If your company does not have the capacity to ensure seasonal employees do not work more than a certain amount to ensure that you don’t miss a threshold making them eligible for enrollment, then auto-enrolling may be a benefit. Maintaining HR staff is an increasingly hard proposition for many companies. Reducing small tasks like monitoring hours for an important threshold requirement can reduce burnout and increase retention.
Seasoning isn’t just for your stuffing or dressing as our midwestern readers may call it (we see you, Mom!). Instead, seasoning may be flummoxing your benefits team. We’ve covered adding temporary and less than full-time workers to your retirement plans. Adding those workers can add a positive boost to morale, in some cases, may help balance discrimination testing. But not every plan sponsor’s temporary or part-time workers are consistent. Instead, many work based on seasonality. It’s not just big-time retailers like Banana Republic or Target that add seasonal workers to their roosters, albeit less this season. We know that many companies add seasonal workers to cover other high-volume periods. For accountants, that may mean boosting the admin staff during the first and second quarters of the year. For destination-based companies, like Country Clubs and Hotels, that may mean adding extra staff in the Spring and Summer to help keep up with the physical plant and keep grounds tidy. Some natural resource-based companies also need seasonal workers, whether they are brine shrimping in the Great Salt Lake or packing cans of Salmon in Seattle. Whichever your reason, the idea of adding seasonal workers to your plan has probably caused more than a few discussions around the HR watercooler. Here are three key considerations for the next discussion.
1. Seasonal workers often became part-time or regular workers. Many seasonal workers may fall into the definition of a part-time or eligible employee as those definitions have changed with the passage of the SECURE Act.[1] That act, sets forth that in certain circumstances workers who provide 500 to 900 hours of service may qualify enrollment. Those seasonal employees who work a 40-hour week over 13 weeks will easily hit that 500-hour mark. In noticing this time calculation, it may be essential to keep in mind that the hours accrue based on a calendar year, not your company’s fiscal year. And releasing and rehiring may not reset the clock either.[2] That may mean some employees could hit a 500-hour threshold with hours you may think are left over from the past season.[3] Even more so, your company may pull from the pool of temporary or seasonal employees when considering hiring full-time workers, which could cause complications.
2. Hours Accrue for Health Care Differently Than for Retirement. Seasonal employees may qualify for health care coverage based on the hours they work per week. And they may also still not qualify for retirement plan participation. Some state laws, like those in California, count hours differently than the federal system when it comes to retirement benefits.[4] For businesses with multiple locations, seasonal workers may have different participation levels based on which state they work in. That can get even more confusing when companies need to transfer employees between locations. It may be simpler for those companies to make one policy for all seasonal workers.
3. Consider Whether the Contractors’ Benefits Are Better Than Yours. Many companies hire seasonal workers through contract or staffing agencies. Those agencies often compete for the best employees by offering competitive benefits packages, including 401(k) participation.[5] If staffing seasonal employees is a difficulty for your company, it may be because you are losing out to those staffing agencies.
4. Auto Enrolling All Employees May Help Reduce Admin Burden. If your company does not have the capacity to ensure seasonal employees do not work more than a certain amount to ensure that you don’t miss a threshold making them eligible for enrollment, then auto-enrolling may be a benefit. Maintaining HR staff is an increasingly hard proposition for many companies. Reducing small tasks like monitoring hours for an important threshold requirement can reduce burnout and increase retention.
[1] https://www.bcgbenefits.com/blog/intern-benefits
[2] https://www.dwc401k.com/blog/can-we-exclude-seasonal-employees-from-our-401k-plan
[5] https://www.bcgbenefits.com/blog/employee-benefits
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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