IRS releases regulations on long-term part-time employees’ eligibility for retirement plans

Recent IRS regulations have unveiled new standards for the participation of long-term part-time employees in 401(k) retirement plans. The changes, set to take effect from 2024, originate from provisions in the Secure Act 2019 and Secure 2.0 Act 2022. Notably, the service requirements for part-time employees have been reduced, allowing those working 500 hours per year for three consecutive years to make retirement contributions. This threshold lowers to two consecutive years of 500-hour service from 2025. The regulations, despite being in the proposed stage, can be relied on by employers.

The IRS also clarified definitions and vesting details for long-term part-time employees and is currently open for comments on the proposed regulations until January 26, 2024. Stay informed on any developments and ensure your retirement plan is compliant with these new standards. So, for employers looking to offer a comprehensive retirement benefit package, it’s essential to stay up to date with these regulations and make the necessary adjustments to include eligible long-term part-time employees in their plans. This not only benefits the employee but also helps employers attract and retain talent by offering an attractive retirement benefit.

As always, it’s best to consult with a financial professional or seek guidance from the IRS for any clarification on the proposed regulations. In doing so, employers can ensure they are providing their employees with the best possible retirement options and staying compliant with federal regulations. So, as we look towards the future and the changing landscape of employee benefits, let us remember the importance of including all employees in retirement plans and providing them with the opportunity to secure their financial future. The proposed IRS regulations are a step in the right direction towards achieving this goal, and we can expect further developments in the coming years. Stay informed, stay compliant, and continue offering valuable benefits to your employees. Keep investing in their futures, so they can continue investing in yours. So, the next time you’re reviewing your company’s retirement plan, don’t forget to consider the impact of these proposed regulations and make any necessary adjustments for long-term part-time employees. By doing so, you not only ensure compliance but also demonstrate your commitment to providing equal opportunities for all employees in securing their financial future. As always, we recommend seeking guidance.

Wage Boosts for Numerous Employees Taking Effect in 22 States

In 2024, over 10 million employees are set to experience wage increases. To assist lower-income workers, 22 states have decided to raise their minimum wage rates. 

The lead state, in terms of generosity, is Hawaii, which is raising its minimum wage by $2 to $14 an hour. Michigan has the smallest increase, with a raise of 23 cents to $10.33 an hour. However, an ongoing lawsuit in Michigan could potentially raise the hourly rate to $12 if a large number of low-income workers get a favorable ruling from the state’s Supreme Court. 

As of January 1, the wage rate for low-income workers in Maryland, New Jersey, and upstate New York will exceed $15 an hour, joining California ($15.50), Connecticut, Massachusetts, Washington state, and the rest of New York in offering $15 per hour or more. 

The list of 22 states raising their minimum wage rates in 2024 includes Alaska, Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, New Jersey, New York, Ohio, Rhode Island, South Dakota, Vermont and Washington state. 

The federal minimum wage, set by the Department of Labor, remains at $7.25 per hour. States have the option to use this as their base rate or set a higher wage. This can give employers in states with higher wages an advantage, such as Illinois (excluding Chicago), where the minimum wage is now $14 an hour, contrasted with neighboring Indiana at $7.25.

Technology Adoption by Employers to Replace Employees

Naturally, some employers will seek to substitute entry-level employees with technology like Artificial Intelligence and robots. The food industry is predicted to particularly see large-scale layoffs. 

Just before the wage increase in California was implemented, Pizza Hut declared it would lay off over 1,200 delivery drivers. A wage increase for fast food employees, from $16 to $20 per hour in California, may prompt other restaurant chains to dismiss their staff. 

Around 17 million workers earn the minimum wage, with women representing nearly 58% of this group.