Some part-timers who stay in their jobs may get quicker access to their company’s 401 (k) plan.
As part of pending pension legislation in Congress, workers who book between 500 and 999 hours in two consecutive years are generally entitled to their employer’s plan. That would be a reduction of the current three-year period, which was enacted under the Secure Act of 2019.
Companies must already extend the entitlement to part-time workers who work at least 1,000 hours per year, a rule that applied before this 2019 law.
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According to the latest data from the Bureau of Labor Statistics, approximately 25.2 million workers are considered part-time. They are also among those workers who do not have access to a retirement plan in the workplace, which may be partly due to the fact that their employer’s eligibility requirements are not met.
“Part-time workers are typically not long-term employees,” said Robyn Credico, director of retirement planning at Willis Towers Watson, a management consulting firm.
“Tell me, even if you are allowed to contribute [right away]if they leave a few months later there will be administrative problems … and there would be a lot of churn on the accounts, “Credico said, explaining why part-time workers are generally treated differently when it comes to 401 (k) plans.
For this new group of part-time workers – those who work 500 to 999 hours a year – the current three-year eligibility requirement means they cannot qualify before at least 2024, as 2021 is the first year that counts towards it. In other words, employers should track their part-time workers’ hours now if they haven’t already.
It’s worth noting that employers who provide matches – contributions to your account – don’t need to extend this benefit to this group of long-term part-time workers just because those workers get access to their company’s 401 (k).
Part-time workers who are not participating in a 401 (k) or who do not expect to meet eligibility requirements can always open an Individual Retirement Account or IRA. These accounts allow you to deposit up to $ 6,000 per year ($ 7,000 for those aged 50 and over).
If you work part-time and receive a 1099 tax form from your company, you are an independent contractor and you are not covered by the part-time employment scheme.
Contractors are essentially self-employed and can build their own retirement plans. This can range from different types of IRAs to a Solo 401 (k) depending on income.
“As far as you can save, even if it is a little, you should do it,” said Credico.