82796 Federal Register / Vol. 88, No. 226 / Monday, November 27, 2023 / Proposed Rules 

■ 4. Removing the language ‘‘partner’’ in 

paragraph (b)(2) and adding the 

language ‘‘person’’ in its place; 

■ 5. Removing the language ‘‘80 

percent’’ in the first and second 

sentences of paragraph (b)(2) and adding 

the language ‘‘50 percent’’ in its place; 

and 

■ 6. Revising paragraph (b)(3). 

The additions and revision read as 

follows: 

§ 1.707–1 Transactions between partner 

and partnership. 

* * * * * 

(b) * * * 

(1) * * * 

(iii) For purposes of matching 

deductions and income in the case of 

expenses and interest under section 

267(a)(2), two partnerships in which the 

same persons own, directly or 

indirectly, more than 50 percent of the 

capital interests or profits interests in 

each partnership will be treated as 

persons specified in section 267(b). 

* * * * * 

(3) Ownership of a capital or profits 

interest. For the purpose of applying 

section 707(b), the rules for constructive 

ownership of stock provided in section 

267(c)(1), (2), (4), and (5) apply in 

determining the extent to which a 

capital interest or profits interest in a 

partnership is owned, directly or 

indirectly, by any person, including a 

person who does not own a partnership 

interest prior to application of 267(c). 

For example, where trust T is a partner 

in the partnership ABT, and AW, A’s 

wife, is the sole beneficiary of the trust, 

the ownership of a capital and profits 

interest in the partnership by T will be 

attributed to AW both for the purpose of 

further attributing the ownership of 

such interest to A and for determining 

whether AW is a constructive owner of 

an interest in the partnership. See 

section 267(c) (1), (2), and (5). 

Accordingly, if A, B, and T are equal 

partners in ABT, because AW is treated 

as constructively owning the one-third 

capital and profits interest in ABT 

owned by T and AW’s ownership is 

attributed to A, A will be considered as 

owning a more than 50 percent capital 

and profits interest in ABT, and a loss 

sustained by A on a sale or exchange of 

property with ABT will be disallowed 

by section 707(b)(1)(A). Similarly, 

because AW is treated as constructively 

owning the one-third capital and profits 

interest in ABT owned by T and is 

attributed the ownership of A’s capital 

and profits interest in ABT, AW will be 

considered as owning a more than 50 

percent capital and profits interest in 

ABT and a loss sustained by AW on a 

sale or exchange of property with ABT 

would also be disallowed by section 

707(b)(1)(A). 

* * * * * 

■ Par. 5. Section 1.707–9 is amended 

by: 

■ 1. Revising the section heading; 

■ 2. Redesignating paragraphs (a) and 

(b) as paragraphs (b) and (c); and 

■ 3. Adding new paragraph (a). 

The addition and revision read as 

follows: 

§ 1.707–9. Applicability dates and 

transitional rules. 

(a) Section 1.707–1. Paragraphs 

(b)(1)(i) through (iii), (b)(2), and (b)(3) of 

§ 1.707–1 apply to sales or exchanges of 

property with respect to controlled 

partnerships in taxable years ending on 

or after [DATE OF PUBLICATION OF 

FINAL RULE IN THE FEDERAL 

REGISTER]. 

* * * * * 

Douglas W. O’Donnell, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 2023–25715 Filed 11–24–23; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–104194–23] 

RIN 1545–BQ70 

Long-Term, Part-Time Employee Rules 

for Cash or Deferred Arrangements 

Under Section 401(k) 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document sets forth a 

proposed regulation that would amend 

the rules applicable to plans that 

include cash or deferred arrangements 

under section 401(k) to provide 

guidance with respect to long-term, 

part-time employees. The proposed 

regulation reflects statutory changes 

made by the SECURE Act and the 

SECURE 2.0 Act that relate to long-term, 

part-time employees. The proposed 

regulation would affect participants in, 

beneficiaries of, employers maintaining, 

and administrators of plans that include 

cash or deferred arrangements. This 

document also provides notice of a 

public hearing. 

DATES: Written or electronic comments 

must be received by January 26, 2024. 

A public hearing on this proposed 

regulation has been scheduled for 

March 15, 2024, at 10 a.m. ET. Requests 

to speak and outlines of topics to be 

discussed at the public hearing must be 

received by January 26, 2024. If no 

outlines are received by January 26, 

2024, the public hearing will be 

cancelled. Requests to attend the public 

hearing must be received by 5 p.m. ET 

on March 13, 2024. The public hearing 

will be made accessible to people with 

disabilities. Requests for special 

assistance during the public hearing 

must be received by March 12, 2024. 

ADDRESSES: Commenters are strongly 

encouraged to submit public comments 

electronically. Submit electronic 

submissions via the Federal 

eRulemaking Portal at 

www.regulations.gov (indicate IRS and 

REG–104194–23) by following the 

online instructions for submitting 

comments. Requests to speak at or 

attend the public hearing must be 

submitted as prescribed in the 

‘‘Comments and Public Hearing’’ 

section. Once submitted to the Federal 

eRulemaking Portal, comments cannot 

be edited or withdrawn. The 

Department of the Treasury (Treasury 

Department) and the IRS will publish 

for public availability any comment 

submitted electronically or on paper to 

its public docket on 

www.regulations.gov. Send paper 

submissions to: CC:PA:01:PR (REG– 

104194–23), Room 5203, Internal 

Revenue Service, P.O. Box 7604, Ben 

Franklin Station, Washington, DC 

20044. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the regulation, call Kara M. 

Soderstrom at (202) 317–6799 or Jason 

E. Levine at (202) 317–4148; concerning 

submission of comments, the hearing, 

and the access code to attend the 

hearing by telephone, call Vivian Hayes 

at (202) 317–6901 (not toll-free 

numbers) or email publichearings@

irs.gov (preferred). 

SUPPLEMENTARY INFORMATION: 

Background 

This document sets forth proposed 

amendments to the Income Tax 

Regulations (26 CFR part 1) under 

section 401 of the Internal Revenue 

Code (Code). This proposed regulation 

would amend § 1.401(k)–5 to set forth 

rules and definitions applicable to longterm, part-time employees under section 

112 of the Setting Every Community Up 

for Retirement Enhancement Act of 

2019 (SECURE Act), enacted on 

December 20, 2019, as Division O of the 

Further Consolidated Appropriations 

Act, 2020 (Pub. L. 116–94, 133 Stat. 

2534 (2019)), and sections 125 and 401 

of the SECURE 2.0 Act of 2022 (SECURE 


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1Section 410(a)(1)(B)(i) provides that a plan may 

require employees to complete 2 years of service 

(rather than 1) if accrued benefits under the plan 

are 100 percent nonforfeitable after not more than 

2 years of service. 

2.0 Act), enacted on December 29, 2022, 

as Division T of the Consolidated 

Appropriations Act, 2023 (Pub. L. 117– 

328, 136 Stat. 4459 (2022)). 

I. Statutory and Regulatory Framework 

Section 401(k)(1) of the Code provides 

that a profit-sharing, stock bonus, preERISA money purchase, or rural 

cooperative plan will not fail to qualify 

under section 401(a) merely because it 

includes a cash or deferred arrangement 

(CODA) that is a qualified CODA. Under 

section 401(k)(2), a CODA (generally, an 

arrangement providing for an election 

by an employee between contributions 

to a plan or payments directly in cash) 

is a qualified CODA only if it satisfies 

certain requirements. Section 

401(k)(2)(B) provides that contributions 

made pursuant to a qualified CODA 

(referred to as elective contributions) 

may not be distributed before the 

occurrence of certain events, and 

section 401(k)(2)(C) provides that 

amounts attributable to the elective 

contributions must be nonforfeitable at 

all times. Section 401(k)(2)(D) limits the 

period of service that a plan may require 

an employee to complete with the 

employer or employers maintaining the 

plan in order to be eligible to participate 

in the qualified CODA. 

Pursuant to section 401(k)(3)(A), a 

CODA is not treated as a qualified 

CODA unless: (1) the group of eligible 

employees under the CODA satisfies the 

requirements of section 410(b)(1), and 

(2) elective contributions under the 

CODA satisfy the actual deferral 

percentage (ADP) test in section 

401(k)(3)(A)(ii). Under section 

401(k)(3)(C), the elective contributions 

(including elective contributions that 

are designated Roth contributions) 

under a qualified CODA satisfy the 

requirements of section 401(a)(4) for a 

plan year with respect to the amount of 

those contributions if the contributions 

satisfy the ADP test for the plan year. As 

an alternative to satisfying the annual 

ADP test, a plan may satisfy the 

provisions of section 401(k)(11) (a 

SIMPLE 401(k) plan), the ADP safe 

harbor provisions of section 401(k)(12) 

(a traditional safe harbor section 401(k) 

plan), section 401(k)(13) (a qualified 

automatic contribution arrangement 

(QACA) safe harbor section 401(k) plan), 

or section 401(k)(16) (a starter 401(k) 

deferral-only arrangement). 

Under section 401(m)(1), the 

matching contributions and employee 

contributions under a defined 

contribution plan satisfy the 

requirements of section 401(a)(4) for a 

plan year with respect to the amount of 

those contributions only if the actual 

contribution percentage (ACP) test in 

section 401(m)(2) is satisfied for the 

plan year. With respect to matching 

contributions, as an alternative to 

satisfying the annual ACP test, a plan 

may satisfy the provisions of section 

401(m)(10) (which parallel the SIMPLE 

401(k) provisions of section 401(k)(11)), 

or the ACP safe harbor provisions of 

section 401(m)(11) (a traditional safe 

harbor section 401(m) plan) or section 

401(m)(12) (a QACA safe harbor section 

401(m) plan). 

The Treasury Department and the IRS 

issued comprehensive regulations under 

section 401(k) and (m) on December 29, 

2004 (TD 9169, 69 FR 78143). Since 

they were issued, the regulations have 

been updated a number of times. For 

example, the regulations were amended 

to reflect certain statutory changes (see 

TD 9237, 71 FR 6, and TD 9324, 72 FR 

21103, providing guidance with respect 

to designated Roth contributions under 

section 402A; and TD 9447, 74 FR 8200, 

providing guidance with respect to 

section 401(k)(13)) and to address 

discrete issues unrelated to statutory 

changes (see TD 9319, 72 FR 16878, 

relating to the definition of 

compensation; TD 9641, 78 FR 68735, 

relating to mid-year amendments to safe 

harbor plan designs; and TD 9835, 83 

FR 34469, relating to whether qualified 

nonelective contributions and qualified 

matching contributions must be 

nonforfeitable when contributed to the 

plan). 

The regulations were most recently 

amended on September 23, 2019 (TD 

9875, 84 FR 49651) to reflect statutory 

changes related to the restriction on 

distribution of elective contributions 

under section 401(k)(2)(B). 

II. SECURE Act Changes to Section 

401(k) Regarding Long-Term, Part-Time 

Employees 

Prior to the enactment of the SECURE 

Act, section 401(k)(2)(D) provided that a 

qualified CODA was not permitted to 

require, as a condition of participation, 

that an employee complete a period of 

service that extended beyond the period 

permitted under section 410(a)(1) 

(disregarding section 410(a)(1)(B)(i) 1). 

In general, the period permitted under 

section 410(a)(1) is the later of 

attainment of age 21 or completion of a 

12-month period during which the 

employee has at least 1,000 hours of 

service. 

Section 112(a) of the SECURE Act 

amended section 401(k)(2)(D) of the 

Code to provide that a qualified CODA 

must permit certain employees to 

participate in the CODA even if they do 

not have at least 1,000 hours of service 

in a 12-month period. Under section 

401(k)(2)(D) (as added by section 

112(a)(1) of the SECURE Act, but prior 

to amendment by the SECURE 2.0 Act), 

a qualified CODA may not require, as a 

condition of participation, that an 

employee complete a period of service 

that extends beyond the close of the 

earlier of: (1) the period permitted under 

section 410(a)(1) (disregarding section 

410(a)(1)(B)(i)); or (2) subject to section 

401(k)(15), the first period of three 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service. 

Section 112(a)(2) of the SECURE Act 

also amended the Code to add section 

401(k)(15), which sets forth additional 

provisions related to section 

401(k)(2)(D)(ii). Section 401(k)(15)(A) 

provides that section 401(k)(2)(D)(ii) 

will not apply to an employee unless 

the employee has attained the age 

specified in section 410(a)(1)(A)(i) by 

the close of the last of the 12-month 

periods described in section 

401(k)(2)(D)(ii). Section 401(k)(15)(B) (as 

added by section 112(a)(2) of the 

SECURE Act, but prior to amendment 

by the SECURE 2.0 Act), modified 

certain nondiscrimination, minimum 

coverage, top-heavy, and vesting 

requirements with respect to employees 

who become eligible to participate in a 

qualified CODA solely by reason of 

section 401(k)(2)(D)(ii). 

Section 401(k)(15)(B)(i)(I) (as added 

by section 112(a)(2) of the SECURE Act, 

but prior to amendment by the SECURE 

2.0 Act) provided that, notwithstanding 

section 401(a)(4), an employer is not 

required to make nonelective or 

matching contributions on behalf of 

employees who are eligible to 

participate in a qualified CODA solely 

by reason of section 401(k)(2)(D)(ii), 

even if those contributions are made on 

behalf of other employees eligible to 

participate in the arrangement. Under 

section 401(k)(15)(B)(i)(II) (as added by 

section 112(a)(2) of the SECURE Act, but 

prior to amendment by the SECURE 2.0 

Act), an employer may elect to exclude 

employees who are eligible to 

participate in a qualified CODA solely 

by reason of section 401(k)(2)(D)(ii) from 

the application of sections 401(a)(4), 

401(k)(3), 401(k)(12), 401(k)(13), 

401(m)(2), and 410(b). 

Section 401(k)(15)(B)(ii) provides that 

an employer may elect to exclude all 

employees who are eligible to 

participate in a plan maintained by the 

employer solely by reason of section 

401(k)(2)(D)(ii) from the application of 

the top-heavy vesting and benefit 


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requirements under section 416(b) and 

(c). 

Under section 401(k)(15)(B)(iii) (as 

added by section 112(a) of the SECURE 

Act, but prior to amendment by the 

SECURE 2.0 Act), an employee 

described in section 401(k)(15)(B)(i) 

must be credited with a year of service 

for purposes of determining whether the 

employee has a nonforfeitable right to 

employer contributions (other than 

elective contributions) under the 

arrangement for each 12-month period 

during which the employee is credited 

with at least 500 hours of service. In 

addition, section 401(k)(15)(B)(iii) 

modifies the break-in-service rules of 

section 411(a)(6) for the employee by 

substituting ‘‘at least 500 hours of 

service’’ for ‘‘more than 500 hours of 

service’’ for purposes of applying 

section 411(a)(6)(A). 

Under section 401(k)(15)(B)(iv) (as 

added by section 112(a) of the SECURE 

Act, but prior to amendment by the 

SECURE 2.0 Act), if an employee who 

is eligible to participate in a qualified 

CODA solely by reason of section 

401(k)(2)(D)(ii) of the Code subsequently 

satisfies the requirements of section 

410(a)(1)(A)(ii) without regard to section 

401(k)(2)(D)(ii), then the special 

provisions of section 401(k)(15)(B)(i) 

and (ii) cease to apply to the employee 

as of the first plan year beginning after 

the plan year in which the employee 

satisfies the requirements of section 

410(a)(1)(A)(ii) without regard to section 

401(k)(2)(D)(ii). However, the cessation 

does not apply to the special vesting 

rules of section 401(k)(15)(B)(iii). 

Section 401(k)(15)(C) provides that 

section 401(k)(2)(D)(ii) does not apply to 

employees described in section 

410(b)(3). This includes, among others, 

employees covered by a collective 

bargaining agreement with respect to 

which retirement benefits were the 

subject of good faith bargaining and 

nonresident aliens who have no earned 

income from the employer that 

constitutes U.S.-source income. 

Section 401(k)(15)(D)(i) provides that 

the entry date rules of section 410(a)(4) 

apply to an employee who is eligible to 

participate in a qualified CODA solely 

by reason of section 401(k)(2)(D)(ii). 

Section 401(k)(15)(D)(ii) provides that 

12-month periods are determined in the 

same manner as under the last sentence 

of section 410(a)(3)(A). 

Prior to amendment by the SECURE 

2.0 Act, section 112(b) of the SECURE 

Act provided that the amendments 

made by section 112 apply to plan years 

beginning after December 31, 2020, 

except that, for purposes of section 

401(k)(2)(D)(ii) of the Code, 12-month 

periods beginning before January 1, 

2021, are not taken into account. The 

effect of disregarding 12-month periods 

beginning before January 1, 2021, is that 

employees generally will not become 

eligible to participate in a CODA 

pursuant to section 401(k)(2)(D)(ii) until 

plan years beginning on or after January 

1, 2024. 

On September 2, 2020, the Treasury 

Department and the IRS released Notice 

2020–68, 2020–38 IRB 567, which 

includes guidance with respect to 

section 112 of the SECURE Act. Q&A C– 

1 of Notice 2020–68 explains that, 

although section 112(b) of the SECURE 

Act excludes 12-month periods 

beginning before January 1, 2021, for 

purposes of determining an employee’s 

eligibility to participate in a qualified 

CODA under section 401(k)(2)(D)(ii) of 

the Code, section 112(b) of the SECURE 

Act does not exclude 12-month periods 

beginning before January 1, 2021, for 

purposes of determining an employee’s 

nonforfeitable right to employer 

contributions (other than elective 

contributions) under section 

401(k)(15)(B)(iii) of the Code. However, 

as described in section III.A of this 

Background, section 125(d) of the 

SECURE 2.0 Act expands the scope of 

the disregard of 12-month periods 

beginning before January 1, 2021, to 

include the vesting rules of section 

401(k)(15)(B)(iii). 

The Treasury Department and the IRS 

received three written comments in 

response to Notice 2020–68. All written 

comments responding to Notices 2020– 

68 are available for public inspection 

and copying at http://

www.regulations.gov or upon request. 

These comments are discussed in 

section I of the Explanation of 

Provisions portion of this preamble. 

III. SECURE 2.0 Act Changes to Section 

401(k) Regarding Long-Term, Part-Time 

Employees and to Section 112(b) of the 

SECURE Act 

A. Section 125 of the SECURE 2.0 Act 

Section 125 of the SECURE 2.0 Act 

generally expands upon the rules set 

forth in section 112 of the SECURE Act. 

Section 125(a)(1) of the SECURE 2.0 Act 

amends the minimum participation 

standards of section 202 of the 

Employee Retirement Income Security 

Act of 1974 (Pub. L. 93–406, 88 Stat. 

829), as amended (ERISA) to add section 

202(c) of ERISA. Section 202(c) of 

ERISA adds rules, which apply to either 

a qualified CODA or a salary reduction 

agreement described in section 403(b) of 

the Code, that are comparable to the 

rules of section 401(k)(2)(D)(ii) and 

(k)(15). Section 125(a)(2)(B)(ii) of the 

SECURE 2.0 Act amends the employer 

election provisions of section 

401(k)(15)(B)(i) of the Code to refer to 

employees who are eligible to 

participate in the arrangement solely by 

reason of section 401(k)(2)(D)(ii) or by 

reason of section 401(k)(2)(D)(ii) and 

section 202(c)(1)(B) of ERISA. 

In addition, section 125(c) of the 

SECURE 2.0 Act amends the period of 

service under section 401(k)(2)(D)(ii) of 

the Code by replacing ‘‘3’’ with ‘‘2’’. 

Thus, as amended by section 125(c) of 

the SECURE 2.0 Act, section 

401(k)(2)(D) of the Code provides that a 

qualified CODA may not require, as a 

condition of participation, that an 

employee complete a period of service 

that extends beyond the close of the 

earlier of: (1) the period permitted under 

section 410(a)(1) (disregarding section 

410(a)(1)(B)(i)); or (2) subject to section 

401(k)(15), the first period of two 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service. 

Section 125(d) of the SECURE 2.0 Act 

amends section 112(b) of the SECURE 

Act by replacing the reference to section 

401(k)(2)(D)(ii) of the Code with 

references to both section 

401(k)(2)(D)(ii) and (k)(15)(B)(iii). Thus, 

as amended by section 125(d) of the 

SECURE 2.0 Act, section 112(b) of the 

SECURE Act provides that 12-month 

periods beginning before January 1, 

2021, are not taken into account for 

purposes of either the eligibility rule 

described in section 401(k)(2)(D)(ii) or 

the vesting rules of section 

401(k)(15)(B)(iii). 

Section 125(e) of the SECURE 2.0 Act 

amends the special rules for cash or 

deferred arrangements using alternative 

methods of meeting nondiscrimination 

requirements under section 416(g)(4)(H) 

of the Code to provide that the term 

‘‘top-heavy plan’’ does not include a 

plan solely because that plan does not 

provide nonelective or matching 

contributions to employees described in 

section 401(k)(15)(B)(i). 

The amendments made by section 

125(a) and (c) of the SECURE 2.0 Act 

apply to plan years beginning after 

December 31, 2024. The amendments 

made by section 125(d) and (e) of the 

SECURE 2.0 Act take effect as if 

included in section 112 of the SECURE 

Act. 

B. Section 401 of the SECURE 2.0 Act 

Section 401 of the SECURE 2.0 Act 

sets forth amendments relating to the 

SECURE Act. Section 401(a)(2) of the 

SECURE 2.0 Act includes technical 

amendments relating to section 112 of 

the SECURE Act that take effect as if 

included in section 112 of the SECURE 

Act. 


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Section 401(a)(2)(A) of the SECURE 

2.0 Act amends the employer election 

provisions of section 401(k)(15)(B)(i)(II) 

of the Code to include the ACP safe 

harbor provisions of section 401(m)(11) 

and (12). Thus, as amended by section 

401(a)(2)(A) of the SECURE 2.0 Act, 

section 401(k)(15)(B)(i)(II) of the Code 

permits an employer to elect to exclude 

employees who are eligible to 

participate in a qualified CODA solely 

by reason of section 401(k)(2)(D)(ii) (or 

by reason of section 401(k)(2)(D)(ii) and 

section 202(c)(1)(B) of ERISA) from the 

application of those ACP safe harbor 

provisions, in addition to the other Code 

provisions listed in section 

401(k)(15)(B)(i)(II). 

Section 401(a)(2)(B) of the SECURE 

2.0 Act amends the vesting rules of 

section 401(k)(15)(B)(iii) of the Code by 

replacing ‘‘under the arrangement’’ with 

‘‘under the plan’’. Thus, section 

401(a)(2)(B) of the SECURE 2.0 Act 

clarifies that section 401(k)(15)(B)(iii) of 

the Code applies for purposes of 

determining whether an employee 

described in section 401(k)(15)(B)(i) has 

a nonforfeitable right to employer 

contributions (other than elective 

contributions) under the plan that 

includes the arrangement. 

Section 401(a)(2)(C) of the SECURE 

2.0 Act amends the special rules under 

section 401(k)(15)(B)(iv) of the Code by 

replacing ‘‘section 410(a)(1)(A)(ii)’’ with 

‘‘paragraph (2)(D)’’. Thus, section 

401(a)(2)(C) of the SECURE 2.0 Act 

clarifies that the special rules of section 

401(k)(15)(B)(iv) of the Code apply if an 

employee who is eligible to participate 

in a qualified CODA solely by reason of 

section 401(k)(2)(D)(ii) (or by reason of 

section 401(k)(2)(D)(ii) and section 

202(c)(1)(B) of ERISA) subsequently 

satisfies the requirements of section 

401(k)(2)(D) without regard to section 

401(k)(2)(D)(ii). 

C. Section 501 of the SECURE 2.0 Act 

In general, under section 501(a) and 

(b) of the SECURE 2.0 Act, for a 

qualified plan that is not an applicable 

collectively bargained plan or a 

governmental plan within the meaning 

of section 414(d) of the Code, the 

deadline to adopt a plan amendment 

that is made pursuant to any 

amendment made by the SECURE 2.0 

Act or pursuant to any regulation issued 

by the Secretary or the Secretary of 

Labor (or a delegate of either such 

Secretary) under the SECURE 2.0 Act is 

the last day of the first plan year 

beginning on or after January 1, 2025, or 

such later date as the Secretary may 

prescribe. The plan amendment 

deadline for an applicable collectively 

bargained plan or a governmental plan, 

as defined in section 414(d), is the last 

day of the first plan year beginning on 

or after January 1, 2027, or such later 

date as the Secretary may prescribe. 

Section 501(c)(1) of the SECURE 2.0 

Act amends section 601(b)(1) of the 

SECURE Act, which provides rules with 

respect to a plan amendment made 

pursuant to a provision of the SECURE 

Act or regulations thereunder, to align 

the deadline to adopt such a plan 

amendment with the deadline that 

applies to a plan amendment that is 

made pursuant to a provision of the 

SECURE 2.0 Act. 

Whether a plan amendment is made 

pursuant to section 112 of the SECURE 

Act, related provisions of the SECURE 

2.0 Act, or any regulation relating to 

those provisions, does not depend on 

whether any employees could become 

eligible to participate in the CODA as 

long-term, part-time employees (as 

discussed in section I.B of the 

Explanation of Provisions) under the 

terms of the amended plan. For 

example, if a plan that is not an 

applicable collectively bargained plan 

or a governmental plan is maintained on 

a calendar-year basis and provides that, 

in order to be eligible to make a cash or 

deferred election under the CODA in the 

plan, an employee is required to 

complete a 12-month period during 

which the employee is credited with at 

least 1,000 hours of service, but the 

employer intends to amend the plan to 

provide that, effective January 1, 2024, 

each employee is eligible to make a cash 

or deferred election as soon as 

administratively practicable after the 

employee’s employment 

commencement date, then the intended 

plan amendment would be made 

pursuant to section 112 of the SECURE 

Act and related provisions of the 

SECURE 2.0 Act. Accordingly, if the 

plan is operated in accordance with the 

intended plan amendment, then the 

plan amendment would not be required 

to be adopted before the deadline that 

applies to the plan under section 501 of 

the SECURE 2.0 Act (that is, December 

31, 2025, or such later date as the 

Secretary may prescribe). 

Explanation of Provisions 

I. Section 1.401(k)–5 

A. Overview 

This proposed regulation would 

amend § 1.401(k)–5 (which is reserved 

for mergers and acquisitions under the 

existing regulations) to reflect the rules 

for long-term, part-time employees 

under section 112 of the SECURE Act 

and sections 125 and 401 of the 

SECURE 2.0 Act. Proposed § 1.401(k)–5 

defines ‘‘long-term, part-time 

employee,’’ and, with respect to each 

long-term, part-time employee, requires 

a qualified CODA to satisfy the 

participation requirements of proposed 

§ 1.401(k)–5(c) and requires the plan 

that includes the CODA to satisfy the 

vesting requirements of proposed 

§ 1.401(k)–5(d). In addition, proposed 

§ 1.401(k)–5(e) provides guidance 

regarding nonelective and matching 

contributions made to the plan on 

behalf of long-term, part-time 

employees, and proposed § 1.401(k)–5(f) 

provides guidance regarding certain 

elections that the employer or 

employers maintaining the plan may 

make with respect to long-term, parttime employees. 

B. Long-Term, Part-Time Employees 

1. Definition 

Section 401(k)(15) provides special 

rules for ‘‘long-term, part-time 

employees,’’ but does not define the 

term. The rules in section 401(k)(15) 

apply to employees who are eligible to 

participate in a qualified CODA solely 

by reason of section 401(k)(2)(D)(ii), or 

by reason of section 401(k)(2)(D)(ii) and 

section 202(c)(1)(B) of ERISA. Under 

section 112(b) of the SECURE Act, 

section 401(k)(2)(D)(ii) of the Code 

generally is effective for plan years 

beginning after December 31, 2020, but, 

pursuant to section 125(c) of the 

SECURE 2.0 Act, section 401(k)(2)(D)(ii) 

of the Code is amended to replace ‘‘3’’ 

with ‘‘2’’ effective for plan years 

beginning after December 31, 2024. 

Thus, section 401(k)(15) applies to 

employees who are eligible to 

participate in a qualified CODA solely 

by reason of completing two 

consecutive 12-month periods or, with 

respect to a plan year beginning before 

2025, three consecutive 12-month 

periods (referred to as ‘‘the applicable 

number of consecutive 12-month 

periods’’) during each of which the 

employee is credited with at least 500 

hours of service. However, section 

401(k)(15)(A) provides that section 

401(k)(2)(D)(ii) does not apply to an 

employee unless the employee has 

satisfied the age requirement of section 

410(a)(1)(A)(i) by the close of the last of 

the 12-month periods described in 

section 401(k)(2)(D)(ii). In addition, 

section 401(k)(15)(C) provides that 

section 401(k)(2)(D)(ii) does not apply to 

employees described in section 

410(b)(3). 

Based on the provisions of section 

401(k)(15) described in the preceding 

paragraph, proposed § 1.401(k)– 

5(b)(1)(i) generally would define a 

‘‘long-term, part-time employee’’ as an 

employee who is eligible to participate 


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2Pursuant to section 401(k)(4)(B)(ii) and 

§ 1.401(k)–1(e)(4), a CODA included in a plan 

maintained by a State or local government or 

political subdivision thereof, or any agency or 

instrumentality thereof, does not satisfy the 

requirements to be a qualified CODA if the 

arrangement is adopted after May 6, 1986. However, 

this adoption deadline for a qualified CODA does 

not apply to a CODA included in a rural 

cooperative plan or a plan of an employer that is 

an Indian Tribal government (as defined in section 

7701(a)(40)), a subdivision of an Indian Tribal 

government (determined in accordance with section 

7871(d)), an agency or instrumentality of an Indian 

Tribal government or subdivision thereof, or a 

corporation chartered under Federal, State or Tribal 

law that is owned in whole or in part by any of 

those entities. 

in a qualified CODA solely by reason of 

having: (1) completed two consecutive 

12-month periods (under proposed 

§ 1.401(k)–5(b)(1)(iii), ‘‘three 

consecutive 12-month periods’’ would 

be substituted for ‘‘two consecutive 12- 

month periods’’ with respect to a plan 

year beginning in 2024) during each of 

which the employee is credited with at 

least 500 hours of service (as defined in 

section 410(a)(3)(C)); and (2) attained 

the age specified in section 

410(a)(1)(A)(i) by the close of the last of 

those 12-month periods. However, 

under proposed § 1.401(k)–5(b)(1)(ii), 

long-term, part-time employees would 

not include: (1) certain employees who 

are covered by a collective bargaining 

agreement, (2) employees who are 

nonresident aliens and who receive no 

earned income from the employer that 

constitutes income from sources within 

the United States, or (3) any other 

employees described in section 

410(b)(3). 

Although section 401(k)(15)(C) 

provides that section 401(k)(2)(D)(ii) 

does not apply to employees described 

in section 410(b)(3), section 401(k)(15) 

does not provide any exceptions from 

the maximum permissible service 

requirement of section 401(k)(2)(D)(ii) 

for a qualified CODA in: (1) a 

governmental plan (as defined in 

section 414(d)),2 or (2) a church plan (as 

defined in section 414(e)) with respect 

to which the election provided by 

section 410(d) has not been made. In 

addition to the general request for 

comments on this proposed regulation, 

comments are specifically requested 

with respect to the application of 

section 401(k)(15) to a qualified CODA 

in such a governmental plan or church 

plan, including the application of 

proposed § 1.401(k)–5(d)(1)(ii) (which 

would clarify that, for purposes of 

proposed § 1.401(k)–5(d), section 411 

will be treated as if it applies to the 

plan, taking into account the 

modifications provided in proposed 

§ 1.401(k)–5(d)(1)(i) and (iii)). 

2. Eligibility To Participate 

As explained in section I.B.1 of this 

Explanation of Provisions, an employee 

would be a long-term, part-time 

employee under the proposed regulation 

only if the employee became eligible to 

participate in a qualified CODA solely 

by reason of having completed the 

applicable number of consecutive 12- 

month periods during each of which the 

employee is credited with at least 500 

hours of service. The Treasury 

Department and the IRS received 

comments in response to Notice 2020– 

68 requesting clarification that the rules 

of section 401(k)(15) do not apply to an 

employee who becomes eligible to 

participate in a qualified CODA prior to 

completing the applicable number of 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service (for 

example, an employee who, upon hire, 

is immediately eligible to make a cash 

or deferred election under the 

arrangement). 

Under this proposed regulation, an 

employee would not be a long-term, 

part-time employee unless the employee 

becomes eligible to participate in a 

qualified CODA solely by reason of 

having completed the applicable 

number of consecutive 12-month 

periods during each of which the 

employee is credited with at least 500 

hours of service (as defined in section 

410(a)(3)(C)). Thus, an employee who 

becomes eligible to participate in a 

qualified CODA by reason of having 

completed any other service 

requirement (or who is immediately 

eligible to participate in the CODA) 

would not be a long-term, part-time 

employee, and the rules of section 

401(k)(15)(B) would not apply to the 

employee, even if the employee is 

classified by the employer or employers 

maintaining the plan as a part-time 

employee. 

The Treasury Department and the IRS 

received a comment in response to 

Notice 2020–68 requesting clarification 

regarding the application of the rules of 

section 401(k)(15) to employees who 

were immediately eligible to participate 

in a qualified CODA if the plan is later 

amended to require employees to 

complete the period of service described 

in section 401(k)(2)(D) in order to 

participate in the CODA. Under this 

proposed regulation, an employee who 

was immediately eligible to participate 

in a qualified CODA or who became 

eligible to participate based on 

completing another permissible service 

requirement (for example, completing a 

1-year period of service under section 

410(a)(1)(A)(ii)) would not become a 

long-term, part-time employee merely 

because the plan is amended 

prospectively to require employees 

hired on or after the effective date of the 

amendment to complete the period of 

service described in section 

401(k)(2)(D). This is because the 

employee was not eligible to participate 

in the CODA solely by reason of 

completing the applicable number of 

consecutive 12-month periods with at 

least 500 hours of service during each 

period. 

3. Elapsed Time Method of Crediting 

Service 

Under the elapsed time method of 

crediting service set forth in § 1.410(a)– 

7, a plan generally is required to take 

into account the period of time that 

elapses while an employee is employed 

with the employer or employers 

maintaining the plan, regardless of the 

actual number of hours the employee 

would have been credited with during 

that period. For purposes of determining 

an employee’s eligibility to participate, 

a plan generally may not require an 

employee to complete more than a 1- 

year period of service under the elapsed 

time method (regardless of whether the 

employee is classified by the employer 

or employers maintaining the plan as a 

part-time employee). 

The Treasury Department and the IRS 

received a comment in response to 

Notice 2020–68 requesting that a plan 

be permitted to determine an 

employee’s eligibility to participate as a 

long-term, part-time employee using the 

elapsed time method. In general, this 

proposed regulation would permit a 

plan to use the elapsed time method to 

determine an employee’s eligibility to 

participate in a qualified CODA. 

However, under the elapsed time 

method, an employee’s eligibility to 

participate is not based upon the actual 

completion of a specified number of 

hours of service during a 12-month 

period. Therefore, an employee who 

becomes eligible to participate in a 

qualified CODA under the elapsed time 

method would not be eligible to 

participate solely by reason of 

completing the applicable number of 

consecutive 12-month periods with at 

least 500 hours of service during each 

period and would not be a long-term, 

part-time employee. 

In addition, this proposed regulation 

does not include an amendment to the 

elapsed time rules under § 1.410(a)–7. 

Therefore, a plan may not require an 

employee, including an employee who 

is classified as a part-time employee, to 

complete more than a 1-year period of 

service under the elapsed time method 


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3 If a former employee who previously was 

eligible to participate in a qualified CODA (but who 

was not eligible to participate as a long-term, parttime employee) is rehired by an employer 

maintaining the plan, then the employee generally 

would be immediately eligible to participate again 

in the CODA based on the employee’s prior service 

with the employer or employers maintaining the 

plan. Therefore, that former employee would not be 

eligible to participate in the qualified CODA as a 

long-term, part-time employee after being rehired. 

However, if the former employee’s eligibility 

service is disregarded because the plan applies the 

provisions of section 410(a)(5)(D), then that former 

employee may become eligible to participate in the 

qualified CODA as a long-term, part-time employee 

after being rehired. 

in order to be eligible to participate in 

a qualified CODA. 

4. Equivalency Methods of Crediting 

Service 

As an alternative to the general 

method of crediting service, which is 

based upon the actual counting of hours 

of service, a plan may credit hours of 

service using equivalency methods 

permitted under 29 CFR 2530.200b–3. 

Any equivalency method (or methods) 

used by a plan must be set forth in the 

plan document. For example, a plan 

generally may determine the number of 

hours of service to be credited to 

employees on the basis of months of 

employment if an employee is credited 

with 190 hours of service for each 

month for which the employee would 

be required to be credited with at least 

1 hour of service. Under this 

equivalency method, the hours of 

service credited to an employee for each 

month are not affected by whether the 

employee is classified by the employer 

or employers maintaining the plan as a 

part-time employee. 

The Treasury Department and the IRS 

received a comment in response to 

Notice 2020–68 requesting that a plan 

be permitted to determine an 

employee’s eligibility to participate as a 

long-term, part-time employee using an 

equivalency method to credit hours of 

service and requesting guidance 

regarding the application of the 

equivalency methods for purposes of 

determining an employee’s eligibility to 

participate as a long-term, part-time 

employee (for example, whether the 

minimum number of hours that must be 

credited under an equivalency method 

would be reduced). Because an 

employee is credited with a specified 

number of hours under both the general 

method of crediting service and the 

equivalency methods, this proposed 

regulation would permit either the 

general method of crediting service or 

an otherwise permissible equivalency 

method to be used to determine whether 

an employee is credited with at least 

500 hours of service during a 12-month 

period. However, for purposes of 

determining an employee’s eligibility to 

participate as a long-term, part-time 

employee, this proposed regulation does 

not include an amendment reducing the 

number of hours that otherwise would 

be credited to the employee under the 

applicable equivalency method. 

C. Participation 

1. Time of Participation 

This proposed regulation would set 

forth rules regarding the date by which 

a long-term, part-time employee must 

become eligible to make a cash or 

deferred election under a qualified 

CODA (that is, rules regarding the latest 

permissible entry date for a long-term, 

part-time employee). 

The Treasury Department and the IRS 

received a comment in response to 

Notice 2020–68 requesting confirmation 

that a plan may use the same entry date 

rules for long-term, part-time employees 

as it does for other eligible employees. 

Under section 401(k)(15)(D)(i), the entry 

date rules of section 410(a)(4) apply to 

an employee who is eligible to 

participate in an arrangement solely by 

reason of section 401(k)(2)(D)(ii). 

Accordingly, proposed § 1.401(k)– 

5(c)(1) reflects the rules of section 

410(a)(4), including the rule in 

§ 1.410(a)–4(b) relating to the treatment 

of an employee who separates from 

service prior to the employee’s 

scheduled entry date. 

2. Determination of 12-Month Periods 

Under section 410(a)(5)(A), in general, 

all years of service with the employer or 

employers maintaining the plan must be 

taken into account in computing an 

employee’s period of service for 

purposes of section 410(a)(1). Similarly, 

proposed § 1.401(k)–5(c)(2)(i) would 

clarify that, in general, all 12-month 

periods during which an employee is 

credited with at least 500 hours of 

service with the employer or employers 

maintaining the plan must be taken into 

account for purposes of determining 

whether an employee is eligible to 

participate as a long-term, part-time 

employee. For example, 12-month 

periods during which an employee is 

included in a classification of 

employees who are ineligible to 

participate in the qualified CODA 

generally must be taken into account for 

purposes of determining whether the 

employee is eligible to participate as a 

long-term, part-time employee. 

However, pursuant to section 112(b) of 

the SECURE Act, 12-month periods 

beginning before January 1, 2021, are 

not taken into account for purposes of 

determining whether an employee is 

eligible to participate as a long-term, 

part-time employee. 

With respect to an employee who is 

not yet eligible to participate in a 

qualified CODA, the rules of proposed 

§ 1.401(k)–5(c)(2)(i) would not affect the 

requirement that the employee complete 

the applicable number of consecutive 

12-month periods during each of which 

the employee is credited with at least 

500 hours of service in order to be 

eligible to participate as a long-term, 

part-time employee. Thus, if an 

employee who is not yet eligible to 

participate in a qualified CODA 

completes a 12-month period during 

which the employee is credited with 

fewer than 500 hours of service, then 

any prior 12-month periods during 

which the employee was credited with 

at least 500 (but less than 1,000) hours 

of service during each period would not 

be taken into account for purposes of 

determining whether the employee is 

eligible to participate in the CODA as a 

long-term, part-time employee. 

However, this proposed regulation 

does not include any provisions similar 

to the break-in-service rules under 

section 410(a)(5) for purposes of 

determining whether an employee is 

eligible to participate as a long-term, 

part-time employee. Thus, if an 

employee has become eligible to 

participate as a long-term, part-time 

employee, then the employee’s 

eligibility to participate as a long-term, 

part-time employee would not be 

affected by the employee’s completion 

of one or more 12-month periods during 

each of which the employee is credited 

with fewer than 500 hours of service 

(although, as explained in section I.D.1 

of this Explanation of Provisions, a longterm, part-time employee is not required 

to be credited with a year of vesting 

service with respect to a 12-month 

period during which the employee is 

credited with fewer than 500 hours of 

service). Similarly, if a former employee 

who was eligible to participate as a 

long-term, part-time employee is rehired 

by an employer maintaining the plan, 

then the 12-month periods during 

which the employee previously was 

credited with at least 500 hours of 

service with an employer maintaining 

the plan must be taken into account for 

purposes of determining whether the 

rehired employee is eligible to 

participate as a long-term, part-time 

employee.3

The Treasury Department and the IRS 

received a comment in response to 

Notice 2020–68 requesting clarification 

that the long-term, part-time employee 

rules of section 401(k)(15) could apply 

to an employee even if 12-month 

periods beginning before January 1, 


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4The rules of proposed § 1.401(k)–5(c)(3) are 

intended to align with those of § 1.410(a)–3(d) and 

(e). 

2021, are used to determine the 

employee’s eligibility to participate in 

the qualified CODA. However, because 

section 112(b) of the SECURE Act 

provides that 12-month periods 

beginning before January 1, 2021, are 

not taken into account for purposes of 

section 401(k)(2)(D)(ii), this proposed 

regulation would exclude any 12-month 

period beginning before January 1, 2021, 

for purposes of determining whether an 

employee is eligible to participate as a 

long-term, part-time employee. 

Therefore, an employee would not be a 

long-term, part-time employee under the 

proposed regulation if one or more 12- 

month periods beginning before January 

1, 2021, were taken into account for 

purposes of determining whether the 

employee completed the applicable 

number of consecutive 12-month 

periods during each of which the 

employee was credited with at least 500 

hours of service. 

This proposed regulation also 

includes rules regarding the date on 

which a 12-month period may begin for 

purposes of determining an employee’s 

eligibility to participate as a long-term, 

part-time employee. 

The Treasury Department and the IRS 

received a comment in response to 

Notice 2020–68 requesting confirmation 

that, although an employee’s initial 12- 

month period for purposes of 

determining whether the employee is 

eligible to participate as a long-term, 

part-time employee must be based on 

the employee’s date of hire, subsequent 

12-month periods for the employee may 

be based on the plan year. Under section 

401(k)(15)(D)(ii), 12-month periods are 

determined in the same manner as 

under the last sentence of section 

410(a)(3)(A). Accordingly, under 

proposed § 1.401(k)–5(c)(2)(ii), an 

employee’s initial 12-month period 

would begin on the first day for which 

the employee is entitled to be credited 

with an hour of service; however, the 

terms of the plan may provide that, 

beginning with the plan year that 

commences within that initial 12-month 

period, subsequent 12-month periods 

are determined by reference to the first 

day of the plan year. Moreover, the 

subsequent 12-month periods with 

respect to an employee may be 

determined by reference to the first day 

of the plan year regardless of whether 

the employee is credited with at least 

500 hours of service during the 

employee’s initial 12-month period 

(provided that the employee is not 

credited with at least 1,000 hours of 

service during the employee’s initial 12- 

month period). 

If the plan provides that 12-month 

periods (after an employee’s initial 12- 

month period) are determined by 

reference to the first day of the plan 

year, an employee’s initial 12-month 

period and second 12-month period are 

treated as consecutive 12-month periods 

for purposes of determining the 

employee’s eligibility to participate as a 

long-term, part-time employee. 

Therefore, if an employee is credited 

with at least 500 (but less than 1,000) 

hours of service during each of those 12- 

month periods, the employee has 

completed two consecutive 12-month 

periods with at least 500 hours of 

service during each period for purposes 

of determining the employee’s eligibility 

to participate as a long-term, part-time 

employee. This is the case even though 

an employee may be credited with 

certain hours of service for both the 

initial 12-month period and the second 

12-month period. For an employee hired 

prior to January 1, 2021, this proposed 

regulation provides that 12-month 

periods beginning before January 1, 

2021, are not taken into account for 

purposes of determining whether the 

employee is eligible to participate as a 

long-term, part-time employee. Thus, if 

12-month periods after an employee’s 

initial 12-month period are determined 

by reference to the first day of the plan 

year, then, with respect to an employee 

who was hired prior to January 1, 2021, 

the first 12-month period for purposes 

of determining whether the employee is 

eligible to participate as a long-term, 

part-time employee generally would be 

determined by reference to the first day 

of the first plan year beginning on or 

after January 1, 2021. 

3. Eligibility Conditions Not Based on 

Age or Service 

The Treasury Department and the IRS 

received comments in response to 

Notice 2020–68 requesting clarification 

that an employee who otherwise would 

be eligible to participate in a qualified 

CODA as a long-term, part-time 

employee may be excluded from 

participating in the CODA if the 

employee is a member of a job 

classification that is not based on age or 

service and whose members are 

excluded from participating in the 

CODA under the terms of the plan. 

In response to these comments, this 

proposed regulation would address 

whether a plan may impose conditions 

that are not based on age or service in 

order for an employee to be eligible to 

participate in a qualified CODA as a 

long-term, part-time employee. In 

general, section 401(k)(15) does not 

preclude a plan that includes a CODA 

from establishing conditions that must 

be satisfied in order for an employee to 

be eligible to participate in the CODA. 

However, a CODA will fail to satisfy 

section 401(k)(2)(D) if, as a condition of 

participation, the plan imposes an age 

or service requirement (or imposes a 

condition that has the effect of an age or 

service requirement) that requires an 

employee to complete a period of 

service with the employer or employers 

maintaining the plan that extends 

beyond the close of the earlier of the 

periods described in section 

401(k)(2)(D)(i) and (ii). 

Accordingly, proposed § 1.401(k)– 

5(c)(3) would clarify that the long-term, 

part-time employee rules of § 1.401(k)– 

5 do not preclude a plan from 

establishing an eligibility condition that 

must be satisfied in order for an 

employee to participate in the CODA, 

provided that the condition is not a 

proxy for imposing an age or service 

requirement (that is, the condition does 

not have the effect of imposing an age 

or service requirement with the 

employer or employers maintaining the 

plan) that requires an employee to 

complete a period of service with the 

employer or employers maintaining the 

plan that extends beyond the close of 

the earlier of the periods described in 

section 401(k)(2)(D)(i) and (ii).4

However, with respect to an employee 

who otherwise would be eligible to 

participate in a qualified CODA as a 

long-term, part-time employee, but who 

is excluded from participating as a longterm, part-time employee due to 

conditions imposed by the plan, the 

rules of section 401(k)(15)(B)(i) and (ii) 

(disregarding long-term, part-time 

employees for purposes of 

nondiscrimination and coverage testing 

and top-heavy benefits) do not apply to 

that excluded employee. 

In addition, the maximum period of 

service that the employer or employers 

maintaining a plan may require under 

section 401(k)(2)(D) applies regardless 

of an employee’s job classification. For 

example, it would not be permissible for 

an employee classified as a temporary 

employee to be required to complete a 

period of service that is described in 

section 401(k)(2)(D)(ii). This would not 

be permissible because section 

401(k)(2)(D) provides that a qualified 

CODA may not require, as a condition 

of participation, that an employee 

complete a period of service that 

extends beyond the close of the earlier 

of the periods described in section 

401(k)(2)(D)(i) and (ii). Thus, if the 

employee were to complete the period 

described in section 410(a)(1) 

(determined without regard to section 


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410(a)(1)(B)(i)), then the employee must 

become eligible to participate in the 

CODA under section 401(k)(2)(D)(i). 

Proposed § 1.401(k)–5(c)(1)(iii) would 

provide rules addressing the date of 

participation that apply in the case of an 

employee who would otherwise be 

eligible to participate in the 

arrangement as a long-term, part-time 

employee but who does not participate 

solely because the employee does not 

satisfy the plan’s eligibility conditions 

(other than age or service) as of the date 

the employee would have participated 

in the arrangement had the employee 

satisfied those conditions. If such an 

employee later satisfies those 

conditions, then the employee must 

become eligible to participate in the 

arrangement immediately upon 

satisfying those conditions. 

4. Elective Contributions 

To avoid a circumvention of the 

requirement that a long-term, part-time 

employee be eligible to make elective 

contributions under a qualified CODA, 

proposed § 1.401(k)–5(c)(4) would 

provide, in general, that the right to 

make elective contributions by a longterm, part-time employee who is an 

eligible non-highly compensated 

employee (NHCE) may not be restricted 

in a manner that would not be permitted 

for an NHCE under a safe harbor section 

401(k) plan under § 1.401(k)–3(c)(6). 

However, a SIMPLE 401(k) plan would 

be permitted to limit the amount of 

elective contributions made by a longterm, part-time employee under the plan 

to the extent needed to satisfy the 

elective contribution limitation for 

SIMPLE 401(k) plans under section 

401(k)(11)(B)(i)(I) and (m)(10)(A). 

D. Vesting 

1. Years of Vesting Service Taken Into 

Account 

This proposed regulation would 

provide vesting rules for purposes of 

determining whether a long-term, parttime employee (or former long-term, 

part-time employee, as explained in 

section I.D.2 of this Explanation of 

Provisions) has a nonforfeitable right to 

employer contributions under the plan 

(other than elective contributions). 

In general, the nonforfeitable right of 

a long-term, part-time employee (or 

former long-term, part-time employee) 

to employer contributions under the 

plan (other than elective contributions) 

would be determined under the rules of 

section 411. However, pursuant to 

section 401(k)(15)(B)(iii), proposed 

§ 1.401(k)–5(d)(1)(i)(A) would provide 

that each 12-month period during which 

a long-term, part-time employee (or 

former long-term, part-time employee) is 

credited with at least 500 hours of 

service (as defined in section 

410(a)(3)(C)) with the employer or 

employers maintaining the plan is 

treated as a year of vesting service. 

The Treasury Department and the IRS 

received a comment in response to 

Notice 2020–68 requesting clarification 

that, for purposes of determining vesting 

service for a long-term, part-time 

employee, a plan may use the same 

vesting computation period that it uses 

for other employees and is not required 

to use the long-term, part-time 

employee’s eligibility computation 

period. Under section 411(a)(5)(A), a 

vesting computation period generally 

may be a calendar year, plan year, or 

other 12-consecutive month period 

designated by the plan (and not 

prohibited under regulations prescribed 

by the Secretary of Labor). Section 

401(k)(15)(D)(ii) provides that 12-month 

periods are determined in the same 

manner as under the last sentence of 

section 410(a)(3)(A). However, the 

introductory language of section 

401(k)(15) states that it applies ‘‘for 

purposes of paragraph (2)(D)(ii)’’ (that 

is, the eligibility rules of section 

401(k)(2)(D)(ii)). Based on this language, 

this proposed regulation would apply 

the rule under section 401(k)(15)(D)(ii) 

for purposes of section 401(k)(2)(D)(ii) 

but would not extend the application of 

that rule to the vesting rules of section 

401(k)(15)(B)(iii). Accordingly, in 

response to this comment, proposed 

§ 1.401(k)–5(d)(1)(i)(A) would clarify 

that a plan may designate any 12- 

consecutive month period that is not 

prohibited for use under section 411(a) 

for purposes of determining a long-term, 

part-time employee’s (or former longterm, part-time employee’s) vesting 

service. 

In addition, pursuant to section 

401(k)(15)(B)(iii), proposed § 1.401(k)– 

5(d)(1)(iii) would provide that, for 

purposes of determining whether a longterm, part-time employee (or former 

long-term, part-time employee) has 

incurred a 1-year break in service, 

section 411(a)(6)(A) is applied by 

substituting ‘‘at least 500 hours of 

service’’ for ‘‘more than 500 hours of 

service.’’ 

This proposed regulation also would 

provide guidance regarding 12-month 

periods that must be taken into account 

for purposes of determining a long-term, 

part-time employee’s (or former longterm, part-time employee’s) years of 

vesting service. As described in section 

II of the Background portion of this 

preamble, Q&A C–1 of Notice 2020–68 

provides that, unless a long-term, parttime employee’s years of service may be 

disregarded under section 411(a)(4) (for 

example, years of service before the 

employee attains age 18), all years of 

service with the employer or employers 

maintaining the plan must be taken into 

account for purposes of determining the 

long-term, part-time employee’s 

nonforfeitable right to employer 

contributions under section 

401(k)(15)(B)(iii), including 12-month 

periods beginning before January 1, 

2021. 

However, section 125(d) of the 

SECURE 2.0 Act amended section 

112(b) of the SECURE Act (effective as 

if included in section 112 of the 

SECURE Act) to provide that 12-month 

periods beginning before January 1, 

2021, are not taken into account for 

purposes of either the eligibility rule 

described in section 401(k)(2)(D)(ii) or 

the vesting rules of section 

401(k)(15)(B)(iii). Thus, Q&A C–1 of 

Notice 2020–68 was effectively rendered 

obsolete by the enactment of section 

125(d) of the SECURE 2.0 Act. 

Accordingly, proposed § 1.401(k)– 

5(d)(1)(i)(B) generally would require 

that all 12-month periods of service 

with the employer or employers 

maintaining the plan must be taken into 

account for purposes of determining the 

nonforfeitable right of a long-term, parttime employee (or former long-term, 

part-time employee) to employer 

contributions (other than elective 

contributions), unless the period of 

service of the employee may be 

disregarded under section 411(a) (which 

takes into account section 411(a)(4), 

(a)(6), and (a)(7)(B)). In addition, 

proposed § 1.401(k)–5(d)(1)(i)(B) would 

reflect section 125(d) of the SECURE 2.0 

Act by permitting any 12-month period 

beginning before January 1, 2021, to be 

excluded for purposes of determining 

the nonforfeitable right of a long-term, 

part-time employee (or former longterm, part-time employee) to employer 

contributions (other than elective 

contributions) under the plan. 

2. Former Long-Term, Part-Time 

Employees 

This proposed regulation would 

provide rules for an employee who 

becomes eligible to participate in a 

qualified CODA as a long-term, parttime employee but who subsequently 

completes 1 year of service under 

section 410(a)(1)(A)(ii) or who ceases to 

satisfy the plan’s eligibility conditions 

(other than age or service conditions). 

Under section 401(k)(15)(B)(iv), the 

rules of section 401(k)(15)(B) (other than 

the vesting rules of section 

401(k)(15)(B)(iii)) cease to apply to any 

employee as of the first plan year 

beginning after the plan year in which 


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82804 Federal Register / Vol. 88, No. 226 / Monday, November 27, 2023 / Proposed Rules 

the employee satisfies the requirements 

of section 401(k)(2)(D) without regard to 

section 401(k)(2)(D)(ii) (that is, satisfies 

the requirements of section 

410(a)(1)(A)(ii) without regard to section 

410(a)(1)(B)(i)). Thus, the 

nondiscrimination and coverage testing 

provisions of section 401(k)(15)(B)(i) 

and the top-heavy benefit provisions of 

section 401(k)(15)(B)(ii) cease to apply 

to any employee as of the first plan year 

beginning after the plan year in which 

the employee satisfies the requirements 

of section 401(k)(2)(D) without regard to 

section 401(k)(2)(D)(ii), but the vesting 

rules of section 401(k)(15)(B)(iii) 

continue to apply to the employee. 

Proposed § 1.401(k)–5(d)(2) would 

reflect the rules of section 

401(k)(15)(B)(iv) by providing that an 

employee ceases to be a long-term, parttime employee and becomes a former 

long-term, part-time employee as of the 

first day of the first plan year beginning 

after the plan year in which the 

employee satisfies the requirements of 

section 401(k)(2)(D) without regard to 

section 401(k)(2)(D)(ii). The 

nondiscrimination provisions of 

proposed § 1.401(k)–5(e)(1) (which are 

explained in section I.E.1 of this 

Explanation of Provisions) and the 

employer election provisions of 

proposed § 1.401(k)–5(f)(1) and (2) 

(which are explained in section I.F of 

this Explanation of Provisions) would 

not apply to a former long-term, parttime employee (regardless of whether 

the former long-term, part-time 

employee subsequently completes one 

or more 12-month periods during each 

of which the employee is credited with 

at least 500 (but less than 1,000) hours 

of service). However, the vesting rules of 

proposed § 1.401(k)–5(d)(1) (as 

explained in section I.D.1 of this 

Explanation of Provisions) would 

continue to apply to a former long-term, 

part-time employee. Thus, a former 

long-term, part-time employee would 

continue to be credited with a year of 

vesting service for any 12-month period 

during which the former long-term, 

part-time employee is credited with at 

least 500 hours of service with the 

employer or employers maintaining the 

plan (unless the period of service may 

be disregarded under section 411(a)). 

The Treasury Department and the IRS 

received a comment in response to 

Notice 2020–68 requesting clarification 

regarding the application of the vesting 

rules of section 401(k)(15)(B)(iii) and 

(iv) with respect to an employee who: 

(1) becomes eligible to participate as a 

long-term, part-time employee, but who 

subsequently completes 1 year of 

service under section 410(a)(1)(A)(ii); or 

(2) becomes eligible to participate 

because the employee completed 1 year 

of service under section 410(a)(1)(A)(ii), 

but who also completes (before or after 

becoming eligible to participate) one or 

more 12-month periods during each of 

which the employee is credited with at 

least 500 (but less than 1,000) hours of 

service. 

Under this proposed regulation, the 

vesting rules of proposed § 1.401(k)– 

5(d)(1) would continue to apply to a 

long-term, part-time employee who 

completes 1 year of service under 

section 410(a)(1)(A)(ii). However, an 

employee who becomes eligible to 

participate in a qualified CODA because 

the employee completes 1 year of 

service under section 410(a)(1)(A)(ii) 

would not be eligible to participate in 

the CODA solely by reason of 

completing the applicable number of 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service. 

Therefore, the employee would not be a 

long-term, part-time employee, and the 

vesting rules of proposed § 1.401(k)– 

5(d)(1) would not apply to the employee 

(regardless of whether the employee 

also completes, before or after becoming 

eligible to participate in the qualified 

CODA, one or more 12-month periods 

during each of which the employee is 

credited with at least 500 (but less than 

1,000) hours of service). 

Section 401(k)(15) does not address a 

long-term, part-time employee who 

ceases to satisfy a plan’s eligibility 

conditions (other than age or service 

conditions) for participation in the 

qualified CODA included in the plan. 

However, this proposed regulation 

would provide rules similar to those of 

section 401(k)(15)(B)(iv) with respect to 

a long-term, part-time employee who 

ceases to be eligible to participate in a 

qualified CODA. Therefore, proposed 

§ 1.401(k)–5(d)(2)(ii) would provide that 

a long-term, part-time employee 

becomes a former long-term, part-time 

employee as of the first day of the first 

plan year beginning after the earlier of 

the plan year in which the employee: (1) 

satisfies the requirements of section 

401(k)(2)(D) without regard to section 

401(k)(2)(D)(ii); or (2) ceases to satisfy 

the plan’s eligibility conditions (other 

than age or service conditions). 

Regardless of the reason that a longterm, part-time employee becomes a 

former long-term, part-time employee, 

this proposed regulation would provide 

that the nondiscrimination provisions of 

proposed § 1.401(k)–5(e)(1) and the 

employer election provisions of 

proposed § 1.401(k)–5(f)(1) and (2) do 

not apply to a former long-term, parttime employee (although the vesting 

rules of proposed § 1.401(k)–5(d)(1) 

would continue to apply to a former 

long-term, part-time employee). 

Unlike the rules that would apply to 

a long-term, part-time employee who 

becomes a former long-term, part-time 

employee by reason of satisfying the 

requirements of section 401(k)(2)(D) 

without regard to section 401(k)(2)(D)(ii) 

(that is, by reason of having completed 

1 year of service under section 

410(a)(1)(A)(ii)), proposed § 1.401(k)– 

5(d)(2)(iii) would provide that a longterm, part-time employee who ceases to 

satisfy the plan’s eligibility conditions 

(other than age or service conditions) 

during a plan year generally will return 

to long-term, part-time employee status 

as of the first day of the plan year during 

which the employee again satisfies 

those conditions. However, that 

employee would not return to longterm, part-time employee status if the 

employee also is a former long-term, 

part-time employee by reason of having 

completed 1 year of service under 

section 410(a)(1)(A)(ii). Although 

proposed § 1.401(k)–5(d)(2)(iii) would 

permit an employee’s status to change 

from that of a former long-term, parttime employee to a long-term, part-time 

employee during the plan year, this 

proposed regulation would not permit 

an employee to be both a long-term, 

part-time employee and a former longterm, part-time employee for that plan 

year. Similarly, under this proposed 

regulation, if a long-term, part-time 

employee ceases to satisfy the plan’s 

eligibility conditions (other than age or 

service conditions) during a plan year, 

but again satisfies those conditions 

during the same plan year, the employee 

would remain a long-term, part-time 

employee for the entire plan year. 

Accordingly, proposed § 1.401(k)– 

5(d)(2)(i) would define a former longterm, part-time employee as an 

employee who became eligible to 

participate in the arrangement as a longterm, part-time employee; subsequently 

ceased to be a long-term, part-time 

employee because the employee was 

described in proposed § 1.401(k)– 

5(d)(2)(ii)(A) or (B); and has not 

returned to long-term, part-time 

employee status in accordance with 

proposed § 1.401(k)–5(d)(2)(iii). Thus, 

under this proposed definition, an 

employee first must become eligible to 

participate in a qualified CODA as a 

long-term, part-time employee before 

the employee may become a former 

long-term, part-time employee. 


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E. Nonelective and Matching 

Contributions 

1. General Rule 

This proposed regulation reflects the 

nondiscrimination provisions of section 

401(k)(15)(B)(i)(I). Proposed § 1.401(k)– 

5(e)(1) would provide that, 

notwithstanding section 401(a)(4), 

neither nonelective nor matching 

contributions are required to be made 

on behalf of long-term, part-time 

employees, even if those contributions 

are made on behalf of other eligible 

employees. However, as explained in 

section I.D.2 of this Explanation of 

Provisions, proposed § 1.401(k)–5(e)(1) 

would not apply to former long-term, 

part-time employees. 

2. Coordination With Employer 

Elections 

In addition to section 401(a)(4), other 

Code sections affect whether 

contributions must be made on behalf of 

long-term, part-time employees. 

Accordingly, proposed § 1.401(k)– 

5(e)(2) would address the safe harbor 

section 401(k) plan contribution 

requirements under section 401(k)(12) 

and (13), the safe harbor section 401(m) 

plan contribution requirements under 

section 401(m)(11) and (12), the topheavy benefit requirements under 

section 416, and the SIMPLE 401(k) 

plan contribution requirements under 

section 401(k)(11) and (m)(10). 

As explained in section I.F.1 of this 

Explanation of Provisions, this proposed 

regulation would provide that the 

employer or employers maintaining a 

plan are permitted to elect to exclude 

long-term, part-time employees for 

purposes of determining whether the 

plan satisfies the ADP safe harbor 

provisions of section 401(k)(12) and 

(13), the ACP safe harbor provisions of 

section 401(m)(11) and (12), and certain 

other nondiscrimination and coverage 

testing provisions. Similarly, as 

explained in section I.F.2 of this 

Explanation of Provisions, this proposed 

regulation would permit the employer 

or employers maintaining the plan to 

elect to exclude long-term, part-time 

employees for purposes of determining 

whether the plan satisfies the top-heavy 

vesting and benefit requirements of 

section 416(b) and (c). However, this 

proposed regulation would not permit 

an employer to elect to exclude longterm, part-time employees for purposes 

of determining whether a plan satisfies 

the SIMPLE 401(k) provisions of section 

401(k)(11) and (m)(10). 

Therefore, proposed § 1.401(k)– 

5(e)(2)(i) would clarify that if long-term, 

part-time employees are excluded for 

purposes of determining whether a plan 

satisfies the ADP safe harbor provisions 

of section 401(k)(12) or (13) (and, if 

applicable, the ACP safe harbor 

provisions of section 401(m)(11) or 

(12)), then the plan will not fail to 

satisfy those provisions merely because 

the employer does not make a 

nonelective or matching contribution on 

behalf of an eligible NHCE who is a 

long-term, part-time employee (or makes 

a nonelective or matching contribution 

that would not satisfy the safe harbor 

contribution requirements on behalf of 

the eligible NHCE). Similarly, proposed 

§ 1.401(k)–5(e)(2)(ii) would clarify that 

if long-term, part-time employees are 

excluded for purposes of determining 

whether the plan satisfies the minimum 

benefit requirements of section 416(c) 

for the plan year, then the plan will not 

fail to satisfy the minimum benefit 

requirements of section 416(c) merely 

because the employer contribution (if 

any) made for the plan year on behalf 

of a non-key employee who is a longterm, part-time employee does not 

satisfy those requirements. 

However, proposed § 1.401(k)– 

5(e)(2)(iii) would clarify that, because an 

employer may not elect under this 

proposed regulation to exclude longterm, part-time employees from the 

application of the SIMPLE 401(k) 

provisions of section 401(k)(11) and 

(m)(10), a plan intended to satisfy the 

SIMPLE 401(k) provisions of section 

401(k)(11) or (m)(10) must satisfy the 

matching or nonelective contribution 

requirements of § 1.401(k)–4(e) with 

respect to long-term, part-time 

employees. 

F. Employer Elections 

1. Nondiscrimination and Coverage 

This proposed regulation generally 

reflects the provisions of section 

401(k)(15)(B)(i)(II). Section 

401(k)(15)(B)(i)(II) permits an employer 

to elect to exclude long-term, part-time 

employees from the application of the 

nondiscrimination requirements of 

section 401(a)(4), the ADP test of section 

401(k)(3), the ADP safe harbor 

provisions of section 401(k)(12) and 

(13), the ACP test of section 401(m)(2), 

the ACP safe harbor provisions of 

section 401(m)(11) and (12), and the 

minimum coverage requirements of 

section 410(b). Accordingly, proposed 

§ 1.401(k)–5(f)(1) generally would 

permit an employer to elect to exclude 

long-term, part-time employees (but not 

former long-term, part-time employees, 

as explained in section I.D.2 of this 

Explanation of Provisions) for purposes 

of determining whether a plan satisfies 

those nondiscrimination and minimum 

coverage requirements. 

The nondiscrimination and minimum 

coverage requirements listed in section 

401(k)(15)(B)(i)(II) do not include the 

SIMPLE 401(k) provisions of section 

401(k)(11) and (m)(10). Accordingly, an 

employer election under proposed 

§ 1.401(k)–5(f)(1) would not exclude 

long-term, part-time employees for 

purposes of determining whether a plan 

satisfies the SIMPLE 401(k) 

requirements of section 401(k)(11) and 

(m)(10). 

For purposes of section 410(b), if 

long-term, part-time employees are not 

excluded for purposes of determining 

whether the plan satisfies section 410(b) 

pursuant to an employer election under 

proposed § 1.401(k)–5(f)(1), then those 

employees generally will be otherwise 

excludable employees for purposes of 

section 410(b)(4)(B) and § 1.410(b)– 

6(b)(3) because those long-term, parttime employees will not have satisfied 

the service requirements of section 

410(a)(1) (without regard to section 

410(a)(1)(B)). However, former longterm, part-time employees who have 

completed 1 year of service under 

section 410(a)(1)(A)(ii) will not be 

otherwise excludable employees 

because those former long-term, parttime employees will have satisfied the 

minimum age and service requirements 

of section 410(a)(1) (without regard to 

section 410(a)(1)(B)). 

The Treasury Department and the IRS 

received a comment in response to 

Notice 2020–68 requesting clarification 

that an employer may elect to exclude 

long-term, part-time employees for 

purposes of certain nondiscrimination 

and coverage testing provisions listed in 

section 401(k)(15)(B)(i)(II), but include 

long-term, part-time employees for other 

of those provisions. This proposed 

regulation would not provide for such 

an option because of the 

interconnection among the 

nondiscrimination and coverage testing 

provisions listed in section 

401(k)(15)(B)(i)(II) and the risk that 

disregarding long-term, part-time 

employees for purposes of some (but not 

all) of those nondiscrimination and 

coverage testing provisions could result 

in discrimination against NHCEs who 

are not long-term, part-time employees. 

Accordingly, this proposed regulation 

would clarify that an employer election 

under proposed § 1.401(k)–5(f)(1) 

applies for purposes of every 

nondiscrimination and coverage testing 

provision listed in section 

401(k)(15)(B)(i)(II) (to the extent the 

provision otherwise would apply to the 

plan) and applies with respect to all 

long-term, part-time employees who are 

eligible to participate in the qualified 

CODA. 


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82806 Federal Register / Vol. 88, No. 226 / Monday, November 27, 2023 / Proposed Rules 

With respect to a plan that is intended 

to satisfy the ADP safe harbor provisions 

of section 401(k)(12) or (13), this 

proposed regulation would clarify that 

an election under proposed § 1.401(k)– 

5(f)(1) must be set forth in the plan and 

satisfy the plan year requirements of 

§ 1.401(k)–3(e). This proposed 

regulation would set forth a similar 

requirement for a plan that is intended 

to satisfy the ACP safe harbor provisions 

of section 401(m)(11) or (12). Therefore, 

with respect to these plans, in order for 

an election to satisfy the conditions of 

proposed § 1.401(k)–5(f)(1), the terms of 

the plan must provide clearly that longterm, part-time employees are excluded 

for purposes of the ADP safe harbor 

provisions of section 401(k)(12) or (13), 

the ACP safe harbor provisions of 

section 401(m)(11) or (12), and any 

other provisions under proposed 

§ 1.401(k)–5(f)(1)(i) that otherwise 

would apply to the plan. 

With respect to a plan that is not 

intended to satisfy the ADP safe harbor 

provisions of section 401(k)(12) or (13) 

or the ACP safe harbor provisions of 

section 401(m)(11) or (12) for a plan 

year, this proposed regulation would 

not require an election under proposed 

§ 1.401(k)–5(f)(1) to be set forth in the 

plan. However, in order for the 

employer or employers maintaining the 

plan to make an election under 

proposed § 1.401(k)–5(f)(1), the terms of 

the plan would need to provide 

enabling language. Thus, in the case of 

a plan that is not intended to satisfy the 

ADP safe harbor provisions of section 

401(k)(12) or (13) or the ACP safe harbor 

provisions of section 401(m)(11) or (12) 

for a plan year, if the plan document 

does not include enabling language, or 

an election under proposed § 1.401(k)– 

5(f)(1) is not made, then long-term, parttime employees would not be excluded 

for purposes of determining whether the 

plan satisfies the nondiscrimination 

requirements of section 401(a)(4), the 

ADP test of section 401(k)(3), the ACP 

test of section 401(m)(2), or the 

minimum coverage requirements of 

section 410(b) (to the extent those 

provisions would otherwise apply to the 

plan). 

2. Top-Heavy 

Proposed § 1.401(k)–5(f)(2) reflects the 

provisions of section 401(k)(15)(B)(ii), 

which permit an employer to elect to 

exclude all long-term, part-time 

employees from the application of the 

top-heavy vesting and benefit 

requirements under section 416(b) and 

(c). As explained in section I.D.2 of this 

Explanation of Provisions, the election 

under proposed § 1.401(k)–5(f)(2) would 

not apply to former long-term, part-time 

employees. In addition, this proposed 

regulation would clarify that an election 

under section 401(k)(15)(B)(ii) does not 

apply for purposes of determining 

whether a plan is a top-heavy plan (as 

defined in section 416(g)). 

However, section 125(e) of the 

SECURE 2.0 Act amends the special 

rules under section 416(g)(4)(H) of the 

Code for cash or deferred arrangements 

using alternative methods of meeting 

nondiscrimination requirements to 

provide that the term ‘‘top-heavy plan’’ 

does not include a plan solely because 

that plan does not provide nonelective 

or matching contributions to employees 

described in section 401(k)(15)(B)(i). As 

explained in section I.E.2 of this 

Explanation of Provisions, a plan does 

not fail to satisfy the ADP safe harbor 

provisions of section 401(k)(12) or (13) 

or the ACP safe harbor provisions of 

section 401(m)(11) or (12) (including for 

purposes of applying section 

416(g)(4)(H) of the Code) merely because 

the employer does not make a 

nonelective or matching contribution on 

behalf of an eligible NHCE who is a 

long-term, part-time employee, provided 

that long-term, part-time employees are 

excluded for purposes of determining 

whether the plan satisfies those 

provisions pursuant to an election that 

satisfies the requirements of proposed 

§ 1.401(k)–5(f)(1). Accordingly, 

proposed § 1.401(k)–5(f)(2) would 

clarify that, in the case of an employer 

that makes an election described in 

proposed § 1.401(k)–5(f)(1) (which has 

the effect of excluding long-term, parttime employees for purposes of 

determining whether the plan satisfies 

the ADP and ACP safe harbor 

provisions), the plan will not fail to be 

excluded from the definition of a ‘‘topheavy plan’’ under section 416(g)(4)(H) 

merely because the employer does not 

make nonelective or matching 

contributions on behalf of long-term, 

part-time employees (or makes 

nonelective or matching contributions 

that do not satisfy the requirements for 

safe harbor contributions). 

The employer election regarding 

nondiscrimination and coverage testing 

under proposed § 1.401(k)–5(f)(1) and 

the employer election regarding topheavy benefits under proposed 

§ 1.401(k)–5(f)(2) would be separate 

elections. In order for an election to 

satisfy the conditions of proposed 

§ 1.401(k)–5(f)(2), the terms of the plan 

would be required to provide that longterm, part-time employees are excluded 

from the application of the vesting and 

benefit requirements of section 416(b) 

and (c). 

3. Additional Employer Contributions 

As explained in section I.E of this 

Explanation of Provisions, this proposed 

regulation generally would not require 

an employer to make nonelective or 

matching contributions on behalf of a 

long-term, part-time employee. 

However, the Treasury Department and 

the IRS received a comment in response 

to Notice 2020–68 requesting 

clarification that an employer may elect 

under section 401(k)(15)(B)(i)(II) to 

exclude long-term, part-time employees 

from nondiscrimination and coverage 

testing, even if the employer makes 

employer contributions (other than 

elective contributions) on behalf of longterm, part-time employees under the 

plan. 

Under this proposed regulation, an 

election to exclude long-term, part-time 

employees for purposes of 

nondiscrimination and coverage testing 

under proposed § 1.401(k)–5(f)(1), and 

an election to exclude long-term, parttime employees for purposes of topheavy benefits under proposed 

§ 1.401(k)–5(f)(2), would not be 

conditioned upon long-term, part-time 

employees being ineligible to receive 

employer contributions other than 

elective contributions under the plan. 

Accordingly, this proposed regulation 

generally would permit the employer or 

employers maintaining the plan to elect 

to exclude long-term, part-time 

employees under proposed § 1.401(k)– 

5(f)(1) and (2), even if the employer or 

employers maintaining the plan make 

nonelective or matching contributions 

on behalf of long-term, part-time 

employees under the plan. If a plan is 

intended to satisfy the ADP safe harbor 

provisions of section 401(k)(12) or (13), 

or the ACP safe harbor provisions of 

section 401(m)(11) or (12), and the 

employer elects to exclude long-term, 

part-time employees under proposed 

§ 1.401(k)–5(f)(1) for purposes of 

determining whether the plan satisfies 

those provisions (and any other 

provisions under proposed § 1.401(k)– 

5(f)(1)(i) that otherwise would apply to 

the plan), then any nonelective or 

matching contributions made on behalf 

of long-term, part-time employees under 

the plan would not be safe harbor 

contributions for purposes of § 1.401(k)– 

3 or 1.401(m)–3 but, as described in 

section I.F.2 of this Explanation of 

Provisions, the plan would continue to 

be excluded from the definition of a 

‘‘top-heavy plan’’. 


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Federal Register / Vol. 88, No. 226 / Monday, November 27, 2023 / Proposed Rules 82807 

5After these comments were received, revisions 

were made to the forms and instructions for the 

Form 5500, ‘‘Annual Return/Report of Employee 

Benefit Plan,’’ and Form 5500–SF, ‘‘Short Form 

Annual Return/Report of Small Employee Benefit 

Plan,’’ for plan years beginning on or after January 

1, 2023. The new instructions provide that only 

participants with an account balance are counted 

for purposes of the small plan audit waiver of 

annual examination and report of an IQPA under 

29 CFR 2520.104–46. See 88 FR 11984 (February 24, 

2023). 

II. Other Issues 

A. Catch-Up Contributions and Roth 

Elective Contributions 

Section 112 of the SECURE Act does 

not address whether a long-term, parttime employee may be a catch-up 

eligible participant for purposes of 

making catch-up contributions under 

section 414(v) and § 1.414(v)–1. 

However, § 1.414(v)–1(g)(3) provides 

that an employee is a catch-up eligible 

participant for a taxable year if: (1) the 

employee is eligible to make elective 

deferrals under an applicable employer 

plan (without regard to section 414(v) or 

§ 1.414(v)–1), and (2) the employee’s 

50th or higher birthday would occur 

before the end of the employee’s taxable 

year. An employee who is eligible to 

participate in a qualified CODA as a 

long-term, part-time employee would be 

eligible to make elective deferrals under 

an applicable employer plan for 

purposes of § 1.414(v)–1(g)(3). 

Accordingly, a long-term, part-time 

employee is a catch-up eligible 

participant for a taxable year if the 

employee’s 50th or higher birthday 

would occur before the end of the 

employee’s taxable year. 

Under the universal availability 

requirements of section 414(v)(4) and 

§ 1.414(v)–1(e), a section 401(k) plan (or 

other applicable employer plan) that 

offers catch-up contributions and that is 

otherwise subject to section 401(a)(4) 

generally will not satisfy the 

requirements of section 401(a)(4) unless 

all catch-up eligible participants who 

participate under any applicable 

employer plan maintained by the 

employer are provided an effective 

opportunity to make the same dollar 

amount of catch-up contributions. This 

proposed regulation would not amend 

the catch-up contribution rules of 

§ 1.414(v)–1. However, as explained in 

section I.F.1 of this Explanation of 

Provisions, proposed § 1.401(k)–5(f)(1) 

would permit an employer to elect to 

exclude long-term, part-time employees 

for purposes of certain 

nondiscrimination and coverage testing 

provisions, including for purposes of 

section 401(a)(4). Therefore, long-term, 

part-time employees would be 

disregarded for purposes of the 

universal availability requirements of 

section 414(v)(4) and § 1.414(v)–1(e), if 

the employer elects to exclude longterm, part-time employees in 

accordance with the provisions of 

proposed § 1.401(k)–5(f)(1). 

Similarly, section 401(k)(15) does not 

address whether a section 401(k) plan 

may permit a long-term, part-time 

employee to make designated Roth 

contributions. However, under 

§ 1.401(k)–1(f)(1), a designated Roth 

contribution is an elective contribution 

under a qualified CODA that (to the 

extent permitted under the plan) 

satisfies certain conditions. Section 

1.401(k)–1(f)(4) further provides that a 

designated Roth contribution must 

satisfy the requirements applicable to 

elective contributions made under a 

qualified CODA and is treated as an 

employer contribution for purposes of 

certain Code sections, including section 

401(k). Accordingly, a section 401(k) 

plan may permit long-term, part-time 

employees to make designated Roth 

contributions. 

Under § 1.401(k)–1(a)(4)(iv)(B), the 

right to make designated Roth 

contributions is a right or feature subject 

to the requirements of section 401(a)(4). 

However, if the employer elects to 

exclude long-term, part-time employees 

for purposes of determining whether a 

plan satisfies section 401(a)(4) in 

accordance with the provisions of 

proposed § 1.401(k)–5(f)(1), long-term, 

part-time employees would be 

disregarded for purposes of determining 

whether the right to make designated 

Roth contributions under the plan 

satisfies section 401(a)(4) and 

§ 1.401(a)(4)–4. 

B. Form 5500 and Form 5500–SF— 

Independent Qualified Public 

Accountant Audit 

The Treasury Department and the IRS 

received a comment in response to 

Notice 2020–68 requesting that longterm, part-time employees be excluded 

for purposes of determining whether a 

plan is exempt from the requirement to 

be audited annually by an independent 

qualified public accountant (IQPA). The 

Treasury Department and the IRS also 

received a comment in response to 

Notice 2020–68 requesting that the 

determination of whether a plan is 

exempt from the annual audit 

requirement be based on the number of 

plan participants (including long-term, 

part-time employees) with account 

balances as of the beginning of the plan 

year, rather than the total number of 

participants at the beginning of the plan 

year. The annual audit requirement of 

section 103(a)(3) of ERISA falls under 

the regulatory and interpretive authority 

of the Department of Labor and is 

outside the scope of this proposed 

regulation.5

Proposed Applicability Date 

Section 1.401(k)–5 is proposed to 

apply to plan years that begin on or after 

January 1, 2024. Prior to the date a 

Treasury decision revising § 1.401(k)–5 

to implement rules for long-term, parttime employees is published in the 

Federal Register, taxpayers may rely on 

the rules set forth in this notice of 

proposed rulemaking. 

Availability of IRS Documents 

For copies of recently issued revenue 

procedures, revenue rulings, notices and 

other guidance published in the Internal 

Revenue Bulletin, please visit the IRS 

website at www.irs.gov or contact the 

Superintendent of Documents, U.S. 

Government Publishing Office, 

Washington, DC 20402. 

Special Analyses 

I. Regulatory Planning and Review 

Pursuant to the Memorandum of 

Agreement, Review of Treasury 

Regulations under Executive Order 

12866 (June 9, 2023), tax regulatory 

actions issued by the IRS are not subject 

to the requirements of section 6 of 

Executive Order 12866, as amended. 

Therefore, a regulatory impact 

assessment is not required. 

II. Paperwork Reduction Act 

The information required under this 

regulation is considered usual and 

customary records kept by respondents 

during the normal course of business in 

administering their retirement plans. 

These customary business records 

impose no additional burden on 

respondents and are not required to be 

reviewed by the Office of Management 

and Budget (OMB) per 5 CFR 

1320.3(b)(2). 

III. Regulatory Flexibility Act 

Pursuant to the Regulatory Flexibility 

Act, it is hereby certified that this 

regulation will not have a significant 

economic impact on a substantial 

number of small entities. This 

certification is based on several factors. 

First, the proposed regulation generally 

is intended to reflect certain statutory 

changes that affect section 401(k) plans. 

The proposed regulation primarily 

would conform the current regulations 

under section 401(k) with changes made 

by section 112 of the SECURE Act and 

sections 125 and 401 of the SECURE 2.0 

Act. 

Second, although the proposed 

regulation might affect a substantial 


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82808 Federal Register / Vol. 88, No. 226 / Monday, November 27, 2023 / Proposed Rules 

number of small entities, the economic 

impact of the proposed regulation is not 

expected to be significant. The changes 

made by section 112 of the SECURE Act 

may require certain small entities that 

sponsor section 401(k) plans to revise 

the eligibility service requirements 

under those plans so that long-term, 

part-time employees are permitted to 

make cash or deferred elections. 

However, except with respect to 

SIMPLE 401(k) plans, those small 

entities would not be required to make 

nonelective or matching contributions 

on behalf of long-term, part-time 

employees. Any additional 

recordkeeping or administrative costs 

resulting from the participation of longterm, part-time employees in section 

401(k) plans sponsored by small entities 

are not expected to be significant. 

With respect to small entities that 

sponsor SIMPLE 401(k) plans, the 

proposed regulation would require 

those small entities to make nonelective 

or matching contributions under those 

SIMPLE 401(k) plans on behalf of any 

long-term, part-time employees in order 

to satisfy section 112 of the SECURE 

Act. However, if a small entity sponsors 

a section 401(k) plan, it is expected that 

the plan typically would be subject to 

the ADP test or designed to satisfy the 

requirements for a safe harbor section 

401(k) plan, rather than be designed to 

satisfy the requirements for a SIMPLE 

401(k) plan. Accordingly, the number of 

small entities that sponsor section 

401(k) plans that are intended to satisfy 

the requirements for a SIMPLE 401(k) 

plan and are affected by the expanded 

participation requirements of section 

112 of the SECURE Act is not expected 

to be substantial. 

For the reasons stated, a regulatory 

flexibility analysis under the Regulatory 

Flexibility Act is not required. The 

Treasury Department and the IRS invite 

comments on the impact of this 

regulation on small entities. Pursuant to 

section 7805(f) of the Code, this notice 

of proposed rulemaking has been 

submitted to the Chief Counsel of 

Advocacy of the Small Business 

Administration for comment on its 

impact on small business. 

IV. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 requires 

that agencies assess anticipated costs 

and benefits and take certain other 

actions before issuing a final rule that 

includes any Federal mandate that may 

result in expenditures in any one year 

by a State, local, or Tribal government, 

in the aggregate, or by the private sector, 

of $100 million in 1995 dollars, updated 

annually for inflation. The proposed 

regulation does not propose any rule 

that would include any Federal mandate 

that may result in expenditures by State, 

local, or Tribal governments, or by the 

private sector in excess of that 

threshold. 

V. Executive Order 13132: Federalism 

Executive Order 13132 (Federalism) 

prohibits an agency from publishing any 

rule that has federalism implications if 

the rule either imposes substantial, 

direct compliance costs on State and 

local governments, and is not required 

by statute, or preempts State law, unless 

the agency meets the consultation and 

funding requirements of section 6 of the 

Executive order. The proposed 

regulation does not propose any rule 

that would have federalism 

implications, impose substantial direct 

compliance costs on State and local 

governments, or preempt State law 

within the meaning of the Executive 

order. 

Comments and Public Hearing 

Before a final regulation is adopted 

with respect to long-term, part-time 

employee rules for cash or deferred 

arrangements under § 1.401(k)–5, 

consideration will be given to comments 

regarding the notice of proposed 

rulemaking that are submitted timely to 

the IRS as prescribed in the preamble 

under the ADDRESSES section. The 

Treasury Department and the IRS 

request comments on all aspects of the 

proposed regulation. As described in 

section I.B.1 of the Explanation of 

Provisions, comments specifically are 

requested on the application of section 

112 of the SECURE Act to a qualified 

CODA that is included in either (1) a 

governmental plan, or (2) a church plan 

with respect to which the election 

provided by section 410(d) has not been 

made. 

All comments will be made available 

at www.regulations.gov or upon request. 

Once submitted to the Federal 

eRulemaking Portal, comments cannot 

be edited or withdrawn. 

A public hearing has been scheduled 

for March 15, 2024, beginning at 10:00 

a.m. ET in the Auditorium of the 

Internal Revenue Building, 1111 

Constitution Avenue NW, Washington, 

DC. Due to building security 

procedures, visitors must enter at the 

Constitution Avenue entrance. In 

addition, all visitors must present photo 

identification to enter the building. 

Because of access restrictions, visitors 

will not be admitted beyond the 

immediate entrance area more than 30 

minutes before the hearing starts. 

Participants may alternatively attend the 

public hearing by telephone. 

The rules of 26 CFR 601.601(a)(3) 

apply to the hearing. Persons who wish 

to present oral comments must submit 

an outline of the topics to be addressed 

and the time to be devoted to each topic 

by January 26, 2024 as prescribed in the 

preamble under the ADDRESSES section. 

A period of 10 minutes will be allocated 

to each person for making comments. 

An agenda showing the scheduling of 

the speakers will be prepared after the 

deadline for receiving outlines has 

passed. Copies of the agenda will be 

available free of charge at the hearing. 

If no outline of the topics to be 

discussed at the hearing is received by 

January 26, 2024, the public hearing 

will be cancelled. If the public hearing 

is cancelled, a notice of cancellation of 

the public hearing will be published in 

the Federal Register. 

Individuals who want to testify in 

person at the public hearing must send 

an email to publichearings@irs.gov to 

have your name added to the building 

access list. The subject line of the email 

must contain the regulation number 

REG–104194–23 and the language 

TESTIFY In Person. For example, the 

subject line may say: Request to 

TESTIFY In Person at Hearing for REG– 

104194–23. 

Individuals who want to testify by 

telephone at the public hearing must 

send an email to publichearings@irs.gov 

to receive the telephone number and 

access code for the hearing. The subject 

line of the email must contain the 

regulation number REG–104194–23 and 

the language TESTIFY Telephonically. 

For example, the subject line may say: 

Request to TESTIFY Telephonically at 

Hearing for REG–104194–23. 

Individuals who want to attend the 

public hearing in person without 

testifying must also send an email to 

publichearings@irs.gov to have your 

name added to the building access list. 

The subject line of the email must 

contain the regulation number REG– 

104194–23 and the language ATTEND 

In Person. For example, the subject line 

may say: Request to ATTEND Hearing In 

Person for REG–104194–23. Requests to 

attend the public hearing must be 

received by 5:00 p.m. ET on March 13, 

2024. 

Individuals who want to attend the 

public hearing by telephone without 

testifying must also send an email to 

publichearings@irs.gov to receive the 

telephone number and access code for 

the hearing. The subject line of the 

email must contain the regulation 

number REG–104194–23 and the 

language ATTEND Hearing 

Telephonically. For example, the 

subject line may say: Request to 

ATTEND Hearing Telephonically for 


khammond on DSKJM1Z7X2PROD with PROPOSALS
Federal Register / Vol. 88, No. 226 / Monday, November 27, 2023 / Proposed Rules 82809 

REG–104194–23. Requests to attend the 

public hearing must be received by 5:00 

p.m. ET on March 13, 2024. 

Hearings will be made accessible to 

people with disabilities. To request 

special assistance during the hearing, 

please contact the Publications and 

Regulations Branch of the Office of 

Associate Chief Counsel (Procedure and 

Administration) by sending an email to 

publichearings@irs.gov (preferred) or by 

telephone at (202) 317–6901 (not a tollfree number) by March 12, 2024. 

Drafting Information 

The principal authors of this 

regulation are Kara M. Soderstrom and 

Jason E. Levine, Office of Associate 

Chief Counsel (Employee Benefits, 

Exempt Organizations, and Employment 

Taxes (EEE)). However, other personnel 

from the IRS and the Treasury 

Department participated in the 

development of this regulation. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, the Treasury Department 

and the IRS propose to amend 26 CFR 

part 1 as follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority citation 

for part 1 is amended by adding an entry 

for § 1.401(k)–5 in numerical order to 

read in part as follows: 

Authority: 26 U.S.C. 7805 * * * 

* * * * * 

Section 1.401(k)–5 is also issued under 26 

U.S.C. 401(m)(9). 

* * * * * 

■ Par. 2. Section 1.401(k)–5 is revised to 

read as follows: 

§ 1.401(k)–5 Long-term, part-time 

employees. 

(a) Overview—(1) Rules applicable to 

long-term, part-time employees—(i) In 

general. This section provides rules 

regarding long-term, part-time 

employees, as defined in paragraph 

(b)(1) of this section. A cash or deferred 

arrangement satisfies the requirements 

of section 401(k)(2)(D) of the Internal 

Revenue Code only if, with respect to 

each long-term, part-time employee— 

(A) The employee becomes eligible to 

make a cash or deferred election under 

the arrangement in accordance with the 

participation requirements of paragraph 

(c) of this section; and 

(B) The plan that includes the 

arrangement satisfies the vesting 

requirements of paragraph (d) of this 

section. 

(ii) Optional provisions. A plan that 

includes a cash or deferred arrangement 

that satisfies the requirements of 

paragraphs (c) and (d) of this section 

may reflect the nonelective and 

matching contribution provisions of 

paragraph (e) of this section with 

respect to long-term, part-time 

employees (but not former long-term, 

part-time employees as defined in 

paragraph (d)(2)(i) of this section). In 

addition, an employer maintaining the 

plan may apply the employer election 

provisions of paragraph (f) of this 

section with respect to long-term, parttime employees (but not former longterm, part-time employees). 

(2) Rules applicable to former longterm, part-time employees. See 

paragraph (d)(2) of this section for rules 

relating to former long-term, part-time 

employees. 

(b) Long-term, part-time employees— 

(1) Definition—(i) In general. Except as 

provided in paragraph (b)(1)(ii) or (iii) of 

this section, long-term, part-time 

employee means an employee who is 

eligible to participate in the 

arrangement solely by reason of 

having— 

(A) Completed two consecutive 12- 

month periods during each of which the 

employee is credited with at least 500 

hours of service (as defined in section 

410(a)(3)(C)); and 

(B) Attained the age specified in 

section 410(a)(1)(A)(i) by the close of the 

last of the 12-month periods described 

in paragraph (b)(1)(i)(A) of this section. 

(ii) Exclusion for certain employees. 

Long-term, part-time employees do not 

include— 

(A) Employees who are included in a 

unit of employees covered by an 

agreement that the Secretary of Labor 

finds to be a collective bargaining 

agreement between employee 

representatives and one or more 

employers if there is evidence that 

retirement benefits were the subject of 

good faith bargaining between those 

employee representatives and that 

employer or employers; 

(B) Employees who are nonresident 

aliens and who receive no earned 

income (within the meaning of section 

911(d)(2)) from the employer that 

constitutes income from sources within 

the United States (within the meaning of 

section 861(a)(3)); or 

(C) Any other employees described in 

section 410(b)(3). 

(iii) Plan years beginning in 2024. 

With respect to a plan year beginning in 

2024, paragraph (b)(1)(i)(A) of this 

section is applied by substituting three 

consecutive 12-month periods for two 

consecutive 12-month periods. 

(2) Examples. The following examples 

illustrate the application of the 

definition of long-term, part-time 

employee under paragraph (b)(1) of this 

section, taking into account the 

determination of 12-month periods 

under paragraph (c)(2)(i) of this section. 

For purposes of the examples, each plan 

is maintained on a calendar-year basis, 

includes a cash or deferred arrangement, 

and each plan’s provisions are effective 

as of January 1, 2024. For purposes of 

paragraphs (b)(2)(vi) through (xii) of this 

section (Examples 6 through 12), each 

plan provides that, in order to be 

eligible to make a cash or deferred 

election under the arrangement, an 

employee is required to complete a 

period of service with the employer 

maintaining the plan that extends until 

the close of the earlier of: a 12-month 

period during which the employee is 

credited with at least 1,000 hours of 

service, or three consecutive 12-month 

periods (excluding any 12-month period 

beginning before January 1, 2021) 

during each of which the employee is 

credited with at least 500 hours of 

service (however, effective January 1, 

2025, each plan is amended to provide 

that the applicable number of 

consecutive 12-month periods during 

each of which an employee must be 

credited with at least 500 hours of 

service in order to participate in the 

arrangement is reduced from three to 

two). In addition, for purposes of 

paragraphs (b)(2)(vi) through (xii) of this 

section (Examples 6 through 12), each 

plan provides that, for purposes of 

determining whether an employee has 

satisfied the requirements of paragraph 

(b)(1)(i) of this section, 12-month 

periods are determined by reference to 

the employment commencement date of 

an employee, and each plan provides 

monthly entry dates for an eligible 

employee to commence participation in 

the arrangement. Except as provided in 

paragraphs (b)(2)(viii), (ix), and (x) of 

this section (Examples 8, 9, and 10), 

each employee has attained age 21. 

Except as provided in paragraphs 

(b)(2)(xi) and (xii) of this section 

(Examples 11 and 12), none of the 

employees are described in section 

410(b)(3). 

(i) Example 1. (A) Employer A 

maintains Plan I. Plan I includes a cash 

or deferred arrangement under which 

each employee of Employer A is eligible 

to make a cash or deferred election as 

soon as administratively practicable 

after the employee’s employment 

commencement date. 

(B) None of the employees who are 

eligible to make a cash or deferred 

election under the arrangement in Plan 

I are long-term, part-time employees 


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82810 Federal Register / Vol. 88, No. 226 / Monday, November 27, 2023 / Proposed Rules 

because none of those employees are 

eligible to participate in the 

arrangement solely by reason of having 

completed the number of consecutive 

12-month periods that applies under 

paragraph (b)(1)(i)(A) or (b)(1)(iii) of this 

section (referred to as the applicable 

number of consecutive 12-month 

periods) during each of which the 

employee is credited with at least 500 

hours of service. 

(ii) Example 2. (A) Employer B 

maintains Plan J. Plan J provides that, in 

order to be eligible to make a cash or 

deferred election under the 

arrangement, each employee of 

Employer B is required to complete a 

12-month period of service with 

Employer B during which the employee 

is credited with at least 500 hours of 

service. 

(B) None of the employees who are 

eligible to make a cash or deferred 

election under the arrangement in Plan 

J are long-term, part-time employees 

because none of those employees are 

eligible to participate in the 

arrangement solely by reason of having 

completed the applicable number of 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service. 

(iii) Example 3. (A) Employer C 

maintains Plan K. Plan K provides that, 

in order to be eligible to make a cash or 

deferred election under the 

arrangement, each employee of 

Employer C is required to complete a 

period of service with Employer C that 

extends until the close of the earlier of: 

a 12-month period during which the 

employee is credited with at least 1,000 

hours of service, or two consecutive 12- 

month periods during each of which the 

employee is credited with at least 500 

hours of service. 

(B) For the plan year beginning 

January 1, 2024, none of the employees 

who are eligible to make a cash or 

deferred election under the arrangement 

in Plan K are long-term, part-time 

employees because none of those 

employees are eligible to participate in 

the arrangement solely by reason of 

having completed three consecutive 12- 

month periods during each of which the 

employee is credited with at least 500 

hours of service. 

(C) For plan years beginning on or 

after January 1, 2025, an employee who 

becomes eligible to participate in the 

arrangement in Plan K solely by reason 

of having completed two consecutive 

12-month periods during each of which 

the employee is credited with at least 

500 hours of service would be a longterm, part-time employee. However, an 

employee who became eligible to 

participate in the arrangement before 

January 1, 2025, would not be a longterm, part-time employee for plan years 

beginning on or after January 1, 2025, 

because that employee did not become 

eligible to participate in the 

arrangement solely by reason of 

completing the applicable number of 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service. 

(iv) Example 4. (A) Employer D 

maintains Plan L. Plan L provides that, 

in order to be eligible to make a cash or 

deferred election under the 

arrangement, each employee of 

Employer D is required to complete a 1- 

year period of service with Employer D 

using the elapsed time method of 

crediting service. 

(B) None of the employees who are 

eligible to make a cash or deferred 

election under the arrangement in Plan 

L are long-term, part-time employees 

because none of those employees are 

eligible to participate in the 

arrangement solely by reason of having 

completed the applicable number of 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service. 

(v) Example 5. (A) The facts are the 

same as in paragraph (b)(2)(iv)(A) of this 

section (Example 4), except that Plan L 

requires employees of Employer D who 

are classified as part-time employees to 

complete the applicable number of 

consecutive 1-year periods of service 

under paragraph (b)(1)(i)(A) or (b)(1)(iii) 

of this section with Employer D using 

the elapsed time method of crediting 

service. 

(B) Plan L fails to satisfy the 

requirements of section 401(k)(2)(D)(i) 

because, under the elapsed time method 

of crediting service, a 1-year period of 

service is the maximum period that Plan 

L may require any employee to 

complete in order to participate in the 

arrangement. 

(vi) Example 6. (A) Employer E 

maintains Plan M. For purposes of 

determining the eligibility of an 

employee to participate in the 

arrangement under Plan M, Plan M 

credits an employee with 190 hours of 

service for each month for which the 

employee would be required to be 

credited with at least 1 hour of service. 

Employees R and S are employees of 

Employer E who both have an 

employment commencement date of 

June 1, 2024. Employees R and S are 

both classified by Employer E as parttime employees. During the 12-month 

period beginning on June 1, 2024, 

Employee R has at least 1 hour of 

service each month for 6 months and, 

therefore, is credited with 1,140 hours 

of service. Employee R commences 

participation in the arrangement in Plan 

M on June 1, 2025. During each of the 

12-month periods beginning on June 1, 

2024, and June 1, 2025, Employee S is 

credited with at least 1 hour of service 

each month for 4 months and, therefore, 

is credited with 760 hours of service for 

the period. Employee S commences 

participation in the arrangement in Plan 

M on June 1, 2026. 

(B) Employee R is not a long-term, 

part-time employee (or former longterm, part-time employee, as defined in 

paragraph (d)(2)(i) of this section) 

because Employee R is credited with 

1,140 hours of service during the 12- 

month period beginning on June 1, 

2024. Therefore, Employee R is not 

eligible to participate in the 

arrangement solely by reason of having 

completed the applicable number of 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service. 

However, Employee S is eligible to 

participate in the arrangement solely by 

reason of having completed the 

applicable number of consecutive 12- 

month periods during each of which the 

employee is credited with at least 500 

hours of service. Accordingly, Employee 

S is a long-term, part-time employee. 

(vii) Example 7. (A) Employer G 

maintains Plan O. Employee U is an 

employee of Employer G with an 

employment commencement date of 

June 1, 2024. Employee U is classified 

by Employer G as a part-time employee. 

During the 12-month period beginning 

on June 1, 2024, Employee U is credited 

with 900 hours of service. During the 

12-month period beginning on June 1, 

2025, Employee U is credited with 1,100 

hours of service. Employee U 

commences participation in the 

arrangement in Plan O on June 1, 2026. 

During the 12-month period beginning 

on June 1, 2026, Employee U is credited 

with 900 hours of service. 

(B) Employee U is not a long-term, 

part-time employee (or former longterm, part-time employee) because 

Employee U is credited with 1,100 

hours of service during the 12-month 

period beginning on June 1, 2025. 

Therefore, Employee U is not eligible to 

participate in the arrangement solely by 

reason of having completed the 

applicable number of consecutive 12- 

month periods during each of which the 

employee is credited with at least 500 

hours of service. The result would be 

the same even if Employee U also is 

credited with at least 500 (but less than 

1,000) hours of service during the plan 

year beginning on June 1, 2027 (and 

therefore completes two consecutive 12- 

month periods during each of which the 


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Federal Register / Vol. 88, No. 226 / Monday, November 27, 2023 / Proposed Rules 82811 

employee is credited with at least 500 

hours of service). 

(viii) Example 8. (A) Employer H 

maintains Plan P. Plan P excludes any 

employees who have not yet attained 

age 21 from participating in the 

arrangement under Plan P. Employee V 

is an employee of Employer H with an 

employment commencement date of 

June 1, 2024, who attains age 18 on 

September 2, 2024. During the 12-month 

period beginning on June 1, 2024, 

Employee V is credited with 1,100 

hours of service. During each of the 12- 

month periods beginning on June 1, 

2025, and June 1, 2026, Employee V is 

credited with 600 hours of service. On 

September 2, 2027, Employee V attains 

age 21 and Employee V commences 

participation in the arrangement in Plan 

P on October 1, 2027. 

(B) Employee V is not a long-term, 

part-time employee (or former longterm, part-time employee) because 

Employee V was credited with 1,100 

hours of service during the 12-month 

period beginning on June 1, 2024, and, 

therefore, became eligible to participate 

in the arrangement by reason of 

completing a 12-month period with at 

least 1,000 hours of service and 

attaining age 21. Accordingly, Employee 

V did not become eligible to participate 

in the arrangement solely by reason of 

having completed the applicable 

number of consecutive 12-month 

periods during each of which the 

employee is credited with at least 500 

hours of service. 

(ix) Example 9. (A) Employer I 

maintains Plan Q. Plan Q excludes any 

employees who have not yet attained 

age 21 from participating in the 

arrangement under Plan Q. Employee W 

is an employee of Employer I with an 

employment commencement date of 

June 1, 2024, who attains age 19 on 

October 3, 2024. During each of the 12- 

month periods beginning on June 1, 

2024, and June 1, 2025, Employee W is 

credited with 600 hours of service for 

the period. During the 12-month period 

beginning on June 1, 2026, Employee W 

attains age 21 (on October 3, 2026), but 

is credited with only 400 hours of 

service. 

(B) Employee W is not a long-term, 

part-time employee (or former longterm, part-time employee) because 

Employee W is credited with only 400 

hours of service during the 12-month 

period in which Employee W attains age 

21. Therefore, Employee W did not 

attain age 21 by the close of the last of 

the 12-month periods described in 

paragraph (b)(1)(i)(A) of this section. 

However, Employee W could become 

eligible to participate in the 

arrangement in Plan Q as a long-term, 

part-time employee as of June 1, 2029, 

if Employee W is credited with at least 

500 (but less than 1,000) hours of 

service for each 12-month period 

beginning on June 1, 2027, and June 1, 

2028. 

(x) Example 10. (A) The facts are the 

same as in paragraph (b)(2)(ix)(A) of this 

section (Example 9), except that, during 

the 12-month period beginning on June 

1, 2026, Employee W is credited with 

600 hours of service, and Employee W 

commences participation in the 

arrangement in Plan Q on June 1, 2027. 

(B) Employee W is credited with 600 

hours of service for each 12-month 

period beginning on June 1, 2025, and 

June 1, 2026, and attains age 21 on 

October 3, 2026, which is by the close 

of the last of those 12-month periods. 

Accordingly, Employee W is a longterm, part-time employee. 

(xi) Example 11. (A) Employer J 

maintains Plan R. Plan R excludes any 

employees who are included in a unit 

of employees covered by a collective 

bargaining agreement described in 

paragraph (b)(1)(ii)(A) of this section 

from participating in the arrangement 

under Plan R. Employee X is an 

employee of Employer J who is included 

in a unit of employees covered by a 

collective bargaining agreement 

described in paragraph (b)(1)(ii)(A) of 

this section, and who has an 

employment commencement date of 

June 1, 2024. During each of the 12- 

month periods beginning on June 1, 

2024, and June 1, 2025, Employee X is 

credited with 600 hours of service for 

the period. During the 12-month period 

beginning on June 1, 2026, Employee X 

is credited with 1,100 hours of service. 

On June 2, 2027, Employee X ceases to 

be included in a unit of employees 

covered by a collective bargaining 

agreement described in paragraph 

(b)(1)(ii)(A) of this section and becomes 

eligible to participate in the 

arrangement. 

(B) Employee X is not a long-term, 

part-time employee (or former longterm, part-time employee) because 

Employee X is credited with 1,100 

hours of service during the 12-month 

period beginning on June 1, 2026. 

Therefore, Employee X is not eligible to 

participate in the arrangement solely by 

reason of having completed the 

applicable number of consecutive 12- 

month periods during each of which the 

employee is credited with at least 500 

hours of service. 

(xii) Example 12. (A) The facts are the 

same as in paragraph (b)(2)(xi)(A) of this 

section (Example 11), except that, 

during the 12-month period beginning 

on June 1, 2026, Employee X is credited 

with only 600 hours of service. 

(B) Employee X is eligible to 

participate in the arrangement solely by 

reason of having completed the 

applicable number of consecutive 12- 

month periods during each of which the 

employee is credited with at least 500 

hours of service. Accordingly, Employee 

X is a long-term, part-time employee. 

(c) Participation—(1) Time of 

participation—(i) In general. Subject to 

the rules of this paragraph (c)(1) and 

paragraph (c)(4) of this section, a longterm, part-time employee who satisfies 

the plan’s eligibility conditions (as 

described in paragraph (c)(3) of this 

section) must become eligible to make a 

cash or deferred election under the 

arrangement no later than the earlier 

of— 

(A) The first day of the first plan year 

beginning after the date on which the 

long-term, part-time employee satisfied 

the requirements of paragraphs 

(b)(1)(i)(A) and (B) of this section; or 

(B) The date 6 months after the date 

on which the long-term, part-time 

employee satisfied the requirements of 

paragraphs (b)(1)(i)(A) and (B) of this 

section. 

(ii) Employees who separate from 

service. The requirements of paragraph 

(c)(1)(i) of this section do not apply to 

a long-term, part-time employee who 

separates from service and does not 

return to service with the employer or 

employers maintaining the plan before 

the date referred to in paragraph (c)(1)(i) 

of this section. However, if a long-term, 

part-time employee described in the 

prior sentence returns to service with 

the employer or employers maintaining 

the plan after the date referred to in 

paragraph (c)(1)(i) of this section and is 

otherwise eligible to participate in the 

arrangement, the long-term, part-time 

employee must be eligible to make a 

cash or deferred election immediately 

upon return to service with the 

employer or employers maintaining the 

plan. 

(iii) Change in status. If an employee 

who would otherwise be eligible to 

participate in the arrangement as a longterm, part-time employee does not 

participate solely because the employee 

does not satisfy the plan’s eligibility 

conditions (as described in paragraph 

(c)(3) of this section) as of the date 

referred to in paragraph (c)(1)(i) of this 

section, and the employee satisfies those 

conditions after that date, the employee 

must become eligible to participate in 

the arrangement immediately upon 

satisfying those conditions. 

(2) Determination of 12-month 

periods—(i) In general. Except for any 

12-month period beginning before 

January 1, 2021, all 12-month periods 

during which an employee is credited 


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with at least 500 hours of service with 

the employer or employers maintaining 

the plan must be taken into account for 

purposes of determining whether an 

employee has satisfied the requirements 

of paragraphs (b)(1)(i)(A) and (B) of this 

section. 

(ii) Initial and subsequent 12-month 

periods. (A) The initial 12-month period 

with respect to an employee begins on 

the first day for which the employee is 

entitled to be credited with an hour of 

service. 

(B) Beginning with the plan year that 

commences within the initial 12-month 

period described in paragraph 

(c)(2)(ii)(A) of this section, 12-month 

periods may be determined by reference 

to the first day of the plan year. If the 

preceding sentence applies, that initial 

12-month period and the plan year that 

commences within the initial 12-month 

period are treated as consecutive 12- 

month periods. 

(iii) Examples. The following 

examples illustrate the determination of 

12-month periods under this paragraph 

(c)(2). For purposes of the examples, 

each plan includes a cash or deferred 

arrangement, is maintained on a 

calendar-year basis, and provides 

monthly entry dates for an eligible 

employee to commence participation in 

the arrangement. Each employee in the 

following examples has attained age 21, 

and none of the employees are 

described in section 410(b)(3). For 

purposes of paragraphs (c)(2)(iii)(A), (B), 

and (G) of this section (Examples 1, 2, 

and 7), each plan provides that, for 

purposes of determining whether an 

employee has satisfied the requirements 

of paragraphs (b)(1)(i)(A) and (B) of this 

section, 12-month periods are 

determined by reference to the 

employment commencement date of an 

employee. For purposes of paragraphs 

(c)(2)(iii)(C) through (F) of this section 

(Examples 3 through 6), each plan 

provides that, for purposes of 

determining whether an employee has 

satisfied the requirements of paragraphs 

(b)(1)(i)(A) and (B) of this section, any 

12-month period that begins after the 

first day of the initial 12-month period 

is determined by reference to the first 

day of the plan year. For purposes of 

paragraph (c)(2)(iii)(A) of this section 

and paragraphs (c)(2)(iii)(C) through (G) 

of this section (Example 1 and Examples 

3 through 7), each plan provides that, 

effective January 1, 2024, in order to be 

eligible to make a cash or deferred 

election under the arrangement, each 

employee is required to complete a 

period of service with the employer 

maintaining the plan that extends until 

the close of the earlier of: a 12-month 

period during which the employee is 

credited with at least 1,000 hours of 

service, or three consecutive 12-month 

periods (excluding any 12-month period 

beginning before January 1, 2021) 

during each of which the employee is 

credited with at least 500 hours of 

service. However, effective January 1, 

2025, each plan is amended to provide 

that the applicable number of 

consecutive 12-month periods during 

each of which an employee must be 

credited with at least 500 hours of 

service in order to participate in the 

arrangement is reduced from three to 

two. 

(A) Example 1. (1) Employer K 

maintains Plan S. Pursuant to paragraph 

(c)(2)(i) of this section, Plan S provides 

that any 12-month period beginning 

before January 1, 2021, is not taken into 

account for purposes of determining 

whether an employee has completed 

three consecutive 12-month periods 

during each of which the employee is 

credited with at least 500 hours of 

service. Employee Y is an employee of 

Employer K with an employment 

commencement date of June 1, 2021. 

During each of the 12-month periods 

beginning on June 1, 2021, June 1, 2022, 

and June 1, 2023, Employee Y is 

credited with 600 hours of service for 

the period. Employee Y commences 

participation in the arrangement in Plan 

S on June 1, 2024. 

(2) Employee Y is eligible to 

participate in the arrangement solely by 

reason of having completed three 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service, and 

Employee Y is a long-term, part-time 

employee. If Employee Y had an 

employment commencement date of 

June 1, 2020, and had been credited 

with 600 hours of service for the 12- 

month period beginning on June 1, 

2020, then the result would be the same 

because, under the terms of the plan, the 

12-month period beginning on June 1, 

2020, would not be taken into account 

for purposes of determining whether 

Employee Y has completed three 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service and, 

therefore, Employee Y would become 

eligible to participate in the 

arrangement on June 1, 2024, as a longterm, part-time employee. 

(B) Example 2. (1) Employer L 

maintains Plan T. Plan T provides that, 

in order to be eligible to make a cash or 

deferred election under the 

arrangement, each employee is required 

to complete a period of service with 

Employer L that extends until the close 

of the earlier of: a 12-month period 

during which the employee is credited 

with at least 1,000 hours of service; or 

the number of consecutive 12-month 

periods that applies under paragraph 

(b)(1)(i)(A) or (b)(1)(iii) of this section 

(referred to as the applicable number of 

consecutive 12-month periods), 

including 12-month periods beginning 

before January 1, 2021. Employee Z is 

an employee of Employer L with an 

employment commencement date of 

June 1, 2020. During each of the 12- 

month periods beginning on June 1, 

2020, June 1, 2021, and June 1, 2022, 

Employee Z is credited with 600 hours 

of service for the period. Employee Z 

commences participation in the 

arrangement in Plan T on June 1, 2023. 

(2) Plan T does not fail to satisfy the 

requirements of section 401(k)(2)(D) 

merely because, under the terms of Plan 

T, Employee Z commences participation 

in the arrangement on June 1, 2023. 

However, paragraph (c)(2)(i) of this 

section does not permit any 12-month 

period beginning before January 1, 2021 

(including the 12-month period 

beginning on June 1, 2020), to be taken 

into account for purposes of 

determining whether an employee has 

completed the applicable number of 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service. 

Accordingly, Employee Z is not a longterm, part-time employee because 

Employee Z is not eligible to participate 

in the arrangement solely by reason of 

having completed the applicable 

number of consecutive 12-month 

periods (beginning on or after January 1, 

2021) during each of which the 

employee is credited with at least 500 

hours of service. 

(C) Example 3. (1) Employer M 

maintains Plan U. Employee A is an 

employee of Employer M with an 

employment commencement date of 

March 1, 2023. During the 12-month 

period beginning on March 1, 2023, 

Employee A is credited with 400 hours 

of service. During each of the 12-month 

periods beginning on January 1, 2024, 

and January 1, 2025, Employee A is 

credited with 600 hours of service for 

the period. Employee A commences 

participation in the arrangement under 

Plan U on January 1, 2026. 

(2) Plan U satisfies the requirements 

of paragraph (c)(2)(ii)(B) of this section 

with respect to Employee A. The fact 

that the 12-month period beginning 

March 1, 2023, is not a 12-month period 

for which Employee A is credited with 

at least 500 hours of service, does not 

prevent Employee A from being a longterm, part-time employee. Accordingly, 

Employee A is eligible to participate in 

the arrangement on January 1, 2026, 

solely by reason of having completed 


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two consecutive 12-month periods 

during each of which the employee is 

credited with at least 500 hours of 

service (that is, the 12-month periods 

beginning on January 1, 2024, and 

January 1, 2025), and Employee A is a 

long-term, part-time employee. 

(D) Example 4. (1) Employer N 

maintains Plan V. Employee B is an 

employee of Employer N with an 

employment commencement date of 

December 1, 2023. During the 12-month 

period beginning on December 1, 2023, 

Employee B is credited with 600 hours 

of service. During the 12-month period 

beginning on January 1, 2024, Employee 

B is credited with 600 hours of service. 

Employee B commences participation in 

the arrangement under Plan V on 

January 1, 2025. 

(2) Plan V satisfies the requirements 

of paragraph (c)(2)(ii)(B) of this section 

with respect to Employee B because the 

12-month periods beginning on 

December 1, 2023, and January 1, 2024, 

are considered two consecutive 12- 

month periods. Accordingly, Employee 

B is eligible to participate in the 

arrangement on January 1, 2025, solely 

by reason of having completed two 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service, and 

Employee B is a long-term, part-time 

employee. 

(E) Example 5. (1) Employer O 

maintains Plan W. Employee C is an 

employee of Employer O with an 

employment commencement date of 

August 1, 2020. During the 12-month 

period beginning on August 1, 2020, 

Employee C is credited with 600 hours 

of service. During each of the 12-month 

periods beginning on January 1, 2021, 

January 1, 2022, and January 1, 2023, 

Employee C is credited with 600 hours 

of service for the period. Employee C 

commences participation in the 

arrangement in Plan W on January 1, 

2024. 

(2) Plan W satisfies the requirements 

of paragraph (c)(2)(ii)(B) of this section 

with respect to Employee C. Pursuant to 

paragraph (c)(2)(i) of this section, Plan 

W does not take into account the 12- 

month beginning on August 1, 2020, for 

purposes of determining whether 

Employee C has completed three 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service. 

Accordingly, Employee C is eligible to 

participate in the arrangement on 

January 1, 2024, solely by reason of 

having completed three consecutive 12- 

month periods during each of which the 

employee is credited with at least 500 

hours of service (that is, the 12-month 

periods beginning on January 1, 2021, 

January 1, 2022, and January 1, 2023), 

and Employee C is a long-term, parttime employee. 

(F) Example 6. (1) Employer P 

maintains Plan X. Employee D is an 

employee of Employer P with an 

employment commencement date of 

March 1, 2023. During the 12-month 

period beginning on March 1, 2023, 

Employee D is credited with 600 hours 

of service. During the 12-month period 

beginning on January 1, 2024, Employee 

D is credited with 400 hours of service. 

During each of the 12-month periods 

beginning on January 1, 2025, and 

January 1, 2026, Employee D is credited 

with 600 hours of service for the period. 

Employee D commences participation in 

the arrangement under Plan X on 

January 1, 2027. 

(2) Plan X satisfies the requirements 

of paragraph (c)(2)(ii)(B) of this section 

with respect to Employee D. The 12- 

month period beginning on March 1, 

2023 (for which Employee D is credited 

with 600 hours of service) is not taken 

into account for purposes of 

determining whether Employee D has 

completed the applicable number of 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service 

because Employee D is not credited 

with at least 500 hours of service during 

the 12-month period beginning on 

January 1, 2024. Accordingly, Employee 

D is eligible to participate in the 

arrangement on January 1, 2027, solely 

by reason of having completed two 

consecutive 12-month periods during 

each of which the employee is credited 

with at least 500 hours of service (that 

is, the 12-month periods beginning on 

January 1, 2025, and January 1, 2026), 

and Employee D is a long-term, parttime employee. 

(G) Example 7. (1) Employer Q 

maintains Plan Y. Employee E is an 

employee of Employer Q with an 

employment commencement date of 

June 1, 2023. During each of the 12- 

month periods beginning on June 1, 

2023, and June 1, 2024, Employee E is 

credited with 600 hours of service for 

the period. Employee E commences 

participation in the arrangement in Plan 

Y on June 1, 2025. During the 12-month 

period beginning on June 1, 2025, 

Employee E is credited with 300 hours 

of service. 

(2) Pursuant to paragraph (c)(2)(i) of 

this section, the 12-month periods 

beginning on June 1, 2023, and June 1, 

2024, must be taken into account for 

purposes of determining whether 

Employee E is a long-term, part-time 

employee. This requirement is not 

changed merely because Employee E is 

not credited with at least 500 hours of 

service during the 12-month period 

beginning on June 1, 2025. Accordingly, 

Employee E does not cease to be a longterm, part-time employee merely 

because Employee E completes a 12- 

month period during which Employee E 

is credited with less than 500 hours of 

service. 

(3) Eligibility conditions not based on 

age or service—(i) In general. Subject to 

paragraph (c)(3)(ii) of this section, the 

rules of this section do not preclude a 

plan from establishing an eligibility 

condition that must be satisfied in order 

for an employee to participate in the 

arrangement (for example, requiring as a 

condition of participation that an 

employee be employed within a 

specified job classification), provided 

that the condition is not a proxy for 

imposing an age or service requirement 

that requires an employee to complete a 

period of service with the employer or 

employers maintaining the plan that 

extends beyond the close of the earlier 

of the periods described in section 

401(k)(2)(D)(i) and (ii). 

(ii) Eligibility conditions that are 

proxies for age or service. For purposes 

of applying the rules of this section, a 

plan provision will be treated as a proxy 

for imposing an age or service 

requirement if the provision has the 

effect of imposing an age or service 

requirement with the employer or 

employers maintaining the plan. 

(iii) Examples. The following 

examples illustrate the rules of this 

paragraph (c)(3). For purposes of the 

examples, each plan includes a cash or 

deferred arrangement and is maintained 

on a calendar-year basis. 

(A) Example 1. (1) Employer R 

maintains Plans Z and A. Effective 

January 1, 2024, Plan Z provides that, as 

a condition to participate in the 

arrangement, an employee must 

complete the number of consecutive 12- 

month periods that applies under 

paragraph (b)(1)(i)(A) or (b)(1)(iii) of this 

section (referred to as the applicable 

number of consecutive 12-month 

periods) during each of which the 

employee is credited with at least 500 

hours of service. Effective January 1, 

2024, Plan A provides that, as a 

condition to participate in the 

arrangement, an employee must 

complete a 12-month period during 

which the employee is credited with at 

least 1,000 hours of service. 

(2) Because the provision of Plan Z 

that requires an employee to complete 

the applicable number of consecutive 

12-month periods during each of which 

the employee is credited with at least 

500 hours of service in order to 

participate in the arrangement requires 

an employee to complete the period of 


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service described in section 

401(k)(2)(D)(ii), that provision requires 

an employee to complete a period of 

service with Employer R that extends 

beyond the close of the earlier of the 

period described in section 

401(k)(2)(D)(i), or the period described 

in section 401(k)(2)(D)(ii). Accordingly, 

as of January 1, 2024, the arrangement 

under Plan Z fails to satisfy the 

requirements of section 401(k)(2)(D). 

Similarly, because Plan A requires an 

employee to complete a 12-month 

period during which the employee is 

credited with at least 1,000 hours of 

service in order to participate in the 

arrangement, as of January 1, 2024, the 

arrangement under Plan A fails to 

satisfy the requirements of section 

401(k)(2)(D). 

(B) Example 2. (1) Employer S 

maintains Plan B. Employer S is 

comprised of Divisions T and U. In 

order to be employed in Division T, an 

employee is required to be classified as 

a full-time employee, which Employer S 

defines as an employee who completes 

a 12-month period during which the 

employee is credited with at least 1,000 

hours of service. All other employees of 

Employer S are employed in Division U. 

Effective January 1, 2024, Plan B 

provides that, as a condition to 

participate in the arrangement, an 

employee is required to be employed in 

Division T. 

(2) Because the provision of Plan B 

that requires an employee to be 

employed in Division T in order to 

participate in the arrangement has the 

effect of requiring an employee to 

complete the period of service described 

in section 401(k)(2)(D)(i), that provision 

is treated as a service requirement under 

paragraph (c)(3)(ii) of this section. 

Accordingly, as of January 1, 2024, the 

arrangement under Plan B fails to satisfy 

the requirements of section 401(k)(2)(D) 

because the arrangement requires an 

employee to complete a period of 

service with Employer S that extends 

beyond the close of the earlier of: the 

period described in section 

401(k)(2)(D)(i), or the period described 

in section 401(k)(2)(D)(ii). 

(C) Example 3. (1) Employer V 

maintains Plan C. Prior to January 1, 

2024, Plan C provided that an employee 

classified by Employer V as a part-time 

employee was ineligible to make a cash 

or deferred election under the 

arrangement unless the part-time 

employee completed a 12-month period 

during which the employee was 

credited with at least 1,000 hours of 

service with Employer V. Effective 

January 1, 2024, Plan C provides that an 

employee classified by Employer V as a 

part-time employee is ineligible to make 

a cash or deferred election under the 

arrangement unless the employee 

completes a period of service with 

Employer V that extends until the close 

of the earlier of: a 12-month period 

during which the employee is credited 

with at least 1,000 hours of service, or 

the applicable number of consecutive 

12-month periods during each of which 

the employee is credited with at least 

500 hours of service (excluding any 12- 

month period beginning before January 

1, 2021). 

(2) Plan C does not fail to satisfy the 

requirements of section 401(k)(2)(D) 

merely because, effective January 1, 

2024, Plan C provides that an employee 

classified as a part-time employee is 

ineligible to make a cash or deferred 

election under the arrangement unless 

the employee completes a period of 

service with Employer V that extends 

until the close of the earlier of: a 12- 

month period during which the 

employee is credited with at least 1,000 

hours of service, or the applicable 

number of consecutive 12-month 

periods during each of which the 

employee is credited with at least 500 

hours of service (excluding any 12- 

month period beginning before January 

1, 2021). 

(4) Elective contributions. A cash or 

deferred arrangement satisfies the 

requirements of this paragraph (c)(4) 

only if the right to make elective 

contributions by a long-term, part-time 

employee who is an eligible NHCE is 

not restricted in a manner that would 

not be permitted for an NHCE under 

§ 1.401(k)–3(c)(6). However, a SIMPLE 

401(k) plan may limit the amount of 

elective contributions made by longterm, part-time employees under the 

plan to the extent needed to satisfy the 

elective contribution limitation for 

SIMPLE 401(k) plans under section 

401(k)(11)(B)(i)(I) and (m)(10)(A). 

(d) Vesting—(1) Years of vesting 

service taken into account—(i) General 

rule. For purposes of determining the 

nonforfeitable right of a long-term, parttime employee (or former long-term, 

part-time employee) to employer 

contributions under the plan (other than 

elective contributions)— 

(A) Each 12-month period (which may 

be any 12-consecutive month period 

that is not prohibited for use under 

section 411(a)) during which the 

employee is credited with at least 500 

hours of service (as defined in section 

410(a)(3)(C)) with the employer or 

employers maintaining the plan is 

treated as a year of vesting service; and 

(B) Except for any 12-month period 

beginning before January 1, 2021, all 12- 

month periods of service with the 

employer or employers maintaining the 

plan must be taken into account unless 

the period of service of the employee 

may be disregarded under section 

411(a). 

(ii) Application of vesting rules. For 

purposes of this paragraph (d), section 

411 will be treated as if it applies to the 

plan, taking into account the 

modifications provided in paragraphs 

(d)(1)(i) and (iii) of this section. 

(iii) Break in service. For purposes of 

determining whether a long-term, parttime employee (or former long-term, 

part-time employee) has incurred a 1- 

year break in service, section 

411(a)(6)(A) is applied by substituting at 

least 500 hours of service for more than 

500 hours of service. 

(2) Former long-term, part-time 

employees—(i) Definition. A former 

long-term, part-time employee means an 

employee who— 

(A) Became eligible to participate in 

the arrangement as a long-term, parttime employee; 

(B) Subsequently ceased to be a longterm, part-time employee because the 

employee was described in paragraph 

(d)(2)(ii)(A) or (B) of this section; and 

(C) Has not returned to long-term, 

part-time employee status in accordance 

with paragraph (d)(2)(iii) of this section. 

(ii) Timing. A long-term, part-time 

employee becomes a former long-term, 

part-time employee as of the first day of 

the first plan year beginning after the 

earlier of the plan year in which the 

employee: 

(A) Satisfies the requirements of 

section 401(k)(2)(D) without regard to 

section 401(k)(2)(D)(ii); or 

(B) Ceases to satisfy the plan’s 

eligibility conditions (other than age or 

service conditions). 

(iii) Return to long-term, part-time 

employee status. If a long-term, parttime employee who ceases to satisfy the 

plan’s eligibility conditions (other than 

age or service conditions) during a plan 

year subsequently satisfies those 

conditions, then the employee will 

return to long-term, part-time employee 

status as of the first day of the plan year 

during which the employee again 

satisfies those conditions. However, the 

preceding sentence does not apply if the 

employee is a former long-term, parttime employee because the employee 

satisfies the requirements of section 

401(k)(2)(D) without regard to section 

401(k)(2)(D)(ii). 

(3) Examples. The following examples 

illustrate the vesting requirements of 

this paragraph (d). For purposes of the 

examples, each plan includes a cash or 

deferred arrangement; is maintained on 

a calendar-year basis; provides that, for 

purposes of determining whether an 

employee has satisfied the requirements 


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of paragraph (b)(1)(i) of this section and 

for purposes of determining the 

nonforfeitable right of a long-term, parttime employee (or former long-term, 

part-time employee) to employer 

contributions under the plan (other than 

elective contributions), all 12-month 

periods are determined by reference to 

the employment commencement date of 

an employee; and provides that, for 

purposes of determining the 

nonforfeitable right of an employee to 

any nonelective contribution made on 

behalf of the employee, the plan uses a 

6-year graded vesting schedule. 

(i) Example 1. (A) Employer X 

maintains Plan G. Employees of 

Employer X are employed at either Plant 

Y or Plant Z. Plan G requires that an 

employee be employed at Plant Y as a 

condition to participate in the 

arrangement. This condition is not a 

proxy for age or service under paragraph 

(c)(3)(ii) of this section. Employee N is 

an employee of Employer X who is 

employed at Plant Z, and who has an 

employment commencement date of 

June 1, 2021. During the 12-month 

periods beginning on June 1, 2021, June 

1, 2022, June 1, 2023, June 1, 2024, June 

1, 2025, and June 1, 2026, Employee N 

is credited with 600 hours of service for 

each period. On June 2, 2027, Employee 

N is transferred to Plant Y, becomes 

eligible to participate in the 

arrangement in Plan G, and thereafter 

commences participation in the 

arrangement as a long-term, part-time 

employee. 

(B) Unless Plan G is permitted to 

disregard years of vesting service for 

Employee N under section 411(a), 

paragraph (d)(1)(i) of this section 

requires Plan G to credit Employee N 

with 6 years of vesting service for the 

12-month periods beginning on June 1, 

2021, June 1, 2022, June 1, 2023, June 

1, 2024, June 1, 2025, and June 1, 2026, 

because Employee N is credited with at 

least 500 hours of service during each of 

those periods. Accordingly, Employee N 

has a 100-percent nonforfeitable right to 

any nonelective contribution under Plan 

G that is made on behalf of Employee 

N. 

(ii) Example 2. (A) Employer A 

maintains Plan H. Employee O 

commences participation in the 

arrangement in Plan H as a long-term, 

part-time employee on June 1, 2024. 

During the 12-month period beginning 

on June 1, 2024, Employee O is credited 

with 1,200 hours of service. During each 

of the 12-month periods beginning on 

June 1, 2025, and June 1, 2026, 

Employee O is credited with 600 hours 

of service for the period. 

(B) Based on these facts, Employee O 

remains a long-term, part-time employee 

for the plan year beginning January 1, 

2025. Pursuant to paragraph (d)(2)(ii) of 

this section, Employee O becomes a 

former long-term, part-time employee 

beginning with the next plan year. 

However, this paragraph (d) continues 

to apply to Employee O (although 

paragraphs (e) and (f) of this section no 

longer apply to Employee O beginning 

with the 2026 plan year). Employee O 

will not cease to be a former long-term, 

part-time employee merely because 

Employee O completes one or more 12- 

month periods during each of which the 

employee is credited with at least 500 

(but less than 1,000) hours of service. 

Thus, Employee O is credited with a 

year of vesting service for each of the 

12-month periods in which Employee O 

is credited with at least 500 hours of 

service (including the 12-month periods 

beginning on June 1, 2025, and June 1, 

2026). 

(iii) Example 3. (A) Employer B 

maintains Plan J. Employees of 

Employer B are employed at either Plant 

C or Plant D. Plan J requires, as a 

condition to participate in the 

arrangement, that an employee be 

employed at Plant C. This condition is 

not a proxy for age or service under 

paragraph (c)(3)(ii) of this section. 

Employee P is an NHCE who is 

employed at Plant C, and who has an 

employment commencement date of 

June 1, 2021. On June 1, 2024, Employee 

P commences participation in the 

arrangement in Plan J as a long-term, 

part-time employee. During the 12- 

month periods beginning on June 1, 

2024, and June 1, 2025, Employee P 

continues to be credited with at least 

500 (but less than 1,000) hours of 

service for each period. However, on 

March 1, 2025, Employee P is 

transferred to Plant D and becomes 

ineligible to participate in the 

arrangement. On March 1, 2026, 

Employee P is transferred back to Plant 

C and again becomes eligible to 

participate in the arrangement. 

Employee P remains employed at Plant 

C through the 2026 plan year. 

(B) Based on these facts, Employee P 

remains a long-term, part-time employee 

for the 2025 plan year (although 

Employee P may not make a cash or 

deferred election under the arrangement 

as of March 1, 2025). Pursuant to 

paragraph (d)(2)(iii) of this section, 

Employee P remains a long-term, parttime employee for the 2026 plan year 

(although Employee P is not eligible to 

make a cash or deferred election under 

the arrangement again until March 1, 

2026). As a result, Employee P never 

becomes a former long-term, part-time 

employee, and this paragraph (d) 

continues to apply to Employee P. 

(e) Nonelective and matching 

contributions—(1) General rule. 

Notwithstanding section 401(a)(4), 

neither nonelective nor matching 

contributions are required to be made 

on behalf of long-term, part-time 

employees, even if those contributions 

are made on behalf of other eligible 

employees. 

(2) Coordination with employer 

elections—(i) Safe harbor contributions. 

A plan that is intended to satisfy the 

ADP safe harbor provisions of section 

401(k)(12) or (13) will not fail to satisfy 

those provisions merely because the 

employer does not make a nonelective 

or matching contribution on behalf of an 

eligible NHCE who is a long-term, parttime employee (or makes a nonelective 

or matching contribution that does not 

satisfy the safe harbor contribution 

requirements of § 1.401(k)–3 on behalf 

of the eligible NHCE), provided that 

long-term, part-time employees are 

excluded for purposes of determining 

whether the plan satisfies the ADP safe 

harbor provisions of section 401(k)(12) 

or (13) pursuant to the election under 

paragraph (f)(1) of this section. 

Similarly, a plan that is intended to 

satisfy the ACP safe harbor provisions of 

section 401(m)(11) or (12) will not fail 

to satisfy those provisions merely 

because the employer does not make a 

nonelective or matching contribution on 

behalf of an eligible NHCE who is a 

long-term, part-time employee (or makes 

a nonelective or matching contribution 

that does not satisfy the safe harbor 

contribution requirements of 

§ 1.401(m)–3 on behalf of the eligible 

NHCE), provided that long-term, parttime employees are excluded for 

purposes of determining whether the 

plan satisfies the ACP safe harbor 

provisions of section 401(m)(11) or (12) 

pursuant to the election under 

paragraph (f)(1) of this section. 

(ii) Top-heavy minimum benefits. A 

plan that is a top-heavy plan for the 

plan year will not fail to satisfy the 

minimum benefit requirements of 

section 416(c) merely because the 

employer contribution (if any) made for 

the plan year on behalf of a non-key 

employee who is a long-term, part-time 

employee does not satisfy those 

requirements, provided that long-term, 

part-time employees are excluded for 

purposes of determining whether the 

plan satisfies the minimum benefit 

requirements of section 416(c) for the 

plan year pursuant to an election under 

paragraph (f)(2) of this section. 

(iii) SIMPLE 401(k) contributions. An 

employer may not elect under paragraph 

(f) of this section to exclude long-term, 

part-time employees from the 

application of the SIMPLE 401(k) 


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82816 Federal Register / Vol. 88, No. 226 / Monday, November 27, 2023 / Proposed Rules 

provisions of section 401(k)(11) and 

(m)(10). Accordingly, a plan intended to 

satisfy the SIMPLE 401(k) provisions of 

section 401(k)(11) or (m)(10) must 

satisfy the matching or nonelective 

contribution requirements of § 1.401(k)– 

4(e) with respect to long-term, part-time 

employees. 

(3) Examples. The following examples 

illustrate the employer contribution 

rules of this paragraph (e). For purposes 

of the examples, each plan includes a 

cash or deferred arrangement and is 

maintained on a calendar-year basis. 

(i) Example 1. (A) Employer E 

maintains Plan K, which is intended to 

satisfy the ADP safe harbor provisions of 

section 401(k)(12). Plan K provides that 

Employer E elects to exclude all longterm, part-time employees for purposes 

of determining whether Plan K satisfies 

the statutory requirements listed in 

paragraph (f)(1)(i) of this section, and 

the employer election satisfies the 

requirements of paragraph (f)(1)(ii) of 

this section. Plan K requires Employer 

E to make a QNEC on behalf of each 

eligible NHCE who is not a long-term, 

part-time employee equal to 3 percent of 

the NHCE’s safe harbor compensation, 

and the NHCEs who receive this 

contribution include any former longterm, part-time employees who are 

eligible NHCEs. Plan K provides that 

Employer E is required to make a 

nonelective contribution on behalf of 

each long-term, part-time employee 

equal to 2 percent of the long-term, parttime employee’s compensation for the 

plan year. 

(B) Based on these facts, long-term, 

part-time employees are excluded for 

purposes of determining whether Plan K 

satisfies the statutory requirements 

listed in paragraph (f)(1)(i) of this 

section (to the extent the provision 

would otherwise apply to Plan K), 

including the ADP safe harbor 

provisions of section 401(k)(12). 

Accordingly, Plan K does not fail to 

satisfy the safe harbor nonelective 

contribution requirement of § 1.401(k)– 

3(b) merely because a safe harbor 

nonelective contribution is not made on 

behalf of each eligible NHCE who is a 

long-term, part-time employee. In 

addition, because long-term, part-time 

employees are also excluded for 

purposes of determining whether Plan K 

satisfies the nondiscrimination 

requirements of section 401(a)(4), any 

nonelective contribution made on behalf 

of a long-term, part-time employee is 

disregarded for purposes of determining 

whether nonelective contributions 

satisfy the nondiscrimination 

requirements of section 401(a)(4). 

(ii) Example 2. (A) Employer F 

maintains Plan L, which is intended to 

satisfy the SIMPLE 401(k) provisions of 

section 401(k)(11) and (m)(10). Plan L 

provides that Employer F may elect to 

exclude all long-term, part-time 

employees for purposes of determining 

whether Plan L satisfies the statutory 

requirements listed in paragraph (f)(1)(i) 

of this section. Employer F elects to 

exclude all long-term, part-time 

employees for the plan year in 

accordance with the requirements of 

paragraph (f)(1) of this section. Plan L 

requires Employer F to make a matching 

contribution on behalf of each eligible 

employee, excluding long-term, parttime employees (but including any 

former long-term, part-time employees 

who are eligible employees), equal to 

100 percent of the elective contributions 

of the employee for the plan year, up to 

3 percent of the SIMPLE compensation 

of the employee for the entire plan year. 

Plan L does not provide for any 

employer contributions (other than 

elective contributions) to be made on 

behalf of long-term, part-time 

employees. 

(B) Plan L fails to satisfy the SIMPLE 

401(k) provisions of section 401(k)(11) 

and (m)(10) for the plan year because 

Plan L does not require Employer F to 

make the matching contribution on 

behalf of each eligible employee on 

whose behalf elective contributions 

were made for the plan year. 

(f) Employer elections—(1) 

Nondiscrimination and coverage—(i) 

General rule. Subject to paragraph 

(f)(1)(ii) of this section, an employer 

may elect to exclude long-term, parttime employees for purposes of 

determining whether the plan satisfies 

the following provisions: 

(A) The nondiscrimination 

requirements of section 401(a)(4); 

(B) The ADP test of section 401(k)(3); 

(C) The ADP safe harbor provisions of 

section 401(k)(12) and (13); 

(D) The ACP test of section 401(m)(2); 

(E) The ACP safe harbor provisions of 

section 401(m)(11) and (12); and 

(F) The minimum coverage 

requirements of section 410(b). 

(ii) Additional requirements. An 

employer election satisfies the 

requirements of this paragraph (f)(1)(ii) 

if— 

(A) The election applies for purposes 

of every provision under paragraph 

(f)(1)(i) of this section (to the extent the 

provision would otherwise apply to the 

plan); 

(B) The election applies with respect 

to all long-term, part-time employees 

who are eligible to participate in the 

arrangement; 

(C) With respect to a plan that is 

intended to satisfy the ADP safe harbor 

provisions of section 401(k)(12) or (13), 

the election is set forth in the plan and 

satisfies the plan year requirements of 

§ 1.401(k)–3(e); and 

(D) With respect to a plan that is 

intended to satisfy the ACP safe harbor 

provisions of section 401(m)(11) or (12), 

the election is set forth in the plan and 

satisfies the plan year requirements of 

§ 1.401(m)–3(f). 

(2) Top-heavy—(i) General rule. 

Subject to paragraph (f)(2)(ii) of this 

section, an employer may elect to 

exclude long-term, part-time employees 

for purposes of determining whether the 

plan satisfies the vesting and benefit 

requirements of section 416(b) and (c). 

This election does not apply for 

purposes of determining whether the 

plan is a top-heavy plan as defined in 

section 416(g). However, in the case of 

an employer that makes an election 

described in paragraph (f)(1) of this 

section (which has the effect of 

excluding long-term, part-time 

employees for purposes of determining 

whether the plan satisfies the ADP and 

ACP safe harbor provisions), the plan 

will not fail to be excluded from the 

definition of a top-heavy plan under 

section 416(g)(4)(H) merely because the 

employer does not make nonelective or 

matching contributions on behalf of 

long-term, part-time employees (or 

makes nonelective or matching 

contributions that do not satisfy the 

requirements for safe harbor 

contributions). 

(ii) Additional requirements. An 

employer election satisfies the 

requirements of this paragraph (f)(2)(ii) 

if— 

(A) The election applies with respect 

to all long-term, part-time employees 

who are eligible to participate in the 

arrangement; and 

(B) The terms of the plan provide that 

long-term, part-time employees are 

excluded from the application of the 

vesting and benefit requirements of 

section 416(b) and (c). 

(3) Examples. The following examples 

illustrate the employer election 

provisions of this paragraph (f). For 

purposes of the examples, each plan is 

maintained on a calendar-year basis and 

includes a cash or deferred arrangement, 

which is intended to satisfy the ADP 

test of section 401(k)(3). 

(i) Example 1. (A) Employer G 

maintains Plan M. Plan M provides that 

Employer G may elect to exclude all 

long-term, part-time employees for 

purposes of determining whether Plan 

M satisfies every provision under 

paragraph (f)(1)(i) of this section (to the 

extent the provision would otherwise 

apply to Plan M). Employer G elects to 

exclude all long-term, part-time 

employees for the plan year in 


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Federal Register / Vol. 88, No. 226 / Monday, November 27, 2023 / Proposed Rules 82817 

accordance with the requirements of 

paragraph (f)(1) of this section. Plan M 

requires Employer G to make a 

nonelective contribution on behalf of 

each eligible employee equal to 2 

percent of the compensation of the 

employee for the plan year. 

(B) Based on these facts, long-term, 

part-time employees are excluded for 

purposes of determining whether Plan 

M satisfies every provision under 

paragraph (f)(1)(i) of this section for the 

plan year (to the extent the provision 

would otherwise apply to Plan M), 

including the nondiscrimination 

requirements of section 401(a)(4). 

Accordingly, any nonelective 

contribution made on behalf of a longterm, part-time employee for the plan 

year is disregarded for purposes of 

determining whether nonelective 

contributions made for the plan year 

satisfy the nondiscrimination 

requirements of section 401(a)(4). 

(ii) Example 2. (A) Employer H 

maintains Plan N. Plan N provides that 

all long-term, part-time employees are 

excluded from the application of the 

vesting and benefit requirements of 

section 416(b) and (c). Plan N requires 

Employer H to make a nonelective 

contribution on behalf of each eligible 

employee who is credited with at least 

1,000 hours of service during the plan 

year equal to 3 percent of the 

compensation of the employee for the 

plan year. Plan N provides that each 

employee has a 100-percent 

nonforfeitable right to any nonelective 

contribution Employer H makes on 

behalf of the employee. Plan N is a topheavy plan with respect to the plan 

year. 

(B) Based on these facts, long-term, 

part-time employees are excluded from 

the application of the vesting and 

benefit requirements of section 416(b) 

and (c) for the plan year. Accordingly, 

although Plan N is a top-heavy plan 

with respect to the plan year, Plan N is 

not required to satisfy the top-heavy 

benefit provisions of section 416(c) for 

the plan year with respect to any nonkey employee who is a long-term, parttime employee. 

(g) Applicability date. This section 

applies to plan years that begin on or 

after January 1, 2024. 

Douglas W. O’Donnell, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 2023–25987 Filed 11–24–23; 8:45 am] 

BILLING CODE 4830–01–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 54 

[WC Docket Nos. 10–90, 14–58, 09–197, and 

16–271; RM–11868; Report No. 3203; FR ID 

183017] 

Petitions for Reconsideration of Action 

in Rulemaking Proceeding 

AGENCY: Federal Communications 

Commission. 

ACTION: Petition for Reconsideration. 

SUMMARY: Petitions for Reconsideration 

(Petitions) have been filed in the 

Commission’s proceeding Connect 

America Fund: A National Broadband 

Plan for Our Future High-Cost Universal 

Service Support, ETC Annual Reports 

and Certifications, Telecommunications 

Carriers Eligible to Receive Universal 

Service Support, Connect America 

Fund—Alaska Plan, and Expanding 

Broadband Service Through the ACAM 

Program. 

DATES: Oppositions to the Petitions 

must be filed on or before December 12, 

2023. Replies to oppositions must be 

filed on or before December 22, 2023. 

ADDRESSES: Federal Communications 

Commission, 45 L Street NE, 

Washington, DC 20554. 

FOR FURTHER INFORMATION CONTACT: For 

additional information on this 

proceeding, contact Stephen Wang of 

the Wireline Competition Bureau, 

Telecommunications Access Policy 

Division, at (202) 418–7400 or 

Stephen.Wang@fcc.gov. 

SUPPLEMENTARY INFORMATION: This is a 

summary of the Commission’s 

document, Report No. 3203, released 

October 31, 2023. The full text of the 

Petitions can be accessed online via the 

Commission’s Electronic Comment 

Filing System at: http://apps.fcc.gov/ 

ecfs/. The Commission will not send a 

Congressional Review Act (CRA) 

submission to Congress or the 

Government Accountability Office 

pursuant to the CRA, 5 U.S.C. 

801(a)(1)(A), because no rules are being 

adopted by the Commission. 

Subject: Connect America Fund: A 

National Broadband Plan for Our Future 

High-Cost Universal Service Support 

(WC Docket Nos. 10–90, 14–58, 09–197, 

and 16–271; RM–11868). 

Number of Petitions Filed: 5. 

Federal Communications Commission. 

Marlene Dortch, 

Secretary, Office of the Secretary. 

[FR Doc. 2023–25858 Filed 11–24–23; 8:45 am] 

BILLING CODE 6712–01–P 

DEPARTMENT OF THE INTERIOR 

Fish and Wildlife Service 

50 CFR Part 17 

[Docket No. FWS–R2–ES–2023–0023; 

FF09E21000 FXES1111090FEDR 245] 

RIN 1018–BH13 

Endangered and Threatened Wildlife 

and Plants; Designation of Critical 

Habitat for Sacramento Mountains 

Checkerspot Butterfly 

AGENCY: Fish and Wildlife Service, 

Interior. 

ACTION: Proposed rule; reopening of 

comment period and announcement of 

public hearing. 

SUMMARY: We, the U.S. Fish and 

Wildlife Service (Service), are reopening 

the public comment period on our 

August 10, 2023, proposed rule to 

designate critical habitat for the 

Sacramento Mountains checkerspot 

butterfly (Euphydryas anicia 

cloudcrofti), a butterfly from New 

Mexico, under the Endangered Species 

Act of 1973, as amended (Act). We are 

taking this action to conduct a public 

hearing and to allow all interested 

parties additional time to comment on 

the proposal to designate critical habitat 

for the Sacramento Mountains 

checkerspot butterfly. Comments 

previously submitted need not be 

resubmitted and will be fully 

considered in preparation of the final 

rule. 

DATES: 

Comment submission: The comment 

period on the proposed rule that 

published August 10, 2023 (88 FR 

54263), is reopened. We will accept 

comments received or postmarked on or 

before December 27, 2023. Please note 

that comments submitted electronically 

using the Federal eRulemaking Portal 

(see ADDRESSES, below) must be 

received by 11:59 p.m. eastern time on 

the closing date to ensure consideration. 

Public hearing: On December 12, 

2023, we will hold a public hearing on 

the proposed critical habitat designation 

for the Sacramento Mountains 

checkerspot butterfly from 5 to 8 p.m., 

Mountain time, using the Zoom online 

platform (for more information, see 

Public Hearing, below). 

ADDRESSES: 

Availability of documents: You may 

obtain copies of the August 10, 2023, 

proposed rule and associated 

documents on the internet at https://

www.regulations.gov under Docket No. 

FWS–R2–ES–2023–0023. 


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