Multiple-employer Plans

[DTH]

A PEO is sponsoring an 401(k) multiple-employer plan. A new client of the PEO is a non-profit client organization with a 403(b). Can the multiple-employer plan contain both 401(k) and 403(b) provisions?

[GBurns]

What would make a PEO an eligible sponsor of a 403(b) plan????

[mbozek]

Only if the PEO would qualify as a 501©(3) tax exempt entity with employees.

[Kirk Maldonado]

Mbozek:

Are you saying that a single plan document could have both 401(k) and 403(b) features in it?

[Alf]

Aside from the dual 401(k) / 403(b) plan document issue (which sounds ok to me but I have never heard of it before), I don't think you should have a multiple employer 403(b) plan because I don't think that the multiple employer rules apply to 403(b)s. However, just becasue the PEO makes a document available to clients and handles administration doesn't mean that it is a "sponsor." As long as the PEO doesn't have any employees in the 403(b), it shouldn't matter whether the PEO is an eligible organization.

[GBurns]

Alf,

The original post says " A PEO is sponsoring". It did not say that it was just making documents etc available.

Are you saying in your post that an ineligible organization can sponsor a plan for employees that are not its own?

[mbozek]

K: I was referring to the eligibility of the PEO to sponsor the 403(b) plan. While not recommended, I have reviewed documents that contained both 403(b) and 401(a) provisions.

[GBurns]

I am still trying to figure out how a PEO could gain and keep 501 ©(3) status so as to be able to sponsor a plan.

[Alf]

A PEO is sponsoring an 401(k) multiple-employer plan. A new client of the PEO is a non-profit client organization with a 403(b). Can the multiple-employer plan contain both 401(k) and 403(b) provisions?

I don't understand why any importance is being placed on the word "sponsoring" in the multiple employer context. If a plan has 403(b) provisions (or profit sharing, catch up contributions, etc.), not every employer that has adopted it has necessarily adopted those provisions. If you can have a 403(b)/401(k) combination document, then I don't think that every employer "sponsoring" that plan for its employees (including the entity that is "sponsoring" the document by drafting it, administering it, and making it availble to other entities) has to be an 403(b) eligible entity unless it is making the 403(b) provisions available to its employees.

[GBurns]

"Sponsoring" a plan does not include the entity that drafts the documents, administering it or making it available to other entities. TIAA-CREF, Fidelity, Vanfguard etc are product providers who do just that but are not sponsors. Sponsors are the employers or organization that make the plan available to their employees. The plan then makes the product/providers available to the employees. The same applies to a 401(k), ADP and Principal are service and product providers not Plan Sponsors.

Do some basic reaearch using Google etc and read IRS Pub 571

http://www.aspa.org/pdf_files/govpdffiles/.../2002_ncbar.pdf

A 403(b) can only be set up for the employees of Public Schools and certain tax-exempt organizations. The IRC does not recognize co-employers and therefore does not recognize a PEO as an employer especially as the common-law employer.