Ellie Lowder

That is true, provided the assets are in 403(B)(1) annuities - not true if in 403(B)(7) custodial accounts. Plan rules, however, might prohibit distribution of the employer contributions to the annuity, even though Code permits it.

I have just learned that there is a possibility that we will see Technical Corrections on this (among other Corrections to the bill)in August. In other words, I have been told that the repeal of the coordination requirements was not intended to permit "double dipping". This is the first I had heard of that possibility. Anyone else out there with your ear to the ground?

The employer can formally correct under VCT by make a submission to the IRS (see Rev. Proc. 2001-17). Contributions to the 403(B) plan must be stopped; however, the IRS will permit all past contributions to be considered 403(B) contributions. Any other "defects" have to be identified and included in submission. There will be fees/sanctions involved.

Public Education Institutions who sponsored 401(k) plans prior to 5/6/86 are grandfathered, e.g., can keep them. Some have them. Otherwise, governmental groups are not eligible to establish a 401(k) plan!

Has anyone heard about general results of using negative elections in 403(B) plans? We do get survey results for 401(k) plans which indicate more participants when negative elections are used - but no news on the 403(B) front. As an independent consultant, I generally become aware when something is "hot", but there is a singular lack of comment about this issue relative to 403(B).

Interesting discussion - think I'll join it! I agree with both Michael & Carol that individual 403(B) accounts cannot be transferred by the employer. The employer can fulfill fiduciary responsibility by communcating with employees the reasons for the new investment choice(s), and encourage the transfer, but can't FORCE the transfer, I don't think! However, if the employer is the master contract holder of a group annuity (e.g., vs. individual annuities owned and controlled by participants), then I believe employer can, indeed, transfer the assets. Agree? Disagree? Why?

However, if the participant elects catch up Option C, there is only one 415© limit for both plans.

The IRS is planning to issue publication 571 "sometime this summer"; however, will no longer tie it to specific tax return years. They plan to change it totally to an informational publication - goal is to make it better which would be welcomed!

Michael, last conversation I had w/Employee Plans staffers, the plan was, indeed, to redo pub. 571 for 2000 returns; however, the plan was also to make it less confusing - recognition of the fact that it needs to be improved. Perhaps that has delayed completion. I'll check again - and share if there is anything new. Perhaps one of our other readers knows?

Debbie, ADP testing does not apply to 403(B) deferrals.

Thought I would expand just a bit on Felicia's response to you - many folks appear to be confused about Title I coverage. Governmental employers are exempt - doesn't matter if employer contributions are made. Generally, that would be public education institutions - but, could be a state or local gov't hospital that ALSO is a 501©(3) org. Churches & QCCOs are exempt UNLESS THEY MAKE AN AFFIRMATIVE ELECTION TO BE COVERED - and most don't. Thus, employer contributions do not force ERISA coverage! Other 501©(3)s are not exempt - thus, employer contributions automatically mean Title I applies. Elective deferrals are exempt AS LONG AS EMPLOYER limits involvement, deferrals are voluntary, etc.

Sure, if permitted by state law. At least one state (maybe more)didn't permit it, but was in the process of passing enabling legislation because they called me about it.

Felicia, you are correct.

Governmental groups are exempt from Title I of ERISA - doesn't matter if employer contributions are being made. This includes public education institutions. Employers can certainly choose to follow Title I requirements - but that does not make the governmental employer an ERISA plan.

Section 403(B)(1)(D)and 403(B)(12)(B) says that churches (and qualified church controlled organizations) as defined in IRC 3121(w)(3)(A) & B are not subject to the nondiscrimination rules - hence, if you use a 403(B) plan for pastor, you have no nondiscrimination requirements.

My copy has only 55 pages - am I missing something? Incidentally, we need to understand how the proposed regulations square up with probable new legislation (we'll get it some day!) which substantially changes RMDs! I plan to discuss this with the drafter of the new proposed regs should I be able to connect since I need to report to the industry through the National TSA Association!

Hi, David! IRS plans to begin auditing 457 plans by Spring - currently supposedly training the field examiners to audit those types of plans. While 457(f) was not specifically mentioned to me in my last discussion w/IRS, I would assume audit plans would include both eligible & ineligible plans. As to using 457(f)s - I'm seeing some of that happening in public schools - but not a great deal now that no nondiscrimination rules apply to employer contributions in governmental plans - mostly seeing 401(a) and 403(B) being used. The substantial risk of forfeiture required in 457)f) seems to be a deterrent (especially w/such employees as the superintendent of schools).

Actually, at last look, the bill # had once more changed to H.R. 2614 - Congress keeps attaching the very popular pension measure to other issues in an effort to get less popular issues passed. While Congress is currently planning to return on December to take up appropriations bills and other measures, I don't really see much hope for pension changes this year (in light of the current lack of final elections results) - although one prominent legislator did say it has a "50-50" chance for passage yet this year.

Churches and qualified church controlled organizations who sponsor employer contribution 403(B) plans are exempt from Title I of ERISA unless they affirmatively elect to be covered. 403(B)(9) Retirement Income Accounts are set up through church pension boards/plan adm. committees and can include investments other than 403(B)(1) annuities or 403(B)(7) custodial accounts.

Two Orange County schools/one in Northern CA. are taking place - audits also reported in Virginia and Florida, among others. I am told about 40 are underway in public schools - not sure how accurate that is, however! Self-correction hasn't become popular yet - probably because most public school employers did not, until recently, have any kind of compliance procedures in place!

I looked at Code Section 72(f), and still am not sure how contributions to a 403(B)(1) will be treated. Do those contributions form a cost basis in the contract - e.g., go in tax deferred and come out not taxed? Does it make a difference whether the contributionsa are voluntary salary deferrals, or employer contributions? Yep, I should understand the Code - but, in this case, am getting tangled up in the language, and am being asked questions about 403(B) for foreign missionaries for the first time! Thanks for your help.

Page 7, General Instructions to Form 5500 says to complete lines 1 through 5 and 8. It goes on to say there is no requirement for an independent accountant's opinion, nor is there any requirement for schedules! Still a piece of cake!!!!!!!!!

Just a brief update - H.R. 1102 was quickly approved by the Senate Finance Committee on September 7, and is anticipated to go to the Senate floor before the end of September. It contains pension portability among many other pension measures. Like Michael, I don't predict legislation passage in an election year (Vegas, eh, Mike?), but possibilities look better for this bill than others introduced in the last 2-3 years.

There is currently a private letter ruling request in front of the IRS, and it is probable that we'll see that yet this year. There has even been "talk" about issuing a revenue ruling in view of the importance of the issue, but, of course, we can't rely on that "talk"! I also hear that the PLR will be favorable, e.g., that negative elections would be applicable to certain types of 403(B) plans (surely not to elective deferral-only plans, but to employer contribution and matching plans, whether ERISA or non-ERISA). Remember: as always, things could "flip-flop", so we can't take this to the bank!

I agree, Carol; however, they are "hot" on the issue because so many complaints have been lodged about the poor job on Pub. 571 (I have been among the complainers and I am persistent). They say they must get it done! Maybe in our lifetime!