I have offered my employees an optional 401(k) plan for a number of years now and, in light of some concerns about the future of social security, would like to begin running the program on an automatic enrollment basis. In doing so, am I obligated to enroll even those employees who only work part time? Do I have to match the same percentage of every participating employee’s contribution, regardless of salary and hours worked per week? —J.A., Tyler, TX

According to the IRS, any employee who has worked at your company for 12 consecutive months, and has worked at least 1,000 hours over the course of those months, must be eligible to contribute to your firm’s 401(k) plan and receive the same matching contribution as a full time employee. That breaks down to around 22 hours of work per week, which is why some employers limit their part-timers to 20 hours. IRS anti-discrimination rules also prevent retirement plans from favoring highly-compensated employees over those who don’t make as much, so the short answer is yes, you do have to include those employees who work at least 22 hours per week and provide them with the same matching contribution as any full time employee. Setting up a “safe harbor” plan, where you make a 3%-of-income nonelective annual contribution to each employee’s 401(k) will keep you well within the parameters of these anti-discrimination rules. Bear in mind that, while automatic enrollment helps many employees—especially young ones who may have cause to worry about the future of Social Security—save for retirement, the median deferral rate for employers using the automatic enrollment system is only 3%, which may be below the rate many employees would choose on their own. Deferring a bit more of employees’ salary—even 5% or 6%—could better prepare them for retirement. For more information on 401(k) programs, visit 401khelpcenter.com or irs.gov/retirement/ index.html.

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