Ellie Lowder

I agree with JOH - many 403(b) plans are exempt from ERISA. Be sure to check that!

Governmental employers are not eligible to sponsor a 401(k) plan unless it was established before May, 1986,

It is a facts & circumstances issue - the IRS says that if you had planned the return to work, then you have not separated from service - in other words, if you and your employer knew you were returning, it does't qualify as a separation from service. So, the age 55 rule doesn't kick in unless you later actually later separate before age 59 1/2.

In the situation where the plan does not permit a COVID distribution, but the participant can take one and properly report it, can the participant take it from an account other than the elective deferral account?

And, if they also have a 403(b) plan, there is also a separate $57,000 415(c) limit for employer contributions - so, $57,000 for the 401(a) DC plan; another $57,000 for the 403(b) plan. And, as John says, the 457 nothing to do with any of them.

Yes, I know - but does it apply to employer contributions to 403(b) and 457(b) plans, or just 401(a)/401(k) plans?

Does it apply only to 401(a)/401(k) plans, or are 457(b) and 403(b) plans included?

FPGuy, she can defer from pay that would have been paid had she left or stayed, provided the amount is paid by the end of the year following the termination, or within 2 1/2 months, if later.

If you work with gov't plans, then, the TGPC will give you the deep dive into that marketplace, and equip you with that specialty market knowledge. To be fair, I am the co-author of "The Source: 403(b) & 457(b) plans" which forms the bulk of the curriculum for the designation; thus, may be biased.

If this is a plan sponsored by a church or a QCCO, the universal eligibility rules do not apply.

The universal availability requirements do not apply to churches (IRC 3121(3)(A) or QCCOs (IRC 3121(3)(B)).

Since they cannot be relied on in proposed form, we won't know effective date until we see them (according to Treasury/IRS on "June 40th" which might mean by July 10 or so?). Many have asked for later effective dates in view of substantial proposed changes and the need for employers & vendors to prepare. We have heard everything from 1/1/07 to 1/1/08.

The Form 5500 for any ERISA 403(b) plan requires very abbreviated reporting and no schedules whatsoever. Instructions to the Form 5500 specifically state that this applies to both 403(b)(1) annuities and 403(b)(7) custodial accounts. Only Part I and Part II, lines 1-5, and 8 are required to be completed.

This, of course, assumes that the employer is not one of those exempt from ERISA - that is, not a church/QCCO that did not affirmatively elect ERISA coverage, or not a governmental employer (such as public education).

Actually, Joel, I'm too busy marshalling forces to prepare written comments to the IRS in protest of much of the content of the proposed regulations (many of which have no statutory authority) to stop long enough to figure out what you are saying. My concern is to protect the interest of employers (especially those in non-ERISA plans) who would be heavily burdened with the new requirements, and the participants who would lose so much ownership and control if these regulations are finalized. As a pioneer in the 403(b) market, I do remember the intent of Congress in implementing 403(b) plans (in 1958 for non-profits and 1961 for public education employees) as a unique and special benefit for a group of people that need it. It appears that the IRS has foregotten that. The fight begins. Peace yourself.

The proposed regulations have been delayed because there were some changes found to be necessary in the final review process. The NTSAA has rescheduled the Chicago symposium to September 13 & 14 to permit Bob Architect, Kristi Cook and me to have time to review the regulations and prepare our presentations. Keep in mind that the symposiums in Los Angeles, Chicago and Atlanta are two-day meetings - first day will focus on plan sponsor compliance issues (e.g., what the new regs will mean in terms of changes to compliance programs), and second day focused on in depth review of the regulations - especially the changes from past practices for 403(b). Many are planning to attend both days, and likely should do so because I am told the first regs. specific to 403(b) since the early 60's will be very comprehensive. Bob Architect of the IRS, Kristi Cook and I will be presenting the two-day sessions as a team using open forum (e.g., questions & answers throughout). Should be interesting stuff. Last word - regulations are now expected "sometime this month" - direct quote from IRS source - this month means July. Fingers are crossed.

Scotty, as I said on the NTSAA bulletin board, I understand that Exchange Traded Funds are "baskets of securities" traded like a stock; thus, I don't believe they can be included in a 403(b)(7) custodial account. Everything that I have read discusses the fact that these are not actually mutual funds. It would be nice if they could be included in 403(b) investment choices, but many believe they cannot. Obviously, based on what you have said, one provider believes they can be. I've been digging into this; however, haven't found anyone else who agrees as yet.

Michael, my friend - participants who elect to purchase service credits using pre-tax 414(h) picked up contributions are not making elective deferrals (those are defined in IRC 402(g)) and there is no direct offset of elective deferrals to 403(b) (or 401(k) where grand fathered plans exist). The pre-tax contribution does reduce includible compensation for purposes of determining the contribution limits for 403(b) (or 401(k)); however, now that limits are base on 100%, doesn't make a heck of a lot of difference, yes?

Probably the primary advantage of the 403(b) vs. the 457(b) is the participant's ownership and control. In the non-ERISA market, the 403(b) account is the "plan" which means that it is not subject to "plan" documents and plan rules. This permits greater flexibility and freedom for the participant to make his/her own decisions (as opposed to being restricted by plan rules) AND without employer or third party approvals. There is also more in-service access in 403(b) (e.g., age 59 1/2 vs. 70 1/2 in the 457(b)). 457(b) plans are a good "2nd plan" for public education employers to offer (and as Top Hat plans by tax-exempts) for those who want "double deferral" opportunity - and, also fill a "non-retirement" purpose for short term employees (those who will leave the employer before age 55 and want to use the money without restriction before age 59 1/2 since there is no IRS 10% penalty tax for 457(b) distributions at any age.

Hey, Chuck - a transfer of assets from the 403(b) account to purchase the credits would not reduce includible compensation. I think you meant to say that, if the employee in your example chooses to contribute the $5,000 pre-tax from the paychecks, it would reduce includible compensation.

He/She should have begun RMDs at 70 1/2 because employment with the sponsoring employer was severed. Only way to avoid RMD on assets accumulated with a former employer would be to start a new plan with new employer, then rollover the assets from the 403(b) with the former employer to the 403(b) with the new employer. Or, begin contributions into the former employer account with the new employer which would serve to make that account a part of the new employer's "plan".

Felicia, keep in mind that many states have passed legislative dictating the timing of remittance of salary reduction contributions in ERISA plans - thus, in addition to IRC, state law must be checked. In some states, the requirements are pretty stringent.

Dan, most 403(b) plans are funded with individual annuity contracts, or individual custodial accounts. This is not an issue for the filing of the 5500 because there is no financial data required (e.g., very abbreviated reporting, according to the instructions for the 5500); no schedules; no independent audits. The requirement for summary annual reports is the challenge since there is usually no trustee. However, as discussed in chapter 4 of The 403(b) & 457(b) Primer Plus, "the authors are unaware of any 403(b) plan that has been fined or penalized by ...DOL for failing to satisfy the SAR requirement". The authors (of which I am one) go on to say "In fact, any inquiries are usually satisfied" when it is explained that "plan assets are directly owned by the participant and the participant receives statements directly from the product or investment providers." You should check with your own counsel on that issue before deciding whether to make any change. In terms of nondiscrimination testing for non-elective contributions (assuming that you are a non-governmental employer or non-church/QCCO employer that has not affirmatively elected ERISA coverage), the key question is whether you have an HCE. Do you have an employee or employees that earned $90k or more last year? Additionally, even if you do, your post indicates you are making equal contributions for all eligible employees (not matching; not graded according to service, etc.), thus, I can't see that discrimination in contributions is an issue. Incidentally, this responds to your initial query and your e-mail directly to me. Hope it helps.

Agree! As long as the churches have not elected ERISA coverage (and most do not), even employer contributions to a 403(b) plan are simple and not costly to administer.

On the contrary - a lot of "non-FICA" public schools have been audited - good example is a # of audits in California. Remember that the audits focus on under with held income taxes (not just FICA issues), and violation of the universal eligibility rule, which is 2nd most common violation!