Tracking Part-Time Hours for 401(k) Eligibility

Employers must track part-time employees' hours because federal law now requires many 401(k) plans, and ERISA-covered 403(b) plans, to let long-term part-time workers make deferrals. Under current rules, an employee who works at least 500 hours in each of two consecutive 12-month periods and is age 21 generally becomes eligible. Missing that milestone creates plan errors.

Key takeaways

  • The traditional 1,000-hour eligibility rule is no longer the only test that matters for part-time staff.
  • SECURE 2.0 shortened the long-term part-time period to two consecutive years of 500 hours for plan years beginning after 2024.
  • Employers do not have to give long-term part-time employees matching or nonelective contributions, but vesting credit rules still apply.
  • Accurate hours data flowing from timekeeping to payroll to the recordkeeper is the real control.

How the long-term part-time rules work

Retirement plans have long been allowed to require a year of service, generally 1,000 hours in a 12-month period, and age 21 before an employee can join. That excluded many part-time workers indefinitely. The SECURE Act of 2019 created a second path for 401(k) plans: long-term part-time (LTPT) employees who reach 500 hours a year for consecutive years must be allowed to make elective deferrals. The original rule required three consecutive years.

SECURE 2.0 reduced the requirement to two consecutive years and extended the rule to 403(b) plans subject to ERISA. IRS Notice 2024-73 states that these SECURE 2.0 provisions apply to plan years beginning after December 31, 2024. Governmental 403(b) plans are not subject to the LTPT rules.

RuleStandard eligibilityLong-term part-time path
Hours thresholdGenerally 1,000 hours in 12 monthsAt least 500 hours in each of two consecutive 12-month periods
AgeUp to 2121 by the end of the period
Employee deferralsYesYes
Employer match or nonelective contributionsPer plan termsNot required while the employee remains LTPT
Nondiscrimination testingIncludedMay be excluded under IRS guidance
Vesting creditPer plan termsEach 12-month period with 500 or more hours counts as a year of vesting service

The IRS notice also says certain earlier periods are excluded from counting, and that the vesting rules differ between 401(k) and 403(b) plans. Confirm the exact service crediting rules for your plan with your recordkeeper and benefits counsel.

Why hours tracking is the hard part

The rule is simple on paper; the data is not. Part-time employees often work variable schedules, move between locations, take breaks in service or hold more than one job with the same employer. Hours may live in different timekeeping systems, and payroll may send recordkeepers only compensation data, not hours. If hours are incomplete, the plan cannot tell who crossed the threshold.

Plans that miss an eligible employee may owe corrective contributions for missed deferral opportunities. Errors are cheaper to prevent than to correct, so treat LTPT tracking as a payroll control, not a once-a-year report. If you have recently added auto-enrollment, remember that newly eligible LTPT employees may be swept in, which can surprise workers, as described in our article on being auto-enrolled in a 401(k).

A practical tracking process

  1. Confirm the measurement period. Decide with your recordkeeper whether hours are measured by plan year or anniversary year, and document it.
  2. Capture all hours of service. Include paid hours that count as service under plan terms, across every location and timekeeping system.
  3. Clean data at the source. Missed punches and unapproved timecards produce wrong totals. Our guide to timecard approval and payroll close shows how to tighten that step.
  4. Send hours to the recordkeeper. Add hours to every payroll file, not only compensation and deferrals.
  5. Run a milestone report. Flag part-time employees approaching 500 hours in the current period and those with one qualifying year already.
  6. Notify and enroll on time. Provide enrollment materials and the deferral opportunity on the plan's entry date.
  7. Reconcile at year end. Compare annual hours totals with eligibility status as part of your payroll year-end checklist.

Questions to ask your recordkeeper and payroll provider

  • Do you track hours for LTPT eligibility automatically, or do we need to supply a separate file?
  • How do you handle rehires, breaks in service and employees in more than one payroll entity?
  • Which contributions and tests treat LTPT employees differently in our plan document?
  • How will we be alerted when an employee reaches the threshold?

Frequently Asked Questions

Do we have to match contributions for long-term part-time employees?

No. IRS Notice 2024-73 states that employers are not required to make matching or nonelective contributions for LTPT employees, even when other eligible employees receive them. A plan may choose to provide them. Once an LTPT employee meets the plan's regular eligibility rules, the usual contribution terms apply.

What counts as an hour of service?

Generally, hours for which an employee is paid or entitled to payment, including some paid time off, subject to plan terms and Department of Labor rules. Some plans use equivalency methods instead of counting actual hours. Check your plan document, because the definition drives who reaches the 500-hour threshold.

Do the LTPT rules apply to seasonal workers?

They can. A seasonal employee who works at least 500 hours in each of two consecutive measurement periods and meets the age requirement may qualify, even with breaks between seasons. Track hours across rehires and confirm how your plan treats breaks in service so returning workers are evaluated correctly.

Next steps

Pull a list of part-time and variable-hour employees with hours for the last two measurement periods, confirm which are already eligible, and add hours to every recordkeeper file. Review your plan document with counsel to confirm LTPT provisions.

Last reviewed: October 2026.

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