Long-Term Part-Time Employees Under SECURE 2.0: 2026 401(k) and 403(b) Rules

Long-term part-time employees under SECURE 2.0 earn the right to make 401(k) deferrals after two straight years of at least 500 hours, but they do not automatically earn the employer match.

Under SECURE 2.0, a long-term part-time employee is a worker age 21 or older who completes two consecutive 12-month periods with at least 500 hours of service in each. For plan years beginning after December 31, 2024, 401(k) plans and ERISA-covered 403(b) plans must let these workers make elective deferrals, though employer contributions remain optional.

By Craig Wear, CFP® | Last reviewed: October 9, 2026

What is a long-term part-time employee under SECURE 2.0?

A long-term part-time (LTPT) employee is a worker who becomes eligible to make 401(k) or 403(b) deferrals solely because of a 500-hour rule, not the traditional 1,000-hour year of service. The definition comes from Internal Revenue Code section 401(k)(2)(D)(ii), as amended by section 125 of the SECURE 2.0 Act, and from the parallel ERISA section 202(c) for 403(b) plans.

Three conditions define the group. The worker must be at least 21 by the end of the last measuring period, must have at least 500 hours of service in each of two consecutive 12-month periods, and must not already be eligible under the plan’s normal rule. Under IRC 410(a), a plan may otherwise require one year of service, defined as a 12-month period with at least 1,000 hours.

In practice, someone working roughly 10 to 19 hours a week year after year can no longer be left out of the deferral feature indefinitely.

How did SECURE 2.0 change the original SECURE Act rule?

SECURE 2.0 cut the waiting period from three consecutive 500-hour years to two, extended the rule to ERISA-covered 403(b) plans, and fixed two technical gaps. The 2019 SECURE Act created the LTPT category for 401(k) plans only, with three-year measurement and no credit for 12-month periods beginning before January 1, 2021, so the first LTPT entrants arrived in 2024.

According to the Treasury preamble to the November 27, 2023 proposed regulations, section 125 of SECURE 2.0 replaced “3” with “2” for plan years beginning after December 31, 2024. It also extended the pre-2021 disregard to the vesting rule (earlier IRS guidance had said pre-2021 periods still counted for vesting) and amended the top-heavy rules so a plan is not treated as top-heavy merely because it gives no employer contributions to LTPT employees.

SECURE 2.0 contains dozens of other provisions with staggered effective dates; the site’s SECURE 2.0 effective-date tracker covers the retirement-distribution side of the law.

When does a long-term part-time employee have to be let into the plan?

An LTPT employee must start participating no later than the earlier of the first day of the next plan year or six months after meeting the requirements. That timing comes from the general entry-date rule in IRC 410(a)(4), which section 401(k)(15)(D) applies to LTPT workers.

The two 12-month periods must be consecutive. The proposed regulations explain that if a not-yet-eligible worker has a 12-month period with fewer than 500 hours, the earlier 500-hour periods stop counting toward eligibility and the two-period count starts over.

Plans that credit eligibility service with the elapsed time method work differently. Under the proposed rules, an elapsed-time plan generally cannot require more than one year of employment, regardless of hours, so a part-timer becomes eligible as a regular participant and is not an LTPT employee at all.

What do long-term part-time employees actually get?

LTPT employees get the right to make elective deferrals, and the law requires nothing more. Under IRC 401(k)(15)(B), an employer is not required to make matching or nonelective contributions for employees who are eligible solely under the 500-hour rule, even if other participants receive them.

The employer may also elect to exclude LTPT employees from the ADP and ACP nondiscrimination tests, the 410(b) coverage test, the safe harbor contribution requirements and the top-heavy minimum contribution and vesting rules. Those exclusions protect plans whose regular participants are mostly full-time; the mechanics of those tests are covered in the site’s guide to highly compensated employee testing, and safe harbor design in safe harbor 401(k) plans.

Two things LTPT workers do receive by statute are vesting credit and the ordinary contribution limits. Each 12-month period with at least 500 hours counts as a year of vesting service for any employer contributions the plan does choose to make, a rule explained in depth in the 401(k) vesting schedule guide. Deferrals themselves are always 100% vested.

A newer wrinkle involves automatic enrollment. For plan years beginning after December 31, 2024, SECURE 2.0 generally requires 401(k) and 403(b) plans first established on or after December 29, 2022 to automatically enroll eligible employees at a default rate of 3% to 10%, rising each year to at least 10% (capped at 15%). The January 14, 2025 proposed regulations state that the automatic arrangement must cover all employees eligible to defer, “including long-term, part-time employees.” Employers in existence for less than three years, very small employers and some other plans are exempt from the mandate.

Which workers and plans are not covered?

The LTPT rule does not reach employees covered by a collective bargaining agreement in which retirement benefits were bargained, nonresident aliens with no U.S.-source earned income, or workers at employers that sponsor no plan. Section 401(k)(15)(C) carves out the first two groups, and the law creates no obligation to start a plan; whether employers must offer one at all is covered in do all employers offer a 401(k).

For 403(b) plans, IRS Notice 2024-73 adds specifics. Governmental 403(b) plans, which are not subject to Title I of ERISA, are outside the rule. ERISA 403(b) plans must now let an otherwise excludable “under 20 hours a week” employee defer once that employee qualifies as an LTPT employee, but they may keep excluding student employees because that exclusion is based on classification rather than service.

Job-category exclusions are allowed only within limits. The proposed 401(k) regulations say a plan may exclude a classification that is not based on age or service, but a classification cannot be a proxy for a longer service requirement. Calling a worker “temporary” does not let the plan demand more than two 500-hour periods.

What is the 2026 status of the long-term part-time regulations?

The 401(k) LTPT rules remain in the proposed regulations published November 27, 2023, and plans may rely on them until a final Treasury decision is issued. In IR-2024-257, the IRS said the final 401(k) regulation will apply no earlier than plan years beginning on or after January 1, 2026; no final regulation had been located on IRS.gov or the Federal Register when this article was reviewed.

For 403(b) plans, Notice 2024-73 governs for plan years beginning after December 31, 2024, and the IRS said it expects to issue proposed 403(b) regulations later. Employers have been required to follow the rules in operation since they took effect, but the written plan amendment deadline for most SECURE and SECURE 2.0 changes is December 31, 2026 for non-governmental plans, December 31, 2028 for applicable collectively bargained plans and December 31, 2029 for governmental plans, according to IRS Notice 2024-2.

Worked example: a 12-hour-a-week employee in 2026

A part-timer who logs 624 hours in each of two calendar years reaches LTPT status at the end of the second year and must be offered deferrals by the next January 1. The example below is hypothetical, assumes a calendar-year 401(k) plan whose eligibility periods run on the plan year, and covers federal income tax only.

Because her taxable income is already zero, a traditional pre-tax deferral would save her no federal income tax in this example, while a Roth deferral, if the plan offers it, would cost no federal income tax either. The trade-offs are laid out in Roth 401(k) vs. traditional 401(k). The same logic, paying tax at a low rate now rather than a possibly higher rate later, is what drives Roth conversions in low-income years, and a financial professional can model whether either applies to a given household.

Low earners who defer may also look at the Saver’s Credit, available in 2026 up to $40,250 of AGI for single filers (IRS). Because it is nonrefundable, the Saver’s Credit helps only someone with income tax to offset.

What do people commonly get wrong about part-time 401(k) eligibility?

The most common error is assuming the LTPT rule entitles a worker to the employer match; it entitles the worker only to the right to defer. Several other misconceptions are corrected directly by the statute and the IRS guidance.

• “Any part-time worker can join right away.” The worker still needs two consecutive 500-hour periods and age 21, and a plan can use those limits.
• “Only 2025 hours count.” For 401(k) plans, 12-month periods beginning on or after January 1, 2021 count, so many long-tenured part-timers became eligible in 2024 or 2025.
• “A bad year just pauses the clock.” Under the proposed rules, a sub-500-hour period before eligibility resets the consecutive count.
• “Becoming full-time ends the special vesting credit.” A former LTPT employee keeps receiving a year of vesting credit for each 500-hour period, even after qualifying under the regular rule.
• “The rule applies to every employer.” It applies only to employers that already sponsor a 401(k) or ERISA 403(b); comparisons of those plan types are in 403(b) vs. 401(k).

Matching formulas, when offered, follow the plan document; the mechanics are covered in how a 401(k) match works.

Frequently asked questions

This article is for educational purposes only and is not individualized investment, tax, or legal advice. Consult a qualified professional about your specific situation.