Employer contributions

[Guest JBeck]

An employer started a 403(B) plan that only provides for employer contribuitons. The vendor is saying a plan with employer contributons must be a 401(a) plan. Is the vendor correct?

[E as in ERISA]

IRC and ERISA allow employer contributions to a 403(B) plan. However, it is possible that this vendor has its own rules under which it will not service a 403(B) plan with employer contributions. That would not be surprisng. The rules get more complicated and many employers fail to recognize the additional requirements, so the plans have more operational problems.

[mbozek]

Qualified plans are approved by the IRS, require that the assets be held in a trust or group annuity contract and do not allow employee contributions on a pre tax basis. A 403(B) plan may provide only for employer contributions and does not receive a determination letter from the IRS. An employee may make pre tax contributions under a different plan to the same 403(B) contract used to fund the employer contributions. Also a 403(B) plan funded by er or ee contributions only files a simplified 5500 form with the Dol. There is a common misconception among some vendors that a 403(B) plan can only provide for employee contributions and that a qualified plan must be adopted if the employer contributes to the plan. Tell the vendor to read IRS pub 571.