Are Part-Time Employees Eligible for 401(k)s?

For years, many part-time workers were excluded from 401(k) participation, leaving them with fewer ways to save through an employer. As flexible schedules and gig work have become more common, this gap has affected a growing share of the workforce. Recent federal law changes now expand access to employer-sponsored retirement plans, allowing more part-time employees to participate and build long-term savings.

If you are a part-time worker, a financial advisor can help you understand the new 401(k) rules, determine your eligibility, and build a savings plan that fits your income and work schedule.

A 401(k) is an employer-sponsored retirement plan that gives employees a way to save directly from their paycheck. Contributions are typically deducted on a pre-tax basis, which means employees can lower their taxable income while putting money aside for retirement. Some companies also offer a Roth 401(k) option. In a Roth 401(k), contributions are made with after-tax dollars but qualified withdrawals in retirement are tax-free.

Employers play an important role in how these plans function. They decide whether to sponsor a 401(k) at all, choose the investment options available within the plan and determine if they will match employee contributions. A matching program can significantly boost savings, as it’s essentially free money that an employer adds to the employee’s retirement account. However, not all companies provide a match, and when they do, the terms vary widely.

Another important feature of a 401(k) is vesting, which determines when employees fully own the employer contributions made on their behalf. While employees always own the money they personally contribute, employers may impose a vesting schedule on matched funds. This means that if a worker leaves the company before a certain period of time, they may forfeit some or all of the employer’s contributions.

Finally, the investment growth inside a 401(k) is tax-deferred, meaning employees don’t pay taxes on earnings until they withdraw the money in retirement. This allows savings to potentially compound more efficiently over time.

In the past, many part-time workers were excluded from 401(k) plans because employers could require at least 1,000 hours of service per year before granting access. That barrier began to shift with recent federal legislation aimed at expanding retirement savings opportunities for more workers. The SECURE Act of 2019, followed by SECURE Act 2.0 in 2022, introduced new rules requiring employers to open their 401(k) plans to long-term part-time employees.

Under these laws, employees who work at least 500 hours per year for three consecutive years must be allowed to participate in their employer’s 401(k). Beginning in 2025, SECURE 2.0 shortened that requirement to two consecutive years, giving part-time workers earlier access to retirement savings opportunities. For example, someone who works about 10 hours per week could now qualify for a 401(k) after two years instead of three, allowing more time for contributions and compounding growth.

It’s important to note, however, that the provision only requires employers to allow these employees to contribute their own money. Companies are not obligated to extend matching contributions or other benefits to part-time participants. That said, some may choose to do so as part of their broader benefits strategy. Vesting schedules and other plan rules may also apply, so workers should carefully review their employer’s specific policies.

For part-time employees, these new rules offer an opportunity to start saving for retirement earlier and build long-term financial security. Even modest contributions can grow meaningfully over time, especially when invested consistently.

While the SECURE Act and SECURE 2.0 expanded eligibility for part-time employees to participate in 401(k) plans, they did not change employer obligations around matching contributions. Employers are only required to let qualifying part-time workers contribute their own money to the plan. They are not legally obligated to extend a company match or other contributions to part-time participants.

That said, some employers may include part-time workers in their matching programs as a way to attract and retain talent. Offering a match can incentivize employees to save and also promote a sense of equity within the workplace. However, it is up to the employer whether a match is available, and what the terms of that match are.

For part-time employees, this means it’s important to carefully review the details of their plan documents. Even without a match, access to a 401(k) offers valuable tax advantages and the ability to invest for long-term growth. But if an employer does extend matching contributions, part-time workers can benefit from a significant boost to their retirement savings.

Employers do not have to provide matching contributions to part-time employees. However, many do so to remain competitive in the job market. In industries where part-time work is common—such as retail, hospitality or healthcare—offering a match can help companies attract and retain reliable staff. It can also foster loyalty and reduce turnover, which ultimately lowers recruitment and training costs.

Some employers also offer matches as part of a broader commitment to employee financial wellness. By encouraging retirement savings across their entire workforce, companies demonstrate a culture of support. In turn, this can enhance morale and improve overall job satisfaction. Some businesses may align policies for full- and part-time workers to keep their benefits package simple and equitable.

Ultimately, the decision comes down to each employer’s benefits philosophy and budget. For part-time employees, it’s worth asking HR or reviewing the plan summary to understand whether matching contributions are available. Even without a match, consistent 401(k) contributions can still create long-term growth opportunities and help build a stronger financial foundation.

Part-time employees have more opportunities than ever to save for retirement thanks to the SECURE Act and SECURE 2.0. Changes introduced by these plans have opened the door for long-term part-time workers to participate in employer-sponsored 401(k) plans. While access is now more attainable, employer matching remains optional, meaning benefits can vary significantly from one workplace to another.

• A financial advisor can help you determine when you may want to retire and manage other factors to maximize your benefits.Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Mandatory distributions from a tax-deferred retirement account can complicate your post-retirement tax planning. Use SmartAsset’s RMD calculator to see how much your required minimum distributions will be.

Photo credit: ©iStock.com/fizkes, ©iStock.com/AntonioGuillem, ©iStock.com/Delmaine Donson