IRS Guidance for Long-Term, Part-Time Employees for Section 403(b) Plans Under the SECURE Act 2.0
Published October 04, 2024
The Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) released Notice 2024-73 with guidance on the application of the nondiscrimination rules for 403(b) plans excluding long-term, part-time employees (LTPTEs) and student employee participation in plans.
Notice 2024-73 addresses a series of questions and answers (Q&As), including:
- Q-1: Do the eligibility rules for ERISA LTPTEs under section 202(c) of ERISA apply to a section 403(b) plan that is not subject to title I of ERISA?
- Q-2: Is a section 403(b) plan subject to ERISA required to provide the right to make elective deferrals to a part-time employee who qualifies as an ERISA LTPTE?
- Q-3: May a section 403(b) plan that is subject to ERISA continue to retain a part-time employee exclusion for part-time employees who do not qualify as ERISA LTPTE?
- Q-4: Is a section 403(b) plan that is subject to ERISA required to provide the right to make elective deferrals to a student employee who qualifies as an ERISA LTPTE?
- Q-5: May an employer with a section 403(b) plan that is subject to ERISA exclude ERISA LTPT employees for purposes of determining whether matching contributions satisfy the nondiscrimination requirements applicable to a section 403(b) plan under section 401(m)(2)?
- Q-6: Can an employer use section 403(b)(12)(D) to continue to exclude an ERISA LTPT employee who later becomes eligible to participate in the plan for reasons other than the eligibility rules for ERISA LTPT employees under section 202(c)(1)(B) of ERISA (a former ERISA LTPT employee) from receiving nonelective or matching contributions or from the application of the nondiscrimination requirements in sections 401(a)(4), 401(m)(2), and 410(b) of the Code?
The IRS and Treasury plan to release additional guidance on section 125 of SECURE 2.0. Final regulations will be issued for 401(k) plans on LTPTEs with applicability no earlier than plan years beginning on or after January 1, 2026.
This notice applies for plan years beginning after December 31, 2024.
The IRS requests comments on or before December 20, 2024. Comments should address:
- the application of section 403(b)(12)(D) of the Internal Revenue Code and section 125 of the SECURE 2.0 Act to section 403(b) plans.
- any rules with respect to section 401(k) LTPTEs (including former section 401(k) LTPTE) that should apply differently for ERISA LTPTEs under section 403(b) plans.