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403(b) nondiscrimination


Guest Frank Rizzo

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Guest Frank Rizzo

Can a 501©(3) entity violate 403(B)(12)(A)(ii) nondiscrimination where only elective deferrals are available through the plan? If so, would offering only one election (whereby only one HCE elected to contribute) in five plan years violate nondiscrimination? What would be the consequences?

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Guest Frank Rizzo

What if the opportunity to contribute was available to everyone in year one but only one EE elected to contribute. Thereafter there were no more elections to contribute so that only that one EE was making contributions?

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The rules are clear: as long as any employee has the opportunity to make salary deferrals then all employees who work at least 20 hours a week and are not students must be allowed to make salary deferrals. There can be no closing of the opportunity to defer by employees because a 403(B) plan is not subject to the eligibility rules of IRC 410(a) or ERISA 202. There is no requirement that an employee must defer salary under a 403(B) plan--only the requirement that all eligible employees be allowed to elect deferral at all times.

mjb

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