Updated November 8, 2024  

SECURE 2.0 requires 403(b) plans subject to ERISA to conform to the LTPT rules (Read a thorough discussion of the LTPT rules). Certain deferral-only 403(b) plans, church plans, and plans sponsored by governmental entities are exempt from this requirement. Employment history before 2023 may be disregarded, so employees working at least 500 hours in 2023 and 2024 will be first eligible to benefit under the new law in 2025.

With universal eligibility rules already applicable for employee salary deferral contributions, the LTPT rules are less impactful for 403(b) plans than 401(k) plans. However, IRS Notice 2024-73 clarified that plans excluding employees working less than 20 hours per week must allow for such an employee to contribute if they otherwise meet the LTPT rules.

The notice also clarified that plans may continue to exclude student employees (which is a class-based rather than service-based exclusion).

Let Pinnacle Plan Design Help

Consultants at Pinnacle Plan Design are actively monitoring new guidance concerning SECURE 2.0. This represents our understanding of the laws at this time. Additional guidance will provide additional clarity. If you have any questions about the application of the LTPT rules in your retirement plan, don’t hesitate to contact us at (520) 618-1305.

The content of this page is for general information only. While it is believed to be accurate and reliable as of the posting date, it may be subject to change as additional guidance becomes available. It is not intended to provide investment, tax, or legal advice. For advice regarding your specific circumstances, please seek services of an appropriate independent legal, tax, or investment professional.