Improving coverage for part-time workers

(a) In general Section 202 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1052) is amended by adding at the end the following new subsection: (c) Special rule for certain part-Time employees (1) In general A pension plan that includes either a qualified cash or deferred arrangement (as defined in section 401(k) of the Internal Revenue Code of 1986) or a salary reduction agreement (as described in section 403(b) of such Code) shall not require, as a condition of participation in the arrangement or agreement, that an employee complete a period of service with the employer (or employers) maintaining the plan extending beyond the close of the earlier of— (A) the period permitted under subsection (a)(1) (determined without regard to subparagraph (B)(i) thereof); or (B) the first 24-month period— (i) consisting of 2 consecutive 12-month periods during each of which the employee has at least 500 hours of service; and (ii) by the close of which the employee has attained the age of 21. (2) Exception Paragraph (1)(B) shall not apply to any employee described in section 410(b)(3) of the Internal Revenue Code of 1986. (3) Coordination with other rules (A) In general In the case of employees who are eligible to participate in the arrangement or agreement solely by reason of paragraph (1)(B): (i) Exclusions An employer may elect to exclude such employees from the application of subsections (a)(4), (k)(3), (k)(12), (k)(13), and (m)(2) of section 401 of the Internal Revenue Code of 1986 and section 410(b) of such Code. (ii) Nondiscrimination rules Notwithstanding paragraph (1), section 401(k)(15)(B)(i)(I) of such Code shall apply. (iii) Time of participation The rules of subsection (a)(4) shall apply to such employees. (B) Top-heavy rules An employer may elect to exclude all employees who are eligible to participate in a plan maintained by the employer solely by reason of paragraph (1)(B) from the application of the vesting and benefit requirements under subsections (b) and (c) of section 416 of the Internal Revenue Code of 1986. (4) 12-month period For purposes of this subsection, 12-month periods shall be determined in the same manner as under the last sentence of subsection (a)(3)(A), except that 12-month periods beginning before January 1, 2023, shall not be taken into account. (b) Vesting Section 203(b) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1053(a)) is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph: (4) Part-time employees For purposes of determining whether an employee who is eligible to participate in a qualified cash or deferred arrangement or a salary reduction agreement under a plan solely by reason of section 202(c)(1)(B) has a nonforfeitable right to employer contributions— (A) except as provided in subparagraph (B), each 12-month period for which the employee has at least 500 hours of service shall be treated as a year of service; and (B) paragraph (3) shall be applied by substituting at least 500 hours of service for more than 500 hours of service in subparagraph (A) thereof. For purposes of this paragraph, 12-month periods shall be determined in the same manner as under the last sentence of section 202(a)(3)(A), except that 12-month periods beginning before January 1, 2023, shall not be taken into account.. (c) Reduction in period service requirement for qualified cash and deferred arrangements Section 401(k)(2)(D)(ii) of the Internal Revenue Code of 1986 is amended by striking 3 and inserting 2. (d) Pre-2021 service Section 112(b) of the Setting Every Community Up for Retirement Enhancement Act of 2019 (26 U.S.C. 401 note) is amended by striking section 401(k)(2)(D)(ii) and inserting paragraphs (2)(D)(ii) and (15)(B)(iii) of section 401(k). (e) Effective dates (1) In general Except as provided in paragraph (2), the amendments made by this section shall apply to plan years beginning after December 31, 2024. (2) Subsection (d) The amendment made by subsection (d) shall take effect as if included in the enactment of section 112 of the Setting Every Community Up for Retirement Enhancement Act of 2019.