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403b missed employer contributions


Guest JVerse

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This is a doosey of a question...

Our church had a 403b annuity account set up many years ago. Two pastors were part of the plan. We hired a new pastor and no matter how many times we filled out the paperwork (long crazy story) he never successfully got added to the plan. Eight years went by and we finally decieded that we needed a new vendor.

We have set up a new account with Vanguard and all three pastors are in the plan and we have made our first contribution this January!

Problem solved, partially....

We would like to restore the employer contribuiotn for all eight years to the pastor that should have been in the plan. We are working on the final amount but it is approximatly $5,000.00 How do we pay him back properly? Our plan allows for a fixed employer contribution of $50/month for qualified employees. It also allows for employee contributions through a salary reduction agreement.

Can we simply pay him back as we have funds making extra contributions to his account since the employer contribution was allowed for and should have been paid to him in those previous years? Should we give him a temporary raise and have him add that to his contribution on his salary reduction agreement until the total almount is paid back? Do we need to modify our plan to allow for some kind of special discressionary contributions?

I would love to get some advice on this. Thanks.

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I am NOT a 403(b) expert maybe one of them will help confirm or say I am wrong.

I would start by talking with your new vendor. They most likely have experts on staff that can help guide you through the process.

As a general rule a correction is not a form of contribution so the money can just be put into the plan. A true correction would mostly likely have an adjustment for lost earnings.

Like I said I would think your vendor should be able to give you some help here.

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  • 2 months later...
Guest JVerse

It is hard to know who has the final answer and when to stop pursuing an answer and make a decision sometimes. This has been a hard answer to find. I think I know what to do. I am posting here again just to put it out there and see if any red-flags go up for you.

The best guidance that I have received is this. As long as we are not brushing up against the yearly contribution limits that we can go ahead and make an employer contribution for the lump sum or make small contributions until the amount owed is satisfied. This goes along with the idea that a correction is not a contribution. We are just correcting what we should have contributed to his account.

Thanks for your comments.

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some typos make us immature types smile. I wonder if it has a long jawbone.

edit: of course, this comment doesn't make any sense since JVerse (appropriately) edited post #4 ... but I'm still smiling. ^_^

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