Which Long-Term, Part-Time Employees Can Be Excluded From a 403(b) Plan?

Q: I read in a recent Ask the Experts column that student employees who could previously be excluded from an ERISA 403(b) plan could still be excluded, even if they would otherwise qualify as long-term, part-time employees under ERISA. Does the same type of exclusion apply to employees who previously could be excluded from an ERISA plan because they normally work fewer than 20 hours per week?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: No. Unlike the student employee classification, Notice 2024-73 makes it clear that an employee who normally works fewer than 20 hours per week and could be excluded under the existing universal availability provisions for 403(b) plans, but who also qualifies as an ERISA LTPT employee (for example, because that employee has worked at least 500 hours in at least two consecutive years), must be provided with the right to make elective deferrals in an ERISA 403(b) plan. Having said this, the plan may maintain an exclusion, such that if an employee does not qualify as an ERISA LTPT employee, the 403(b) plan could still exclude such an employee from the right to make elective deferrals.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.