How SECURE 2.0 will give a leg up to part-timers saving for retirement in 2025

This provision lessens the barriers to entry for part-timers wishing to participate in their employer’s retirement plan by reducing the eligibility period from three years to two. In other words, an employee aged 21+ will be eligible to contribute to their workplace retirement plan if they clock between 500 and 999 hours over the course of two consecutive years. This cohort is referred to in the provision as “long-term part-time” (LTPT) employees.

Why is this significant? While it may not seem like a big change, a year is valuable time when it comes to retirement planning. Getting into the habit of saving, increasing contribution levels at regular intervals, and allowing funds to compound over time are how Americans build their nest eggs through 401(k)s and similar vehicles. In other words, the earlier an individual can start saving for retirement, the better. And with the average worker changing jobs every 4.1 years, shorter eligibility requirements can get them into that saving discipline sooner at each new workplace. 

Access is only the first step

According to data from the U.S. Bureau of Labor Statistics (BLS), just 44% of private sector part-time workers have access to defined benefit pension plans and defined contribution retirement plans at work, compared to 79% of full-time employees. Across the private sector, full-time workers are nearly three times as likely to participate in a retirement plan (63%; 22%).

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Expanding access will be an important first step, but there will be much more work to do to drive participation—and ultimately improve outcomes for LTPTs.

Automatic or opt-out features are powerful tools in the plan sponsor toolkit, and auto-enrollment will be one of the keys to spurring greater participation among part-time workers. With no action required on their part, qualifying LTPTs can begin building wealth and activate their employer match as soon as they meet the new eligibility criteria. 

In addition, education and communication can increase employees’ awareness of the plan and why they should engage with it. Some organizations segment benefits communications by worker type (full-time vs. part-time vs. contingent), so it will be vital for HR departments to review their strategy to ensure LTPTs receive important information about the plan in the lead-up to becoming eligible and/or being auto-enrolled.

In terms of outcomes, auto-escalation is a top strategy for helping workers save at a sufficient level over time. In addition, nonelective contributions—or funds that an employer puts into an employee’s account regardless of that employee’s own contributions—can bolster account balances. A recent study from Vanguard suggests that traditional employer matches favor high-earners who can afford to max out their 401(k) contributions. As such, nonelective contributions can go a long way toward leveling the playing field for part-time workers who may be on the lower end of the pay curve.

Women benefit, who lag behind in savings

It might be tough to pin down an exact figure for how many LTPTs will be impacted by this legislative change, but it is worth noting that part-time workers make up a significant portion of the labor force. A record number of Americans, some 22 million, are working part time, or less than 35 hours per week. In 2023, the majority of them were working part time voluntarily (88.3%), for reasons including family or personal obligations and childcare issues.

Digging a little deeper, we see that women are 1.6 times more likely than men to work part time. We know that caregiving disproportionately falls on women, which may contribute to this ratio.

While not a panacea, SECURE 2.0 contains a number of provisions to help employers support their workforce in saving more for retirement. Taking advantage of provisions like the one for LTPTs can start to chip away at these gaps and create a more equitable system for American workers.

More awareness is needed

In my estimation, the part-timer provision is one of the lesser-known pieces of SECURE 2.0. But I’ve also observed that there is not enough awareness about the landmark legislation more broadly, especially among middle market companies.

For example, we’ve spoken with employers who were unaware of the provision that allows them to make a matching contribution to an employee’s 401(K) for qualified payments that employee makes on their student loan—even though the employer was aware that the vast majority of its workforce is in active repayment for several years. Whereas auto enrollment has become the norm for larger employers or plan sponsors with more than 1,000 employees or participants, many middle-market companies lack auto-enrollment, have low participation rates (20-40%) and are “grandfathered” under the Secure 2.0 auto-enrollment and auto-escalation provisions.

As an industry, we owe it to the workers in our purview to keep learning, speaking out about and implementing the tools at our disposal to increase retirement plan access, participation and outcomes for hardworking Americans as they save for the future. The part-timer provision, once it goes into effect, is a great place to start.