Jump to content

1 or 2 plans?


Guest tegernsee
 Share

Recommended Posts

Guest tegernsee

I work primarily with 401(k)s & ESOPs, but was trying to help my kids' private school set up a 403(b) plan for their teachers. We recently established a garden variety salary deferral ERISA 403(b) plan with a major mutual fund provider, and everything is good. Four teachers are participating. I recently learned that another teacher has been making contributions to a 403(b) account that she established when she worked for another school. It is not an employer-sponsored plan in any sense of the term. She prefers the investments under "her" plan, rather than those in the "new" plan, although I believe it's more a matter of intertia than anything else. She has the opportunity to participate in the new plan, but simply would rather not do so. Can she continue to make contributions to that 403(b) arrangement, or must we put her contributions in the new plan? There are no HCEs at the school. Many thanks, Joe

Link to comment
Share on other sites

Messy. Are the contributions to the old account being deposited there by the teacher or by the school (the current employer)? How is that account titled ("Old School 403(b) Plan FBO Mrs. Teacher" or "Current School 403(b) Plan FBO Mrs. Teacher" or something else)?

Link to comment
Share on other sites

Guest tegernsee
Messy. Are the contributions to the old account being deposited there by the teacher or by the school (the current employer)? How is that account titled ("Old School 403(b) Plan FBO Mrs. Teacher" or "Current School 403(b) Plan FBO Mrs. Teacher" or something else)?

Link to comment
Share on other sites

Guest tegernsee

The account is simply in the teacher's name (e.g., "403(b) account f/b/o Jane Doe"). The account style does not reference any school. The contributions are being withheld by the employer and forwarded to the provider. I'm thinking it would be safer to require her make contributions to the new plan, if she makes them to any account.

Link to comment
Share on other sites

Was the teacher in the other account deferring to it while employed by the current school prior to the existence of the "new plan," while no other employee of the current school was eligible to participate in a 403(b) plan? Hopefully not.

Ignoring that, if the current employer is forwarding deferrals to the account, then I think the account is part of the new plan. Assuming this is a non-ERISA plan and there is no plan document that limits the participants' vendor options, maybe that's not such a big deal. Maybe the account entered the new plan as a "rollover" and is now receiving deferrals. The account title should reference the name of the plan of which it is a part.

Some would argue that limiting the participants to a single vendor would make the plan an ERISA plan.

Link to comment
Share on other sites

Guest tegernsee

Thanks, Lippy. The thought was that this would be an ERISA plan, administratively limited to a single provider, and then I found out that this teacher was out there deferring to her account. Theoretically, I think anyone else could have set one up if they had wanted to, but I don't think anyone was interested until I brought the idea to the school's trustees. There is a plan document, but it doesn't limit deferrals to go to one vendor. I think I'll tell the school that they will be well-advised to have her future deferrals go to the new vendor, just to make it simple for them. I don't have the time or patience to become their benefits manager. :)

Thanks again for your counsel, Lippy!

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...