perkinsran Posted August 27, 2003 Posted August 27, 2003 I seem to have read somewhere that if a 501c3 organization has a 401k plan with a ADP problem for the HCEs, the company can sponsor a 403(b) plan just for the HCEs and doesn't have coverage or ADP problems. Thoughts?
mbozek Posted August 27, 2003 Posted August 27, 2003 yes there is no ADP test for a 403b plan, but why not put all employees in the 403(b) plan. mjb
QDROphile Posted August 27, 2003 Posted August 27, 2003 You had better check the rules for universal availability of deferrals if you think you can run a 403(b) plan without including everyone.
mbozek Posted August 28, 2003 Posted August 28, 2003 Q: A 403(b) plan can exclude participants in a CODA from the universal availability requirement for the 403(b) plan. Therefore the plan could exclude the non HCE's from eligibility in the 403(b) plan. mjb
GBurns Posted August 28, 2003 Posted August 28, 2003 If "put all employees in the 403(b) plan" where would you get those whom you propose to "exclude the non HCE's from eligibility in the 403(b) plan."? All always means "all" and would include the HCE's who could therefore not be then excluded. You cannot eat your cake and have it too. George D. Burns Cost Reduction Strategies Burns and Associates, Inc www.costreductionstrategies.com(under construction) www.employeebenefitsstrategies.com(under construction)
mbozek Posted August 28, 2003 Posted August 28, 2003 GB: I suggested two options: 1. a separate 403(b) plan for the HCEs because there is no ADP testing and continue the 401(k) plan for the non HCEs. 2. Terminate the 401(k) plan and put all the employees in the 403(b) plan which will reduce the admin costs because it is not Q plan. If all ee are in the 403(b) plan then there is no exclusion of any employees. mjb
MWeddell Posted August 28, 2003 Posted August 28, 2003 If you split the employee population, then consider having all HCE dollars contributed to the 403(b) plan. Having some of the HCE deferrals (to the extent not expected to exceed the ADP test limit) made to the 401(k) with the rest contributed to the 403(b) might not be allowed per Notice 89-23, Section V.B.3.d.
GBurns Posted August 28, 2003 Posted August 28, 2003 mbozek, Read your posts. You never suggested 2 options anywhere any time. You made an absolute statement on August 27 in which you put "all" the employees in a 403(b) plan, then on August 28, only after being "challenged" by Quadrophile you claimed exclusion from that same 403(b) plan for non HCEs. Neither of the 2 posts mention 2 options nor even mention anything but a single 403(b). George D. Burns Cost Reduction Strategies Burns and Associates, Inc www.costreductionstrategies.com(under construction) www.employeebenefitsstrategies.com(under construction)
actuarysmith Posted August 28, 2003 Posted August 28, 2003 A 403(b) plan does have ADP testing if there are any employer contributions.
mbozek Posted August 28, 2003 Posted August 28, 2003 What empoyer contributions are you referring to and what section of 403(b) requires ADP testing since 401(k) applies only to qualified plans? mjb
ljr Posted August 29, 2003 Posted August 29, 2003 The 403(b) deferral component does not have to be tested as if it were a 401(k) deferral. I believe this dates back to TRA 86. Some employers who offer 403(b)'s match those deferrals and this piece does need to be tested. I've seen separate 401 plans that hold just the match and also single plans that have a trustee that holds the 403(b) deferrals and the match. These plans are definitely different. It's a good deal since the deferrals are not subject to testing.
Lori Foresz Posted September 17, 2003 Posted September 17, 2003 Hashing up an old topic, but I always thought the 403(b) had to be universally offered to everyone (or almost everyone) as qdrophile mentioned. Is this not true? Can some employees be excluded from the 403(b)? If anyone knows, please enlighten me. Many thanks.
E as in ERISA Posted September 18, 2003 Posted September 18, 2003 As mbozek said, the universal availability rule is satisfied even if you exclude employees covered by a CODA. See 403(b)(12). But as he also noted, if you are having trouble passing ADP with the 401(k), you could also just consider using the 403(b) for all employees because there is no discrimination testing for the 403(b).
Guest cease Posted September 19, 2003 Posted September 19, 2003 To ljr's comment, if a 401 plan is set up to hold the match and the 403(b) is used just for deferrals, how does the 401 plan provide the match? In other words, how does the definition of the matching contribution take into consideration the amount deferred in the 403(b) plan? I am curious.
ljr Posted September 19, 2003 Posted September 19, 2003 The employer calculates both the deferral and the match. They send the deferrals off to the provider(s) selected by the individual employees and they send the match to the Trustee of the 401 plan. The match is subject to testing. I can't help you with the exact details of how all this was handled because we were trustee and investment manager of the 401 plan and someone else did the recordkeeping.
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