Sec. 12. Improving coverage for part-time workers
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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: 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— the period permitted under subsection (a)(1) (determined without regard to subparagraph (B)(i) thereof); or the first 24-month period— consisting of 2 consecutive 12-month periods during each of which the employee has at least 500 hours of service; and by the close of which the employee has attained the age of 21.
Paragraph (1)(B) shall not apply to any employee described in section 410(b)(3) of the Internal Revenue Code of 1986. In the case of employees who are eligible to participate in the arrangement or agreement solely by reason of paragraph (1)(B): An employer may elect to exclude such employees from the application of subsections (a)(4), (k)(3), (k)(12), (k)(13), (k)(15)(B)(i)(I), and (m)(2) of section 401 of the Internal Revenue Code of 1986 and section 410(b) of such Code. The rules of subsection (a)(4) shall apply to such employees.
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. 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, 2021, shall not be taken into account. 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: 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— 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; paragraph
(3)shall be applied by substituting at least 500 hours of service for more than 500 hours of service in subparagraph
(A)thereof; and 12-month periods occurring before the 24-month period described in section 202(c)(1)(B) shall not be treated as years of service. 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, 2021, shall not be taken into account. . 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) . Section 410(a) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: In the case of a plan that includes either a qualified cash or deferred arrangement (as defined in section 401(k)), a trust of which such plan is a part shall not constitute a qualified trust under section 401(a) if the plan requires, as a condition of participation in the plan or arrangement, that an employee complete a period of service with the employer (or employers) maintaining the plan extending beyond the close of the earlier of— the period permitted under paragraph
(1)(determined without regard to subparagraph (B)(i) thereof), or the first 24-month period— consisting of 2 consecutive 12-month periods during each of which the employee has at least 500 hours of service, and by the close of which the employee has attained the age of 21. Subparagraph (A)(ii) shall not apply to any employee described in section 410(b)(3). In the case of employees who are eligible to participate in the arrangement or agreement solely by reason of subparagraph (A)(ii)— An employer may elect to exclude such employees from the application of subsection
(b)and of subsections (a)(4), (k)(3), (k)(12), (k)(13), (k)(15)(B)(i)(I), and (m)(2) of section 401. The rules of paragraph
(4)shall apply to such employees. An employer may elect to exclude all employees who are eligible to participate in a plan maintained by the employer solely by reason of subparagraph (A)(ii) from the application of the vesting and benefit requirements under subsections
(b)and
(c)of section 416. For purposes of this paragraph, 12-month periods shall be determined in the same manner as under the last sentence of paragraph (3)(A), except that 12-month periods beginning before January 1, 2021, shall not be taken into account. . Section 410(a) of the Internal Revenue Code of 1986 is amended by adding at the end the following: 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 paragraph (6)(A)(ii) has a nonforfeitable right to employer contributions— 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, section 411(a)(6) shall be applied by substituting at least 500 hours of service for more than 500 hours of service in subparagraph
(A)thereof, and 12-month periods occurring before the 24-month period described in paragraph (6)(A)(ii) shall not be treated as years of service. For purposes of this paragraph, 12-month periods shall be determined in the same manner as under paragraph (6)(D). .
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