Updated July 28, 2026. Quick answer: The threshold is now two consecutive 12-month periods of at least 500 hours, cut from three by the SECURE 2.0 Act §125 for plan years beginning after 2024. A long-term part-time employee must be allowed to make elective deferrals — but you are not required to make employer or matching contributions for them, and they can be excluded from several of the tests.
The change, in the statute’s own words
IRC §401(k)(2)(D) now bars a plan from requiring service beyond the earlier of the ordinary §410(a)(1) period or “the first period of 2 consecutive 12-month periods during each of which the employee has at least 500 hours of service.” The prior edition of the same provision read 3 consecutive periods. If your plan document or your provider is still tracking three, it is a year behind.
What you actually owe them — less than most owners assume
| Obligation | Applies to an LTPT employee? |
|---|---|
| Must be allowed to make elective deferrals | Yes |
| Employer nonelective or matching contributions | No — not required, even if you make them for others |
| Counted for §401(a)(4), §401(m)(2), §410(b) | May be excluded by election |
| Counted for top-heavy under §416 | §416(g)(4)(H) removes the plan from top-heavy status on this ground alone |
So an LTPT employee is a far smaller problem than a full-time hire. You must open the door to their own deferrals; you need not fund anything. But the plan does stop being a one-participant plan for annual reporting, which changes your filing obligation even though it barely changes your cost.
Note the arithmetic of the two-year test: an employee at 500 hours is working under ten hours a week. Two years at that level is a genuinely marginal role, and it is now enough.
Every dollar limit in this area is indexed and changes annually. The figures printed in the Code itself — $40,000 for the defined-contribution limit, $160,000 for the defined-benefit limit, $15,000 for elective deferrals — are 2001 and 2005 base amounts that will never be updated in the statute; IRC §415(d) and §402(g)(4) do the adjusting. Get the current year’s figures from the IRS cost-of-living notice for that year rather than from any article, including this one. Nothing on this page states a dollar amount for that reason.
Sources
IRC §410(a)(1)(A) and §410(b)(1); §401(a)(4); §401(k)(2)(D) as amended by the SECURE 2.0 Act §125; §416(g)(4)(H); §414(b), (c) and (m); IRS One-participant 401(k) plans and IRS Notice 2024-73.
This states what the cited authority says. It is not tax advice, and retirement-plan design turns on facts about your business and your other entities that no page can see. Every dollar limit referenced here is indexed and changes annually.