Part-time work is great for increased flexibility, but a significant bummer when it comes to benefits. Luckily, a new rule now opens the door for millions of part-time workers to start building their nest eggs earlier through employer-sponsored retirement plans. This rule—part of the Secure Act 2.0 passed in 2022—reduces the waiting period for part-time employees to join their company’s 401(k) or 403(b) plans. Here’s what you need to know to take advantage of this change and maximize your savings this year.
How part-time workers can save more for retirement
Under the new rules, part-time workers can qualify for their employer’s retirement plan after just two years of service, provided they work at least 500 hours in each year. This is down from the previous three-year requirement, making it significantly easier for part-time employees to start saving for retirement through their workplace plans.
To put this in perspective, 500 hours per year amounts to roughly 10 hours per week, meaning even those working limited schedules can qualify for these important benefits more quickly than before. Whatever your image of part-time work looks like, this rule benefits a wide range of people:
-
Recent hires who work steady part-time schedules can begin saving a full year earlier than under previous rules.
-
Workers juggling multiple part-time positions can now more quickly access benefits at their longer-term employers.
-
Parents or caregivers working reduced hours can start building retirement savings sooner.
-
Students working part-time while in school can begin their retirement savings journey earlier in their careers.
Read the fine print
First, bit of clarification: Whereas freelancers are self-employed (and eligible for their own types of plans), this rule applies to long-term, part-time workers, who are still considered to be a part of the company and eligible for corporate benefits.
Additionally, the new provision comes with several key stipulations:
-
The rule applies to most 401(k) plans and certain 403(b) plans.
-
Collectively bargained plans are exempt from these requirements.
-
Service hours accumulated before 2021 don’t count toward the eligibility requirement.
-
Employers must still offer plan participation to those who work 1,000 hours in a single year.
Maximizing your retirement savings
For part-time workers now eligible for retirement plans, consider taking these steps.
-
Review your employer’s match program, if available, and try to contribute enough to capture the full match.
-
Calculate how much you can consistently contribute from each paycheck.
-
Consider automatic contribution increases to gradually boost your savings rate.
-
Research your plan’s investment options and choose a diversified portfolio aligned with your retirement timeline.
-
Understand any vesting schedules for employer contributions.
The bottom line: Part-time employees should check with their HR departments about eligibility and plan details, as employers will need to implement these changes in their retirement plan administration asap. Starting to save earlier, even in small amounts, can make a meaningful difference in long-term retirement.