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Universal Eligibility for 403(b) Plans - Gov't Agencies


Guest derek
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Is the universal eligibility provision of Section 403(B)(12) applicable to 403(B) plans sponsored public schools? At an IRS EP/EO council, someone seemed to mention that it did not apply to governmental agencies/public schools. Is that what 403(B)(12)© is talking about?

[This message has been edited by derek (edited 11-09-98).]

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Guest CVCalhoun

The universal eligibility provisions of Section 403(B)(12)(A)(ii) apply to 403(B) plans of public schools. Section 403(B)(12)© provides only that the other nondiscrimination rules (e.g., the coverage tests and benefits tests) set forth in Section 403(B)(12)(A)(i) do not apply to governmental plans.

As a matter of fact, the universal eligibility rules have been one of the bigger headaches for public schools and universities. In general, schools are not trying to keep people out of salary reduction 403(B) plans. Rather, because only a very limited group of employees can be excluded, the plans may have to include such workers as substitute teachers or substitute bus drivers. Trying to get salary reduction agreements, and make accurate calculations of the exclusion allowance, is an administrative nightmare in the case of such workers.

[Note: This message was edited by CVCalhoun]

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Guest rsmelson

Speaking of universal eligibility, can a 403(B) plan require three months of service in order for an otherwise eligible employee to enter the plan and make employee deferrals? If not, is this a disqualification issue? (Note that employer contributions-matching contributions start after one year of service).

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Guest CVCalhoun

Under section 403(B)(12)(A)(i), an employee with less than three months of service cannot be excluded from making salary reduction contributions unless (a) the contributions which such individual could make are less than $200, (B) the individual is a nonresident alien, © the individual is a work-study student, or (d) the individual normally works less than 20 hours a week. This is one of the biggest problems in 403(B) plans; employees must be allowed to make salary reduction contributions more or less immediately. This is true even if the employees are casual workers for whom calculating the maximum exclusion allowance and/or obtaining the necessary salary reduction agreement is a big headache. It has been our experience that few employers with any sizable workforce are completely in compliance with these rules if strictly applied.

[Note: This message was edited by CVCalhoun]

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Does the IRC permit a Board of Education to offer two 403(b)plans? One for those that must join the Public Retirement System and the other for those employees that do not.

For those employees that must join the PRS, the PRS itself is the sole 403(B) carrier. No other carrier is allowed.

For those employees that do not have to join the PRS a mutual fund family is the sole carrier. No other carrier is allowed.

Both plans are salary reduction programs.

[This message has been edited by joel (edited 11-17-98).]

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Guest CVCalhoun

No problem at all with having more than one 403(b) plan, so long as all employees have the right to make salary reduction contributions to at least one of them. Hey, isn't it nice to find something simple in this area? :)

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