Your Busboy Has a 401(k) You Didn't Open

A guy works twelve hours a week at a small restaurant. He buses tables on weekends. He never asked for a retirement plan. He doesn't know he has one.

But on January 1, 2025, a spigot turned on. Cash started flowing into an account with his name on it. Not his cash. His boss's cash.

His boss doesn't know either. Not yet.

Here is rule one. SECURE 2.0 says any worker who logs 500 hours in two years running must be let into the 401(k). That is about ten hours a week. The clock started ticking in 2023. If a part-timer hit 500 hours in 2023 and again in 2024, they became eligible on January 1, 2025. No announcement. No letter. The law just did it.

Here is rule two. Most 401(k) plans created after December 29, 2022, must auto-enroll eligible workers at a rate of at least 3% of pay. The worker can opt out. But if nobody tells them they're in, they can't opt out of something they don't know about.

Now stack them.

In January 2025, the IRS published proposed regulations under Section 414A. Buried in the text: the auto-enrollment rule covers all eligible employees. Including long-term part-time workers. No carve-out. No exception.

So. If you started a 401(k) after 2022 and you have part-timers who worked 500 hours in both 2023 and 2024, those workers became eligible on January 1. Your plan was supposed to auto-enroll them at a rate of at least 3%. Their paychecks were supposed to shrink by at least 3% and that money was supposed to land in their accounts.

Did it? Did you even know who qualified?

Somebody had to track the hours. The employer assumed the recordkeeper did. The recordkeeper assumed the employer did.

Fred Reish, a retirement plan attorney, put it this way: his best guess is that larger employers are aware of and complying with these rules. But he's concerned that smaller plan sponsors may not be.

I mean. "Best guess" and "concerned" are doing a lot of work in that sentence.

Look. You don't owe a match going forward for these workers. The law is clear on that. But you owe something worse.

If you missed an eligible worker, the IRS calls it a "missed deferral opportunity." The fix is a QNEC. A qualified nonelective contribution. Here is what that means in plain English.

You figure out what the worker would have deferred. You pay 50% of that amount out of your own pocket. Into their account. Immediately vested. The worker's paycheck was never touched. Your cash walks into their retirement account because you didn't know they were eligible.

If you catch it fast and the worker is still on payroll, you can cut that to 25%. If the worker already left? Fifty percent. No negotiation.

Plus any match they would have gotten. If your plan has one.

The worker never asked for a 401(k). You're writing the check anyway.

A lot of people. The share of businesses with fewer than five employees that offer a retirement plan doubled from 10% to 20% in recent years. Hospitality businesses tripled their adoption rate. Recreation and agriculture more than doubled. These are the exact industries built on part-time labor. These are the businesses most likely to have started plans after December 2022. And least likely to have compliance departments tracking hours.

One more thing. The formal deadline to amend your plan documents is December 31, 2026. That sounds like breathing room. It isn't. The IRS expects you to operate in compliance now. The amendment deadline is for paperwork. The rules are already live.

The busboy never asked for a retirement account. The owner never meant to open one for him. But two rules collided in the fine print. The spigot turned on. And somewhere, right now, a small business owner owes cash into an account that nobody knew existed.

Sure.