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403(b) and 401a PS Plan


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Employee A is a participant in a hospitals 403b plan and contributes 24,500 to that plan.

Employee A is also an employee of a foundation and they also sponsor a 403b plan, to which Employee A makes no contributions (because he already maxed out in the hospital.

The foundation ALSO maintains a Profit Sharing Plan (401a) and contributes $54,000 on behalf of Employee A. 

There is no overlap on the Boards, so no controlled group.

I know that any additions to the 403(b) Plans would be considered subject to one 415 limit because the ee is deemed to sponsor their own 403b arrangement.

But what about that profit sharing plan?  What makes me nervous about 415 is that 415 tends to pull in "all plans of the employer."  Does the fact that the foundation sponsors a 403b plan make Employee A aggregate all of his contributions under all plans sponsored by the same employer (i.e., the two 403bs plus the 401a)?

Am I over-complicating this?

Austin Powers, CPA, QPA, ERPA

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  • 3 weeks later...

403(b) and 401(a) of the same employer are not aggregated for 415 purposes, because the employee is not in control of the employer, and a 403(b) is considered a plan of an employer controlled by the employee.  https://www.irs.gov/retirement-plans/403b-plan-plan-aggregation-in-determining-compliance-with-irc-section-415c

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The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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So let me get this straight.  A 501c3 sponsors a 403b plan.  the executive director contributes $24,000 to that plan.  We set up a 401a PS plan and contribute an additional $54,000 in that plan (and of course enough to pass nondiscrimination for the ees).  Total of $78,000 of additions for the employer and this complies with 415?

OMG!!!

Austin Powers, CPA, QPA, ERPA

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You should be aware of a wrinkle in 1.415(f)-1(f) - Aggregating plans, with this fact pattern.

If the 403b participant owns  > 50% of any business (including thru attribution), The 403b plan must now be aggregated with other plans of the 403b employer. In this case the 401a.

Separately, if a 403b participant has an employer plan through a business they own. The 403b must be aggregated with the businesses plan.

You can have a situation where a 403b participant's 403b contributions are aggregated with both the other plans of the 403b employer and a plan of the 403b participant's business.

You can actually have a weird case where total allowed contributions would be higher if the individual does not participate in the 403b.

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27 minutes ago, spiritrider said:

If the 403b participant owns  > 50% of any business (including thru attribution), The 403b plan must now be aggregated with other plans of the 403b employer. In this case the 401a.

How could this ever happen?  The only employers that can maintain a 403(b) are employers tax-exempt under 501(c)(3) and public schools.  And no one can "own" either of those.

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The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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6 hours ago, austin3515 said:

So let me get this straight.  A 501c3 sponsors a 403b plan.  the executive director contributes $24,000 to that plan.  We set up a 401a PS plan and contribute an additional $54,000 in that plan (and of course enough to pass nondiscrimination for the ees).  Total of $78,000 of additions for the employer and this complies with 415?

OMG!!!

Yep.  One of the first issues I dealt with as a young associate (back before dirt was invented) involved this.  I think I spent a month figuring out the question, then another month figuring out the answer, then a third month saying "OMG!!"

Employee benefits legal resource site

The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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9 hours ago, Carol V. Calhoun said:

How could this ever happen?  The only employers that can maintain a 403(b) are employers tax-exempt under 501(c)(3) and public schools.  And no one can "own" either of those.

https://www.napa-net.org/news/technical-competence/case-of-the-week/case-of-the-week-403b-aggregation-rules-for-annual-additions/

Austin Powers, CPA, QPA, ERPA

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12 minutes ago, austin3515 said:

But in the case described at that link, the doctor does not own the employer that maintains the 403(b) plan. And the 403(b) and 401(a) are maintained by separate employers (the first by the tax-exempt, the second by the doctor's wholly owned company. As the OP and I have been discussing, a 403(b) and a 401(a) of the same employer are never aggregated, although a 403(b) of one employer is aggregated with the 401(a) of a different employer that is controlled by the employee.  

Employee benefits legal resource site

The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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