MWeddell

The proposed 403(b) regulations will not be finalized until 2006, effective most likely January 1, 2007. I would assume that most providers will continue to process 90-24 transfers to the same degree they always have. Your employer's plan has to allow these transfers to occur. Unofficial comments from key IRS officials indicate that they currently are leaning toward keeping a general ban on 90-24 transfers but may introduce some exceptions. The IRS perceives that allowing these transfers makes it more difficult to monitor whether a 403(b) plan is in compliance. I don't agree with their view, but there is some logic behind it.

Yes, this is permissible, although my explanation differs from the above. The $50,000 in his 401(k) account that is invested in a loan promissory note acts as the collateral so the loan is always fully secure. The 1989 DOL loan regulations make clear that it's the portion invested in the loan that serves as the collateral.

You're not allowed to do this for a safe harbor 401(k) plan because if you have just 1 HCE who receives the discretionary match and 1 NHCE who does not, then you've violated Treas. Reg. 1.401(k)-3©(4)'s limitation on HCE matching contributions and you no longer have a safe harbor 401(k) plan. I'm assuming that you're using safe harbor matching contributions, instead of safe harbor nonelective contributions, to satisfy the safe harbor rules.

It's been awhile since I've considered this issue, but aren't there various other disclosures that have to be provided in advance that can't be done if one considers the brokerage account to be a designated investment for which one is trying to get 404(c ) relief?

The 404(c ) regulations use the term "designated" funds. My argument, although I've not seen DOL guidance to confirm whether it works or not, is that a self-directed brokerage account that invests in any publicly-traded security that can administratively be handled by the provider is a nondesignated fund and therefore no ERISA 404(c ) disclosures on those funds is required.

No, there's not a problem with that assuming that it is done for all eligible NHCEs. Before the latest set of 401(k) regulations, it looked like it might have even been required.

Among the major 401(k) recordkeepers, Vanguard is the only one that I'm aware of that claims they can administer the Roth 401(k) feature even without receiving the final regulations. Others are telling their clients that they can't commit to a 1/1/2006 implementation date without receiving more IRS guidance.

You can use a cross-tested formula. Code Section 403(b)(12) will apply the 401(a)(4) rules to the employer nonelective nonmatching portion of the 403(b) plan, which would include the cross-testing rules (and the comparability regulations). There also are some additional testing rules from IRS Notice 89-23, but I doubt that they'll help a cross-tested plan and that notice will no longer apply once the 403(b) regulations are finalized. You can still use the two years of eligibility rule (with 100% vested) as far as I know.

Yes, although it isn't very common, one can have matching contributions greater than 100% of the deferrals that are being matched.

You could define eligibility as 90 days for those not classified as part-time employees (defined however you want) and 1,000 hours during any eligibility computation period for employees classified as part-time employees.

I read Tom's answer to be the consistent with mine -- we just had a different way of explaining the same thing.

One wouldn't necessarily have to aggregated a 401(k) plan and an ESOP for top-heavy testing purposes. They could be members of a permissive aggregation group instead of a required aggregation group.

If it's clear that one location has a better match rate than the other one, then you only need to do benefit, right or feature testing on the location with the better match rate. If you start with Treas. Reg. 1.401(a)(4)-4 and work through the various cross-references, the BRF test ends up being the nondiscriminatory classification test. There is no average benefit percentage test required for BRF testing.

Does anyone have a citation to the authority described in John Nelson's post?

Yes, by using the word "may" I think that the proposed regulations permit the plan document to specify the rule instead of requiring plans to obtain HCE elections. I plan to recommend: - Don't collect elections. There often is little time available for communicating refund amounts and collecting elections because often an employer is trying to process the refunds within 2½ months after the plan year ends. - Refund traditional pre-tax deferrals before Roth contributions. HCE typically wants to maximize the economic value kept in the plan. $x of Roth contributions, already taxed is greater economic value than $x of pre-tax contributions.

I'm an attorney who practiced law for a few years before spending the last 16 working for an employee benefits consulting firm. I was a computer programmer before law school. Married and have raised two amazing daughters.

More generally, if you go to the Benefits Link homepage (by clicking on the logo in the upper left of this page) and then look down the left hand column for "Using the Web for EB Research" and click on that topic, you'll find a handy collection of links to various source materials.

It's in the ERISA Outline Book in Chapter 11, Section VIII, Part F. The corrective distribution must be made after the end of the plan year. The HCE will have to wait before taking a corrective distribution.

There is a watered down version of the contingent benefit rule in the proposed 403(b) regulations. Before that, nothing prevented having other parts of employees' benefits vary based on whether they deferred to the 403(b) plan.

Not only does the rate seem low, but also pegging the loan interest rate to the applicable federal rate doesn't appear to me to comply with the standard set forth the DOL loan regulation for how to determine the interest rate.

Is the plan large enough that there is no realistic chance that it will ever become top-heavy? I don't often deal with the top-heavy rules, so my concern may not be well-founded, but that's one thing to consider. I can't think of other concerns. There'll be some administrative costs for issuing an SMM or revising an SPD and some ongoing administrative costs for distributing enrollment kits to the eligible union employees, but presumably those are obvious to you.

It never hurts to post the question. However, unless there is new legislation (not in this case), we are entitled to rely on regulations until they are revoked or amended. Hence, even if the IRS were planning to make the excess deferrals rule similar to the new 401(k) excess contributions rule, you can continue to rely on the 402(g) regulation in the meantime.

Felicia -- You're right that governmental employers will be exempt from most of ERISA. I don't know why, but I wasn't thinking that you were talking about a governmental employer in your initial post.

Let's divide your question into two: (1) May employer contributions be made into a non-ERISA 403(b) arrangement without making it subject to ERISA? (2) If so, then what are the permitted vesting schedules? On the first question, I believe it is unlikely that an employer may make contributions to a 403(b) arrangement without making it subject to ERISA. See Labor Reg. 2510.3-2(f)(3). I'm sure you could look for only threads discussing this issue.

Reg § 1.402(g)-1(e)(5)(i) states that gap period income on excess deferrals is refunded only "if the plan so provides." This provision was not changed by the final 401(k) / 401(m) regulations. It seems clear that (for now anyway), that it is still optional based on what the plan provides.