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403(b) Controlled Groups

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Employer  A sponsors a 403(b) - immediate eligibility. They also make a fixed match contribution. 

 Employer A will fully own the new entity Employer B.   They want to offer all benefits under Employer A with the exception of the 403(b) Plan to the Employer B group.

Whether the employees are paid under Employer A's EIN or the Employer B's EIN, can this group be excluded. Doesn't the universal availability preclude  the exclusion of a class of employees ( in this case the employees of the new entity)

When there is a controlled group, can the sponsoring employer , excluded one of the controlled groups in a 403(b) Plan? Or does the universal availability  supersede the ability to exclude a group of employees?

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They could exclude from match (subject to coverage) but not salary deferrals because of universal availability, is my opinion/understanding.

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Does this help?
 

Quote

 

1.403(b)-5(b)(3) Special rules. (i) In the case of a section 403(b) plan that covers the employees of more than one section 501(c)(3) organization, the universal availability requirement of this paragraph (b) applies separately to each common law entity (that is, applies separately to each section 501(c)(3) organization). In the case of a section 403(b) plan that covers the employees of more than one State entity, this requirement applies separately to each entity that is not part of a common payroll. An eligible employer may condition the employee's right to have section 403(b) elective deferrals made on his or her behalf on the employee electing a section 403(b) elective deferral of more than $200 for a year.

(ii) For purposes of this paragraph (b)(3), an employer that historically has treated one or more of its various geographically distinct units as separate for employee benefit purposes may treat each unit as a separate organization if the unit is operated independently on a day-to-day basis. Units are not geographically distinct if such units are located within the same Standard Metropolitan Statistical Area (SMSA).

 

 

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