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I have not dealt with 403(b) plans for at least 30 years.

We set up a corporate profit sharing plan for an employer who is a 501(c)(3) back in 2000; were told by the insurance agent, now known as a "financial advisor", at the time the client had an old 403(b) plan (an old Equitable contract that is no longer marketed, that they terminated and were going to roll over into this new profit sharing plan.

The client has been making a 3% contribution each year to the profit sharing plan.

The 401(b) was employee only, so no 5500s.  This was plan #001, which we were told was terminated.

I pulled the trust report from Equitable for 2019 for the profit sharing plan, and noticed  employee contributions for the first time, called the client who told me the old 403(b) is still active and those contributions should have been made to the old 403(b) annuity accounts.

I was about to suggest to the client that the plans be merged.  Since no 5500s were done or needed as there were no employer contributions, (IRS would have no record) a "silent" termination - ie rollover to plan #002 and show as a transfer in on From 5500-SF.

In so doing, however, I would need amend the profit sharing to a 401(k) going forward,  but the plan would need to be ADP tested or the employer 3% profit sharing contribution would need be the 3% SHNE with 100% vesting.

Currently the profit sharing is 100% after 2 years.

Any thoughts going forward???

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It is not permissible to merge a 401(a) or (k) with a 403(b). 

It sounds like they were trying to maintain the 403(b) as a Non-ERISA plan.  Doing this is not as simple as just not having employer contributions.  We do not know from these notes whether or not this 403(b) would actually be Non-ERISA if it was audited on that point, but let's go on without attempting to resolve this at this time.

  These contributions, however, should not go in the same Equitable contract as the 401(a) plan.

It seems at this point, that the deferrals placed in the 401(a) contract were simply "mistaken contributions."   They should have been in the 403(b) and should be removed from the 401(a) and deposited into a vehicle for funding the  403(b)  as soon as possible.  Move the earnings, too!

Patricia Neal Jensen, JD

Vice President and Nonprofit Practice Leader

|Future Plan, an Ascensus Company

21031 Ventura Blvd., 12th Floor

Woodland Hills, CA 91364

E patricia.jensen@futureplan.com

P 949-325-6727

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