at least 1,000 hours during a plan year in order to become eligible to participate. In 2019, the SECURE Act changed the eligibility requirements so that LTPT employees who are credited with at least 500 hours in three consecutive years must be allowed to participate under a 401(k) plan’s salary deferral provision. In 2022, SECURE 2.0 reduced the wait from three years to two, effective for plan years that begin after Dec. 31, 2024, and expanded applicability to ERISA-covered 403(b) plans. This proposed regulation provides answers to some of the open questions regarding the administration of LTPT employees and paves the way for new plan design concepts. The highlights of the proposed regulation are described below. Definitions The proposed regulation provides clarity on the criteria that need to be met in order for an employee to be considered a LTPT employee and also defines a new classification identified as former LTPT employees. • LTPT Employee: Under this proposed regulation, a LTPT employee is defined as an employee who is eligible to participate in a plan solely by reason of ◻ being credited with at least 500 hours of service during each of two consecutive 12-month periods (three consecutive 12-month periods for plan years beginning before 2025); and ◻ attaining age 21 by the close of the last of the consecutive 12-month periods. LTPT employees do not include employees described in Internal Revenue Code Section (IRC Sec.) 410(b)(3), including union employees and employees who are nonresident aliens with no United States source income. If an employee becomes eligible to participate in the plan under any other service condition (or lack thereof), the employee is not a LTPT employee. For example, if a newly hired employee is immediately eligible to participate in the plan for deferral purposes, she will not be considered to meet the definition of a LTPT employee. Similarly, an employee who becomes eligible to participate using the elapsed time method would not be considered a LTPT employee because the individual would not have met the service requirement solely by completing the applicable number of consecutive 12-month periods during which the employee is credited with at least 500 hours of service. Enjoy your association news anytime, anywhere. Scan the QR code to visit our online publication to stay up to date on the latest association news, share articles and read past issues. nebraska-independentbanker.thenewslinkgroup.org 18 NEBRASKA INDEPENDENT BANKER
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