403(b) and Money Purchase Plan under a controlled group

[Guest KAGrist]

I have recently been made aware that one of my clients, a not-for-profit hospital group which maintains a Money Purchase Pension Plan, also owns another hospital that sponsors it's own 403(b) Plan, administered elsewhere.

The employees of the hospital sponsoring the 403(b) are specifically excluded from participating in the Money Purchase Plan.

The contributions made to the 403(b) Plan are employer non-elective contributions (3% of compensation), and elective deferrals.

The Money Purchase Plan requires a 6% contribution to all eligible employees. No other contributions are made to this plan.

Both plans passed coverage and 415 seperately in 2004. Having only minimal experience with 403(b) plans (and controlled groups for that matter), is there any combined testing must I perform?

Any help is greatly appreciated.

KAG

[Locust]

You might want to look at the requirement that all employees be allowed to make elective deferrals to a 403(b) plan.

Issues:

1. Are the two hospitals in a controlled group?

2. Does the contribution to the MPP eliminate the requirement to allow the MPP participants to make elective deferrals under the 403(b) plan? [Related: what do you do about ees who are not eligible for the MPP plan contribution?].

I think you could find guidance for this in the proposed 403(b) regulations.

Since the groups covered by the 2 plans do not overlap, you wouldn't have an issue of coordinating the variou contribution limits.

[mbozek]

I can't believe that after 40 years of marketing 403(b) plans plans by insurance companies that there is a hospital eligible for a 403(b) annuity plan that does not allow salary reduction. Is it possible that the employees at the hospital with the MP plan are eligible to participate in a 457b plan? The simplest solution is to extend the salary reduction option to the employees of the entity that sponsors the MP plan.