Aliya Robinson, senior vice president of retirement and compensation policy at the ERISA Industry Committee in Washington, also said that the proposal addresses a lot of plan sponsor concerns but noted that sponsors are "never happy about a mandate in the ERISA context."
"The concern that remains is that this becomes a slippery slope of additional requirements under ERISA and 401(k) plans," she said.
The SECURE Act legislation was overwhelmingly passed in the House on May 23 and is pending approval in the Senate, which also has its own bill, the Retirement Enhancement Savings Act, or RESA. Shortly after the House's vote, the Senate decided to forgo passing RESA and take up the SECURE Act instead. RESA does not include the SECURE Act's provision on long-term part-time workers.
Many sponsors already allow part-time employees working fewer than 1,000 hours to participate in their 401(k) plans, but the number has fallen over the past five years, according to the Plan Sponsor Council of America's 61st annual survey of profit-sharing and 401(k) plans. In 2018, 61% of sponsors gave hourly part-time workers with fewer than 1,000 hours of service access to their companies' 401(k) plans. In 2013, 70% did.
While an analysis of how many more part-time workers will be covered as a result of the change was not readily available, experts agreed that coverage would improve but likely not to a significant degree. "It would narrow the coverage gap but the impact would be relatively small," said Alicia Munnell, director for the Center of Retirement Research at Boston College.
Whatever the impact may ultimately be, plan sponsors are not opposing the measure largely because it's aimed at long-term, part-time employees and not temporary or seasonal workers. Initially, there was concern among plan sponsors that the provision would include part-timers with very brief tenures, but the requirement that they be with their employers for three straight years helped eliminate those concerns, said Will Hansen, chief government affairs officer for the American Retirement Association in Arlington, Va.
Still, support for the measure is not universal, with some fretting about the added administrative burdens the new requirement will entail, according to industry groups.
"There's a general concern in the record-keeper arena that this may at the beginning be a little bit of a headache to implement," Mr. Hansen said of the administrative challenge of tracking eligibility for the new group of workers.
Others noted that plan sponsors will have yet another group of employees that they have to send statements and notices to about the plan in addition to adjusting their payroll processes, which may be extensive for some employers.
"From an administrative perspective, it's very hard," said Robyn Credico, Willis Towers Watson PLC's North America defined contribution practice leader in Arlington, Va. "You're going to have to track hours for three years before determining eligibility under the new rules, which is going to create burdens."
The new provision would also increase costs, Ms. Credico said. Even though the legislation does not require plan sponsors to make employer contributions to the 401(k) accounts of the new group of part-time workers, employers will nevertheless feel compelled to do so. "Practically speaking, it's not likely employers would say, 'You can contribute to my plan but you're not going to get a match.'"
She also noted that administrative costs will rise as a result of having more people in the plan. "You still have to pay per-participant fees and you still got payroll issues and everything else," she said.
What's more, she said, the new requirement will likely lead to the creation of small accounts, which carry higher administrative costs. When record keepers bid on plans, they look at the average size of the accounts. "If you lower the average account balance, that's going to increase your record-keeping cost," Ms. Credico said.
