IRS Clarifies LTPT Employee Rules for 403(b) Plans

New IRS Notice 2024-73 provides important clarity on long-term part-time (LTPT) employees' eligibility for participation in 403(b) plans. While 403(b) plans are subject to many of the same rules that apply to 401(k) plans, a special universal availability requirement also applies. Generally, all employees must be eligible to make elective deferrals if any employee is eligible. Exceptions exist for employees who are students and those who typically work less than 20 hours weekly. Notice 2024-73 confirmed that the exclusion for student employees continues to exist even after the SECURE Act changes that make LTPT employees eligible. The exception continues to be available because it depends on a classification of employees, rather than their hours of service or work schedules. Employees who work fewer than 20 hours per week may, however, become eligible if they work at least 500 hours in each of two consecutive 12-month periods after January 1, 2023. Having different categories of "part-time" employees will not, therefore, violate the consistency requirement under 403(b). Notably, the LTPT employee requirements only apply to ERISA-governed 403(b) plans. For more information on the non-discrimination rules that apply to 403(b) plans, visit Tax Facts Online. Read More: Link to Q4038. Note: Q is updated.