Are Part-Time Employees Eligible for a 401(k)? Let’s Talk About It

Are you wondering if part-time employees are eligible for a 401(K)? Well, for the longest time, the answer was “no.” But things have changed in a big way since 2024. Now, it is possible to get a 401(k) for part-time employees. This is one of the biggest steps forward in helping more Americans prepare for retirement, no matter how many hours you work.

Let’s go through this slowly and clearly. What are the rules, who qualifies, and why does this new change matter for both workers and business owners?

Are Part-Time Employees Eligible for 401(k)?

Yes, they are, and that’s a big deal. Before 2024, most part-time employees didn’t have access to their company’s 401(k) plan because they didn’t meet the full-time hour requirements. But the government stepped in and said, “That’s not fair.”

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed to fix that. It created something called Long-Term Part-Time (LTPT) status. Basically, if you’ve been working at least 500 hours every year for a few years in a row, your employer now has to give you access to the 401(k) plan.

Here’s the timeline in simple terms

• From 2025, anyone who’s worked 500 hours per year for three years qualifies.
• It gets even easier in 2026. Only two consecutive years of 500 hours each are needed.

So, if you’ve been working steadily, even part-time, you could soon start putting money aside for your future through your employer’s 401(k).

Who Exactly Qualifies?

Here’s where it gets clear-cut. To join a 401 (k) for part-time employees, you need to

• Be 21 or older
• Have worked at least 500 hours per year
• Have done that for two years in a row

The clock for counting those hours started on January 1, 2023, which means a lot of part-timers become eligible starting January 1, 2025. If you’ve been consistently putting in time for your employer, even without a full-time schedule, you are finally in line to enjoy the same retirement-saving options as everyone else.

What Does This Mean for Employers?

If you run a business or manage a team, you now have to include your long-term part-time staff in your company’s 401(k) plan. It’s not optional anymore! However, you still have flexibility in some areas. The following new 401(k) rules for part-time employees are worth paying attention to.

• You must allow eligible employees to participate once they meet the criteria.
• You don’t have to offer matching contributions, but many companies do! It’s a great way to show appreciation and stay competitive.
• Keeping accurate hour records is more important than ever.
• Any employer match still follows your regular vesting schedule.

It might sound like extra work, but the benefits go both ways. Part-time employees get a chance to save, and you get a happier, more loyal team. It’s a win-win.

How Much Can Part-Timers Contribute?

One of the best parts of the 401(k) rules for part-time employees is that part-timers don’t have smaller limits. The contribution limits are the same as for full-time employees. For 2026, you can contribute up to $24,500, plus an extra $8,000 if you’re 50 or older.

That means even if you work 25 hours a week, you can still take full advantage of the same retirement savings opportunities as someone working 40 hours.

Just remember these points

• Your total contributions can’t exceed your annual pay.
• Employer contributions (if offered) don’t affect your personal limit.
• You still get all the tax advantages of a regular 401(k), whether it’s a traditional or a Roth account.
• Even small, steady contributions can make a surprising difference over time, especially when you let compounding do its magic.

Why Businesses Should Offer 401(k)s for Part-Time Employees?

Giving part-time workers access to retirement benefits isn’t just about following rules. It’s also good business.

Here’s why

• It helps with hiring. In today’s job market, benefits matter just as much as pay.
• It builds trust and loyalty. When people feel valued, they stick around longer.
• It boosts morale. A sense of security goes a long way toward creating a positive workplace.
• It provides tax perks. Employer contributions can reduce your taxable income.
• It keeps your business compliant. Following the SECURE Act rules means fewer headaches later.

At the end of the day, a 401(k) isn’t just about money. It’s about showing that your company genuinely cares about its people.

Thinking About Setting Up a 401(k) for Part-Time Employees?

Whether you are a part-time employee curious about your options or a business owner trying to do right by your team, this is the perfect time to act. The laws are changing in your favor. So, the sooner you start planning, the easier it is to create a 401(k) program that works for everyone.

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