be excluded from this rule.

Long-term/Part-time rules – Employees who work more than 500 hours in two consecutive eligibility computation periods must be given the opportunity to make voluntary deferrals into the plan. These participants may be excluded from employer contributions.

Here are a few considerations as employers determine how the new LT/PT rule applies to their plan.

  • The first question is whether your plan excludes any groups of employees. If not, universal availability should already allow all employees to make elective deferrals, and the LT/PT rules would not apply.
  • The LT/PT rules also do not apply if your plan excludes student employees. IRS guidance issued in October confirms that student employees excluded from the plan are not subject to the LT/PT rules.
  • If your plan excludes employees who typically work less than 20 hours per week, the LT/PT rules do apply. For this group, employers need to determine if any employees worked more than 500 hours in 2023 and 2024. That group of employees must be notified of the opportunity to make voluntary contributions into the plan.

Some employers who exclude part-time workers are electing to remove that exclusion and give all part-time workers the opportunity to make voluntary contributions. This removes the need to monitor the 500-hour rule for this group.


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