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Universal Availability Rule


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I have become the admin on a high school 403(b) plan and I don't work on that many 403(b)s.  In conversations, they have indicated that they are letting people defer once they reach 1,000 hours.  I explained the universal availability rule and so they put in the exclusion of Employees who normally work less than 20 hours a week.  My thinking is they can't possibly have everyone fall under this exclusion.  I thought they could exclude only if they expected them to work 20 hours a week or less.  What if they know they are hired as full time, can they use this exclusion and then once they reach 1,000 hours, let them in.

My company is so terrified to tell the client that they can't do something, so they try to come up with these clever ways to get around the rules.  

They have a discretionary match and I told them they can have the 1,000 hours requirement on that source but not the deferrals.

Any input is greatly appreciated. Thanks!

  

 

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You are correct. And your company SHOULD be more terrified of the consequences or potential liability for knowingly administering a plan in violation of the document (which almost certainly states the parameters of the exclusion) and in violation of the regulations. Refer your supervisor to 1.403(b)-5(b)(4)(ii), and (iii). And in (iii)(B)(1), have them note the "reasonably expects" clause that you alluded to above. 

The IRS also provided some additional guidance on this subject in IRS Notice 2018-95. 

Good luck!

 

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