MPP/403(b) mix - is this possible?

[Guest AEA]

I'm reviewing a plan for a client who is taking over the administration for the plan. Granted, I think that I'm missing a few documents (an annuity funded plan with more paperwork than the Pentagon), but it appears that the employer (a governmental entity) has a money purchase pension plan and a 403(b) deferral-only plan. I'm assuming it was set up like this because the employer is a government (no 401(k) allowed). What I don't get is the contribution scheme . . .

The MPP appears to provide that the employer will only contribute to the MPP if an employee contributes to the 403(b) plan. I'm going to quote the SPD

"For each Plan Year in which you authorize . . . a salary reduction contribution . . . under the Tax Deferred Annuity Plan equal to 3% of your compensation up to 33 1/3% of the SS TWB and 6% of your comp'n in excess of 33 1/3% of the SSTWB, your employer will make a contribution to the MPP . . . equal to 4% of your comp'n up to 33 1/3% of the SSTWB and 8% of your comp'n in excess of 33 1/3% of the SS TWB."

I am ignoring the fact that the annuity contract says that a minimum of $300 must be contributed for each participant annually.

My question is WHAT?? Seriously, why would you want to set it up this way? Am I missing something or would one plan (a 403(b)) that provides matching contributions be MUCH easier? Not sure that you could transfer this formula per se, but this seems rather complicated for not a lot of benefit to anyone?

Any thoughts??

[E as in ERISA]

Are you asking if it's possible -- or just a crazy?

An MPPP can be set up to provide a matching contribution to a 403(b). It has to be subjected to ACP, etc. But it's a definite contribution for purposes of MPPP.

[ljr]

I've seen something similar for a hospital but I think the employer contribution was "profit sharing." Maybe this was considered a good idea back in the late 1980's and early 1990's? The employees could chose where they wanted their 403(b) money to go and the employer's money went into a managed pooled trust account.

[Guest AEA]

Didn't realize I had replies - e-mail notification didn't work.

Actually, I was asking is it possible and, if yes, is it crazy. It just seems like an awkward way to accomplish a 403(b) deferral with a match, of sorts.

Thank you for the replies.