TLGeer

No. They are subject to the pre-ERISA rules on discrimination on coverage and benefits.

Universal means universal. Assuming the plan is subject to the universal availability rules (i.e., it's not a church plan), the only exclusions allowed are those at 1.403(b)-5(b)(4). Here is that provision: "(4) Exclusions--(i) Exclusions for special types of employees. A plan does not fail to satisfy the universal availability requirement of this paragraph (b) merely because it excludes one or more of the types of employees listed in paragraph (b)(4)(ii) of this 90 section. However, the exclusion of any employee listed in paragraph (b)(4)(ii)(D) or (E) of this section is subject to the conditions applicable under section 410(b)(4). Thus, if any employee listed in paragraph (b)(4)(ii)(D) of this section has the right to have section 403(b) elective deferrals made on his or her behalf, then no employee listed in that paragraph (b)(4)(ii)(D) of this section may be excluded under this paragraph (b)(4) and, if any employee listed in paragraph (b)(4)(ii)(E) of this section has the right to have section 403(b) elective deferrals made on his or her behalf, then no employee listed in that paragraph (b)(4)(ii)(E) of this section may be excluded under this paragraph (b)(4). (ii) List of special types of excludible employees. The following types of employees are listed in this paragraph (b)(4)(ii): (A) Employees who are eligible under another section 403(b) plan, or a section 457(b) eligible governmental plan, of the employer which permits an amount to be contributed or deferred at the election of the employee. (B) Employees who are eligible to make a cash or deferred election (as defined at §1.401(k)-1(a)(3)) under a section 401(k) plan of the employer. © Employees who are non-resident aliens described in section 410(b)(3)©. (D) Subject to the conditions applicable under section 410(b)(4) (including section 410(b)(4)(B) permitting separate testing for employees not meeting minimum age and service requirements), employees who are students performing services described in section 3121(b)(10). (E) Subject to the conditions applicable under section 410(b)(4), employees who normally work fewer than 20 hours per week (or such lower number of hours per week as may be set forth in the plan). 91 (iii) Special rules. (A) A section 403(b) plan is permitted to take into account coverage under another plan, as permitted in paragraphs (b)(4)(ii)(A) and (B) of this section, only if the rights to make elective deferrals with respect to that coverage would satisfy paragraphs (b)(2) and (4)(i) of this section if that coverage were provided under the section 403(b) plan. (B) For purposes of paragraph (b)(4)(ii)(E) of this section, an employee normally works fewer than 20 hours per week if and only if-- (1) For the 12-month period beginning on the date the employee’s employment commenced, the employer reasonably expects the employee to work fewer than 1,000 hours of service (as defined in section 410(a)(3)©) in such period; and (2) For each plan year ending after the close of the 12-month period beginning on the date the employee’s employment commenced (or, if the plan so provides, each subsequent 12-month period), the employee worked fewer than 1,000 hours of service in the preceding 12-month period. (See, however, section 202(a)(1) of the Employee Retirement Income Security Act of 1974 (ERISA) (88 Stat. 829) Public Law 93-406, and regulations under section 410(a) of the Internal Revenue Code applicable with respect to plans that are subject to Title I of ERISA.)" Full stop. Tom Geer

Section 413© applies poorly to 403(b) plans. At best, and assuming it applies to 403(b) plans at all, 413© would only allow, and require, applying the exclusive benefit rule, coverage testing and vesting as if all employers were a single employer. Given that most of the issues under 403(b) aren't addressed at all, how would you, for example, go about applying the universal availability rule? How would you determine what the "plan" is in separating the treatment of transfers within a plan among approved investment vehicles and transfers out of the plan within the meaning of 403(b) but within a plan within the meaning of 413©? If, say, forfeitures are allocated across employer lines, the protection in 413© from the exclusive benefit rule only applies to 401(a), not 403(b), so the "plan" would in any event have to calculate and allocate forfeitures separately. The entire conceptual framework of 403(b) is different from that for qualified plans. Essentially, 403(b) is about "contracts" purchased by one employer. In fact, the term "plan" under the 403(b) regulations is primarily concerned with the plan document. The requirement for a plan document doesn't make them like qualified plans, and my view is that 413© does not apply in any useful or even intelligible way. The alternative is to create a plan document that treats the lines between employers as creating separate plans under 403(b). If the plan(s) are funded with a retirement income account, this can be done by gently jumping through a few hoops, as I am helping a client do now. Other non-ERISA plans may, repeat may, be able to share investment arrangements if this is done very carefully. If the plan(s) will be subject to ERISA, the reporting requirements and SAR are going to be a problem that neither 413© nor combining investments can solve. So, what are you business goals? What kinds of employers will be involved? Are you looking to aggregate investments, to file only one Form 5500, or what other objectives are you seeking? Tom Geer

Is it safe to assume the plan is governmental?

Yes. 415(n) is necessary only where the amounts received by the DB plan are from the participant, a 403(b) or a 457(b). It would be possible to create a qualified plan DC-DB transfer that raised problems. For example, a transfer from a qualified DC plan of $1 for an annual benefit of $1000 under the DC plan has to raise issues about 415 compliance. Ordinarily, these sorts of 415 issues under DB plans are dealt with by actuaries, so I have never looked at the constraints in detail. Tom Geer

Or have a minimum maximum. "Exclude ______ except to the extent it would cause a reduction in the maximum allowable contribution to an amount less than the lesser of the applicable limits in §1.403(b)-4© (including any permissible catch-up elective deferrals under §1.403(b)-4©(2) and (3)) or the applicable limits under the contract with the largest limitation." Clumsy, probably impossible to administer with consistent accuracy, and still subject to attack. The attack would be based on participants whose projected compensation eligible for deferral would exceed the limitation but who terminate before that is true for the year. To avoid even that, you would have to exclude the category of compensation only after, in time, the participant had the opportunity to make a deferrals in the required amount, which I can't imagine anybody getting done right. I'm rather be wrong, but this is certainly an issue. Anybody who disagrees, please put out your reasons. Tom

Yes, I had noticed that he is talking about 457(b). The key point here is that 413© doesn't apply, so that you have to renavigate the issues presented and handled under 413© and/or PEO plan structures as to qualified plans. This is true as to both 403(b) and 457(b) plans, and as to governmental 457(b) plans the issues are virtually identical. Done properly, it is safer by far than a qualified plan trying to meet 413©. First, the rules are so much simpler than the general qualification rules. Second, if you do it right, you don't have to worry about cross-disqualification from one employer to another. Of course, this is true under 413©, simply by having separate plans under a single document, as well. Operationally, the governmental 457(b) is most like a church 403(b) with a trust serving as a retirement income account. This means that the issues are essentially the same, even if the solutions vary slightly. Tom Geer

Yes, you can do something an awful lot like this. I am doing one right now for a cluster of church plans, using a retirement income account. You have to be careful because the 403 provisions on multiple employer plans only apply to qualified plans. The details of how to implement depend pretty heavily on the detailed facts and the preferred plan/investment design. The idea of a single plan document and adoption agreements is certainly doable, with appropriate changes to the documents. Tom Geer

Blame Congress for this one. The statute is pretty clear. Tom Geer

This impact is not inadvertent. The Regs. have a parenthetical that reads: "(See, however, section 202(a)(1) of the Employee Retirement Income Security Act of 1974 (ERISA) (88 Stat. 829) Public Law 93-406, and regulations under section 410(a) of the Internal Revenue Code applicable with respect to plans that are subject to Title I of ERISA.)" This is a precise reference to the conflict. Whether any particular document provider has noticed the problem or not. Tom Geer

Yes. Or perhaps just to revoke the payroll withholding, whatever effect that might have on the loan. This is a moderately aggressive position, so bear that in mind.

Do you think this issue is affected by the 4th sentence of Regs. 1.403(b)-5(b)(2)? That sentence says: "Further, an effective opportunity includes the right to have section 403(b) elective deferrals made on his or her behalf up to the lesser of the applicable limits in §1.403(b)-4© (including any permissible catch-up elective deferrals under §1.403(b)-4©(2) and (3)) or the applicable limits under the contract with the largest limitation, and applies to part-time employees as well as full-time employees." Set aside the question of what they mean by "the contract with the largest limitation." Suppose the exclusion of part of a participant's compensation made it impossible to make a deferral to the maximum required under that sentence. Then what? In other words, is this another situation like the part-time employee exclusion that can't, as a practical matter, be used under a plan subject to ERISA? Tom Geer

Good question. FAB 2010-01 is silent on the issue. The DOL Regulation allows: "Collecting annuity or custodial account considerations as required by salary reduction agreements or by agreements to forego salary increases, remitting such considerations to annuity contractors and maintaining records of such considerations." FAB 2007-02 bars the employer, specifically, from "enforcement of loans," on the theory that this involves discretionary determinations. I take "considerations" to mean "contributions," but there may be wiggle room here. I certainly would not require it in the plan document or by administrative fiat, but an aggressive employer might allow revocable withholding arrangements. Tom Geer

1-What does the contract say? 2-What does the plan doc say? Tom Geer

As to the plan to plan transfer, yes, subject to the terms of the GAC. Does it allow the employer or the plan to terminate it and allow the employer/olan to designate a target for the asset transfer? If so, just do it and direct the transfer. Tom Geer

Agreed. As to plans seeking ERISA exemption as not maintained by the employer, see my post on FAB 2010-01 at http://401k-403b-457-plansblog.blogspot.com/ As to other plans, the plan administrator can weigh in to whatever extent the plan documents provide and the PA sees fit. However, the PA cannot enlarge on loan rights under the affected funding vehicles. What to do, as a practical matter if an insurance company processes loan requests independently is somewhat problematic even where the plan has a PA. My perception is that the source of the problem is basically the dominance of individual annuities in the marketplace. It is the existence of multiple, uncoordinated funding vehicles that creates the risk of multiple loans. In the individual annuity situation, the problem is more difficult than with, say, an array of mutual funds in a more standard 401(k)-style design amd operational structure. Tom Geer

See my post at http://401k-403b-457-plansblog.blogspot.com/

Has the client considered using the 403(b) as the ongoing plan? There are advantages to doing so, including the various special rules for maximum contributions. Tom

You're right the first time. The 403(b) rules have specific provisions that allow contributions after employment termination. These can be pre-tax.

I dont think that 403a plan can be funded with individual annuity contracts because the plan assets cannot be subject withdrawal by the employee before a distribution event occurs, e.g. termination or death. If employee's benefits are held in individual contracts employee could cash out at any time in violation of rules against pre retirement distribution. Depends on the terms of the annuity contract. To be a 403(a) annuity, the contract has to limit distributions as per 401(a), so this should turn out to ne a theoretical rather than real world issue. That is, if the contract doesn't have appropriate limitations, it's not a 403(a) annuity to start with.

A 403(a) plan is a qualified plan funded by a group annuity contract instead of a trust. It is subject to all the other requirements for qualified plans including the requirement to have a written plan document. See IRC 404(a)(2). Annual reporting is required. Rollovers are permitted between 403(a) plans and 403b annuities if a distribution event has occurred. I dont know what you mean by converting to a 401(a) plan. A qualified trust under 401(a) can hold an annuity contract under 403(a). Agreed. Our posts were almost simultaneous, so I hadn't seen this. Better put that mine.

1-Ordinarily, the annuity itself or a plan document provided by the insurer and synching up with the annuity will contain the plan language. But some document has to jump through the 401(a) hoops. 2-Yes. Reporting is simpler as to financial matters. 3-Yes. Or it can be one of more than one funding vehicles, alongside a trust or custodial account.

Works for me. The fact that they are in healthcare should make you look closely at the 3010(w)(3) definition to make sure they aren't excluded as an eligible employer. Also, we are assuming, rather than advising, that the plan is a church plan under 414(e) and ERISA 3(33). The fact that an employer is church related does not necessarily mean the plan is a church plan, or that if it is it is a nonelecting church plan.

This question is too broad for a useful answer. Do you have a specific situation? Is the employer a 3121(w)(3) entity? How is it church related? Who do they want to cover?