Jump to content

403(b) design questions


Guest cease

Recommended Posts

Guest cease

Hi.

I have a client that currently has a 403(b) salary deferral only and a p/s plan that provides a discretionary contribution on a non-integrated basis (and uses a 5 year cliff vesting schedule).

The employer is interested in tying the employer contribution into the form of a match. Can you help me with the following:

1. If the match is added to the 403(b) plan, can these contributions be subject to a vesting schedule?

2. Depending on the answer to 1)., if a 401(k) plan is established, is it still true that 403(b) accounts cannot be rolled over to the 401(k) simply because a 401(k) plan has been added (i.e. is there a way to terminate the 403(b) plan)?

3. Is there somehting I have lest out to assist with these questions, or is there something else I should be considering?

Thanks so much for your feedback.

Link to comment
Share on other sites

1. 403(b) plan can provide deferred vesting on employer matching under same rules as a qp. The existing plan can be amended to add a match.

2. A tax free rollover from terminated 403(b) plan to qp is not permitted.

3. A 403(b) plan is cheaper and easier to administer than a 401(k) plan- no IRS qualfication required, 5500 filing is one page, no ADP testing which restricts deferral for HCEs, higher deferral limits for long term employees of certain nps, same loan and hardship provisions as a 401(k) plan, no IRS approval required for terminaton. 403(b) plans are not subject to mandatory amendments to prevent disqualfication. NP can adopt 457 plan for top hat group to increase employee deferral by additonal 12k in 2003.

My question -why would the er want to adopt a 401(k) plan?

mjb

Link to comment
Share on other sites

Guest cease

Thanks for the advice. It is greatly appreciated. Here is my response question:

I am struggling with the vesting concept. Can you point me to something in the code or regs that discusses vesting? If I review the Pension Answer book, it discusses that matching contributions are subject to the ACP test - fair enough.

There is mention if a plan is included in an "aggregated 403(b) annuity program" then a special test needs to be performed and within that test it mentions that matching contributions must satisfy the safe harbor requirement which is related to contributions in a k plan. Safe harbor includes that matching contributions must be 100 vested, correct?

I have read the definition of "aggregated 403(b) annuity program - how can I determine if the plan I am reviewing is not this type of arrangement?

Outside of my hangup on vesting, I am in agreement with you - why think about a 401(k) plan?

Link to comment
Share on other sites

NP 403(b) plans are subject to the vesting provisions of ERISA which are the same as the IRC requirements for qual. plans. The IRS regs apply to the ERISA rules. There are very few IRS rules on discrimination in a 403(b) plan. IRS notice 89-23 requires that 403(b) plans operate in accordance with a reasonable good faith intrepretation of the applicable rules.

mjb

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...