ERISADC

Evan Giller has solved the mystery. He writes: "I think I can solve this mystery for you, and, in fact, may be somewhat responsible for spreading the word on it. In fact, just yesterday I mentioned it in a presentation on 403(b)s at the NIPA conference. So maybe your client was on the Zoom. "This comes from the pre-approved volume submitter 403(b) document at least, so far, the TIAA and Fidelity ones, although I think it may well have been a requirement for all of them. The plan document has a provision that obligates the plan sponsor to send out a notice to participants about the aggregation rule. Here it is, and see (D) regarding the notice: "CONTROLLED EMPLOYER/QUALIFIED DEFINED CONTRIBUTION PLAN. "(A) Application of this Section. If a Participant in a 403(b) Plan owns or controls more than 50% of another employer maintaining a 401(a) or 401(k) plan, the 403(b) Plan is a Defined Contribution Plan maintained both by the controlled employer and by the Participant. In applying the Annual Additions Limit, the Participant must aggregate the 403(b) Plan contributions with all other contributions he/she receives under any qualified 401(a) or 401(k) Defined Contribution Plan the controlled employer maintains. "(B) Control. For purposes of applying the Annual Additions Limit under Section (A), the Plan Administrator determines control under Code §§414(b) or 414(c), as modified by Code §415(h), in accordance with the rules of Treas. Reg. §1.415(f)-1(f). "(C) Annual Additions. For purposes of this Section, Annual Additions include the following amounts in addition to amounts described in Section 4.05: (1) amounts allocated to an individual medical account (as defined in Code §415(l)(2)) included as part of a pension or annuity plan maintained by the Employer; (2) contributions paid or accrued attributable to post-retirement medical benefits allocated to the separate account of a key-employee (as defined in Code §419A(d)(3)) under a welfare benefit fund (as defined in Code §419(e)) maintained by the Employer; and (3) allocations under a simplified employee pension (SEP) described in Code §408(k). However, the amounts described in (1) and (2) apply solely for purposes of the applying the dollar limitation of Section 4.05(B)(i) and do not apply for purposes of the percentage limitation of Section 4.05(B)(ii). "(D) Annual Notice to Participants. The Plan Administrator will provide written or electronic notice to Participants that explains the limitation in this Section 4.04 in a manner calculated to be understood by the average Participant and informs Participants of their responsibility to provide information to the Plan Administrator that is necessary to satisfy this Section. The notice will advise Participants that the application of the limitations in this Section will take into account information supplied by the Participant and that failure to provide necessary and correct information to the Plan Administrator could result in adverse tax consequences to the Participant, including the inability to exclude contributions to the Plan under Code §403(b). The notice will be provided annually, beginning no later than the later of (1) the year in which the Employee becomes a Participant, or (2) the first Plan Year which begins after the Employer adopts this document." "I don’t think there’s any particular penalty for failing to send out the notice, except that you’re not operating the plan in accordance with its terms. And, of course, if the plan is not on a VS, there is no such rule that applies to it. In other words, the IRS made this up and is enforcing it through the document." [Evan later confirmed that this new provision is contained in the LRMs for pre-approved 403(b) documents.]

A service provider is now telling my client, who sponsors a 403(b) Plan, that in addition to the now-familiar annual notice of universal availability, they have to also provide a so-called "415 notice" annually. This notice essentially tells participants that if they operate a business that they are "in control" of, separate and apart form the sponsor of the 403(b) Plan they participate in, and that other business sponsors a qualified plan, then they are responsible for making certain that they do not exceed the 415 annual additions limit, when aggregating contributions to both the 403(b) plan and the plan of the other business they control. This allegedly is a relatively new requirement, in the recent year or two. Does anyone know the source of this notice requirement?

OK, you are asking, essentially, whether your plan may use the 3% safe harbor nonelective contributions to satisfy, or help satisfy, the general test - including the minimum gateway requirement. I think this is OK, that Regs. sec. 1.401(a)(4)-8(b)(3)(vii) says you may do this. This reg incorporates Regs. sec. 1.401(a)(4)-2(c)(2)(ii), which says that "[A]llocations taken into account" for the general test "include all employer contributions ... that are allocated to the account ... of an employee under the plan for the plan year ... ."

A client has just asked me whether the following are "fringe benefits" for purposes of the safe harbor exclusions: PTO cashouts for unused sick days PTO cashouts for unused vacation time Neither a sick-day "plan" nor a vacation pay plan is listed in the IRS Publication (15-B) listing fringe benefits, cited by BG5150. DOL Regs. 2510.3-1(b)(3)(I) says that an unfunded vacation pay plan is not an ERISA welfare plan but merely payroll practice. It would seems that a payroll practice isn't a fringe benefit; it's simply part of an employee's basic compensation. Seems like payment of cash in lieu of payment of one's regular for absence during a sick days meets the same standard. Does anyone argue, or does anyone know of guidance, suggesting are that either of these payouts is a fringe benefit for purposes of the safe harbor exclusions?