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This New Law Could Help Part-Time Workers and Job Hoppers Save for Retirement

The Ascent 2/5/2023 Charles Pastor
A woman sitting at her kitchen table and looking at a laptop while filling out paperwork. © Getty Images A woman sitting at her kitchen table and looking at a laptop while filling out paperwork.

The SECURE Act 2.0, which passed into law in December 2022, made some serious changes to how the average worker saves for retirement. However, some provisions of the bill will help the non-traditional worker, such as the part-time employee or frequent job hopper, make the most of their retirement savings.

Loosened eligibility requirements

Just because your employer offers a 401(k) doesn't always mean you can sign up for it on your first day. Employers are legally allowed to keep certain employees out of their retirement plan thanks to eligibility requirements. But for part-time workers, those requirements just got a little bit easier to satisfy.

Prior to 2019, employers had a lot of flexibility when it came to admitting employees into their retirement plans. The original SECURE Act, passed in December of that year, made enrolling in an employer's plan more straightforward. The law stated that employers offering a 401(k) plan must allow employees to join the plan if they worked for the company for one year, working at least 1,000 hours, or three years, working at least 500 hours each year.

The SECURE Act 2.0, however, made the eligibility requirements even looser for part-time employees. The new law reduces years of service for part-time employees from three to two. And for those wondering, employers may offer more liberal eligibility requirements, but cannot be more restrictive than outlined in the new law.

Simple, standard rollovers

When you leave a job, you are legally allowed to take part or all of your 401(k) balance with you. But in practice, rolling over an old 401(k) into a new plan or IRA account can be both tricky and tedious. The SECURE Act 2.0 will make that process easier.

Ask anyone who has rolled over an old retirement account -- it can be a difficult task. Between finding and submitting the correct paperwork to the sending firm, notifying the receiving firm, and possibly juggling a 20% tax withholding, things can get out of hand. That may be part of the reason why an estimated $1.35 trillion is in lost or forgotten 401(k)s.

Luckily, the new law includes a provision to simplify rollovers. Section 324 of the legislation directs the Treasury Secretary to simplify and standardize the rollover process by creating form templates that can be sent to both the sending and receiving institutions. These templates must be released by Jan. 1, 2025.

Retirement plan lost and found

There are an estimated 25 million abandoned 401(k) accounts in America today. That should come as no surprise to those who have had a previous employer change their company name, relocate, be acquired, or go out of business. Simply put, losing a 401(k) or pension plan is easier than you might think.

Section 303 of the SECURE Act 2.0, however, directs the Department of Labor to build a searchable database for lost retirement plans. This database will serve as another tool which workers can use to get ahold of their old plan's administrator. The provision gives a hard deadline of December 2024 for the DOL to create this lost and found database.

Non-traditional workers were not left out by the SECURE Act 2.0. Part-time workers will enjoy more flexibility to enter an employer's retirement plan. Meanwhile, job hoppers will have an easier time tracking down and consolidating old accounts.

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