Patricia Neal Jensen

If I am replacing (however that is being done technically) a Non-ERISA Plan with an ERISA plan, I try to insert "ERISA" in the name just before "403(b)" because it helps avoid confusion for everyone.

Rules for ACP test are the same for 403(b) as for 401(k). There just is no ADP testing. Hope this helps!

Is this a 403(b)? Different rules if it is.

The two "goals" listed are precisely what the successor plan rules are meant to prohibit. The money in the plan also has to be distributed within 12 months or the termination is retroactively negated. This would also mean that all distributions from the original "termination" would not have been from a distributable event. And if the existing 403(b) is an ERISA 403(b), they still have a 5500 and all other ERISA administration rules to follow with both plans. Here is an idea: Start a new 401(k) and terminate the 403(b). The successor plan rules do not apply in a 403(b) to 401(k) sequence. The sponsor will have deferral testing in the 401(k) and they still have to get all the money out of the 403(b) in 12 months, but it gives you something to offer them that may help. Treas. Reg. Sec. 1.403(b)-10(a)(1); PlanSponsor.com/Terminating-403b-starting-401k/

I do understand, Peter, what you are saying, but the term "claims administrator" is unfamiliar. Just an FYI. Patricia

Excellent article about "Industry Concerns re Roth Catch-ups" in June 23 PlanSponsor. The "industry groups" are asking for Congressional action on this but our specialists are indicating that, since this is a revenue issue for Congress, they (industry groups) may not get any delay. We (FuturePlan 401(k) and 403(b)) also use Relius. I know there is a comprehensive amendment (for SECURE 2.0 issues) coming but do not have a date. The mechanics involved in administering this provision do involve more than the language in the plan document. There are also payroll concerns, etc. Not very specific but hope this helps! Patricia Neal Jensen, JD,VP 403(b) SME FuturePlan

I suggest those employees are resident aliens not non-resident. Peter Gulia's advice is excellent. I am assuming that the employees are terminated and that has occasioned the distribution to which you refer.

As noted by QDROphile and Bird, the valuation date is frequently an issue. Easiest to administer is last valuation date but market fluctuations can cause this to be unpopular. If the last val is higher, then the plan will be paying out assets that can be perceived as "belonging" to the remaining Participants. If the last val is lower, the Participant receiving the payout will want more than the rule entitles him/ her to. A special val can be perceived as solving this but this is an expense the sponsor may not wish to incur. As you are already experiencing, this plan has drafting issues. The drafter should have removed the language permitting in-service withdrawals and the language concerning termination withdrawals should be carefully considered.

IRS FAQs - Auto Enrollment - Are there different types of automatic contribution arrangements for retirement plans? Companies may choose different types of automatic contributions arrangements: The basic automatic contribution arrangement described above The eligible automatic enrollment arrangement (EACA) An EACA is a type of automatic contribution arrangement that must uniformly apply the plan's default automatic contribution percentage to all employees after giving them a required notice. EACAs may allow employees to withdraw automatic enrollment contributions (with earnings). To withdrawal contributions, an employee must: elect to withdrawal under the plan terms (within 30 -90 days after the employee's first automatic enrollment contribution was withheld from wages). Employees are 100% vested in their automatic enrollment contributions. The qualified automatic enrollment arrangement (QACA). A QACA is an automatic contribution arrangement with special "safe harbor" provisions that exempts 401(k) plans from annual nondiscrimination tests. The special safe harbor is a schedule of uniform minimum default automatic contribution percentages starting at 3% and gradually increases each year an employee participates. Under a QACA: an employer must make a minimum of either: a matching contribution of: 100% of an employee's contribution up to 1% of compensation and a 50% matching contribution for the employee's contributions above 1% of compensation and up to 6% of compensation; or a nonelective contribution of 3% of compensation to all participants, including those who choose not to contribute to the plan. employees must be 100% vested in the employer's matching or nonelective contributions by two years of service. A QACA may not distribute the required employer contributions due to an employee's financial hardship.

All comments above are correct and helpful. One thing I would add is that, as you probably know, the ACP test still applies to any employer contributions even in a plan sponsored by a nonprofit. Sometimes, advisors or consultants are concerned that the rules for a nonprofit sponsor would be different. There are many different rules for employee contributions if the plan is a 403(b), but the employer contribution rules are the same.

Thanks, CuseFan. Have seen that information ad nauseam. Looking for something that helps our nonprofit clients obtain this benefit.

Sec. 102 uses the language "Tax Credit." I am getting questions about its application to 403(b). I think, unfortunately, that it cannot be applied as nonprofits do not pay income taxes, but I am reading about the application of the Health Care Tax Credit to nonprofit employers via the FICA tax and also an IRS article on filing a 990-T to claim the credit (again, Health Care at the time of this IRS article). I am beginning to think that the application of this Sec 102 to nonprofits will require further input by the IRS. Any thoughts or comments?

Respectfully suggest reading Treas. Reg. Sec 1.410(b)-6. A 501(c)(3) adopting a 401(k) and a 403(b) was a reasonably common design a few years ago for this reason.

Do not have to aggregate the match into one test. Please read the attachment to my earlier reply.

Why not just match the HCE's in the 403(b) (only HCE's are eligible, I assume)? I do not understand the "shifting" idea. Please see the discussion from "Ask the Experts" attached below regarding excluding employees of a Tax-Exempt org who are eligible for a 403(b) from testing in the same sponsor's 401(k). Treas. Reg. 1.410(b)-6. Patricia Neal Jensen FuturePlan 403(b) Sponsor has 401k and 403b Ask the Experts.docx

They are employed HCE's and eligible, but the deferral is 0. Good for the test results.

I also suggest review of Sec 301 of SECURE 2.0. The rules concerning recovery of overpayments have been changed (for the better).

In order to discuss a conversion, one would have to have a plan provision which would hold Roth Employer contributions. Sec. 604 of SECURE 2.0 permits an optional treatment of Employer Matching or NonElective as Roth contribution. Although this provision has a 2022 effective date, it will have to be written into the plan document and it is optional. I think the person asking the question is just a little ahead of the game. None of us have amendments for these Employer Roth provisions yet and the IRS may provide further guidance. So compliments for thinking ahead, but: 1. The plan would have to provide for this (It will not currently have an Employer Roth "bucket") ; 2. We don't have language for such an amendment today; and, finally, it is optional and the decision concerning adding it to the plan would be the plan sponsor's.

Thanks so much, Peter!

I work on 403(b) plans exclusively. 403(b) plans had been excluded from the LTPT rule prior to SECURE 2.0 but now these plans have been included. I agree that the use of the "20 hour rule" in this new context will be a challenge and will discuss not using it with sponsors. The "universal availability" rules cause all employees to be eligible for 403(b) unless the 20 hour rule (1000 hours in a year) is in the plan. The IRS shares your disdain for the 20 hour rule, Belgarath, and this item is on audit lists as it is frequently used incorrectly or the recordkeeping is inadequate. The "good news" for 403(b) plans is that we don't have to test deferrals because of universal availability so the negatives in avoiding the 20 hour rule will "only" occur with matching or other employer contributions.

Bill Presson is correct. Negotiate a share class without revenue sharing.

Bill Presson et al are correct. This package is easily accessed as unbundled. We (TPA) used to call it "Vanguard Newport" because Newport Group ran the investment admin that Vanguard did not (smaller plans than Vanguard will bundle). Ascensus bought Newport Group in 2022, hence the use of "Ascensus" to reference this package. Ascensus also has a bundled package (so more confusion) and a large (by acquisition) TPA organization named "FuturePlan." I work for FuturePlan as a 403(b) SME and Documents person. The firm I worked for (before Ascensus bought us) lost a very nice 403(b) plan to Ascensus bundled (nothing to do with Vanguard or Newport). We complained to the advisor who organized this and he responded that "it is all Ascensus anyway." This is not, of course, the way this actually works and I suspect he thought he brought a lower cost alternative to his client's attention. The plan sponsor/ client has been back to us several times for advice and help with their 457(b) plan, but has not thought "unbundling" would be worth entertaining at this point in time. I am not sure this helps "thepensionmaven," but information is often useful. If you have other clients with Vanguard (Newport, etc), it would be a good idea to discuss this and pre-empt a change which, I agree will focus mostly on cost and not service. Patricia

End of the year is best, as advised by both of the gentlemen above. No reason that make sense to contribute a Non-Elective on a payroll basis.

Contributor Zeller is spot on! Another way to think about this is that one does not even know if money has to be returned until the Catch-Up (if the P is eligible for one and it is in the document) is utilized.