More part-time workers to get access to employer retirement plans next year
Changes in the federal law, coupled with a strong labor market and state mandates are opening up employer-sponsored retirement plans to part-time workers.
MikeTyes
Like many workers, saving for retirement wasn't a priority for Mark Zimmermann. The 72 year old thought he'd always run the family dairy farm in Wisconsin, but that didn't go as planned.
"I struggled farming, I had too many disasters and was never able to put any money away," Zimmermann told CNBC, speaking from an office at his current employer.
He's now working in the manufacturing industry, maintaining equipment and setting up the sizing for customized metal parts. On his feet at the machines on the factory floor is physically demanding so Zimmermann works part-time.
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His employer, Mitchell Metal Products, has fewer than 100 workers and lets its part-time employees participate in the 401(k) plan.
"I really appreciate being able to [participate in the plan]," Zimmermann said. "I don't have a lot of savings built up right now, not compared to what I'm going to need and with inflation with the way it is."
The Merrill, Wisconsin-based manufacturer offers part-time workers access to the company 401(k) retirement plan as a way to attract and retain workers.
"Whether someone's working full time or part time, we view them as our most valuable assets," said Tim Zimmerman, president of Mitchell Metal Products, noting that 84% of his employees participate in the company retirement plan.
More part-time workers to get 401(k) access in 2024
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Just 66% of private-sector workers in the U.S. have access to an employer defined contribution plan, according to the U.S. Bureau of Labor Statistics. Tax breaks under recent legislation are aimed at making it easier for companies to offer the benefit.
The incentives are among the sweeping changes to the laws governing retirement plans under the SECURE Act of 2019 and expanded under SECURE 2.0 at the end of last year. Also included are provisions to expand part-time workers' access to retirement accounts.
Under the original Secure Act, beginning in 2024, employers must extend eligibility for the company retirement plan to part-time employees who work at least 500 hours per year for three consecutive years. Starting in 2025, Secure 2.0 reduces the work requirement to two years. Companies already have been required to grant eligibility to employees who work at least 1,000 hours in a year.
Changes in the law, mandates in some states and the continued strong job market have many small businesses re-evaluating their retirement benefits.
"I think the real value is that we're having conversations with plan sponsors," said Eric O'Donnell, director of product strategy and marketing strategy for Sentry Insurance, which offers small and micro businesses retirement plan services.
Making part-time workers eligible for retirement benefits also opens up conversations about saving and investing with newly-eligible employees.
Such conversations, he said, helps them understand retirement plan investing "is for you, and it is something that you should be thinking about, it's not for the wealthy, it's for the everyday American."
