Questions and Answers on Long-Term Part-Time Employee Rules and How To Remain Compliant
Q&A's on LTPT Employees
What are our Responsibilities regarding Employer Contributions like Matching and Safe Harbor Contributions?
LTPT Employees are not required to receive the following employer contributions, including the following common contribution types:
- Safe Harbor Contributions
- Matching Contributions
- Non-Elective (aka Profit Sharing) Contributions
- Top-Heavy Minimum Contributions
These contributions that are otherwise provided to plan participants are not required to be provided to LTPT Employees. However, if an LTPT Employee completes a Year Of Service (e.g. work more than 1,000 hours in a future plan year), they will become a full-fledged participant in the plan at that moment and enjoy all the benefits that plan participation entails, including sharing in employer contributions as required by the plan.
What About Testing? Will Testing Fail if Safe Harbor Match Contributions are Not Provided to LTPT Employees that Elect To Defer into the Plan from their Pay?
The inclusion of salary deferrals from LTPT Employees into the plan will not impact the ADP Test nor will the lack of Employer Safe Harbor Contributions cause the ACP Test to fail.
Like other Non-Discrimination Testing performed, the LTPT Employees are disregarded; this includes Coverage Testing under IRC §410(b), testing under IRC §401(a)(4), and Top Heavy Compliance requirements.
The Rules for Audit Plan Determination Changed - Do LTPT Employees an/or Their Deferral Accounts Count Towards the Audit Threshold?
They may. Prior to 2023, the Audit Threshold was based on the number of participants eligible to participant in the plan, regardless of having an account balance or not. An eligible participant could be a long-term full-time employee who hasn't yet decided to contribute into a 401(k) plan but otherwise could at any point in time (having met eligibility requirements already).
Now, after the 2023 Plan Year, the Audit Threshold is based on the number of accounts as of the first day of the plan year. If that count is 100 or more, the plan, for that plan year, is subject to an independent audit.