403(b) and Years of Service

[Guest jgroves]

Unique situation. Employer has 2 sets of employees, Federal and Non-Federal. When calculating MEA for 403(B) test, how do we count years service if person was Federal (not eligible for 403(B) Plan) and then moved into a Non-Federal position within the same Employer? Do we count just the years they were eligible for the 403(B) or all the time they were with the Employer?

[This message has been edited by jgroves (edited 02-01-99).]

[Guest CVCalhoun]

Check out Treas. Reg. § 1.403(B)-1(f)(2). It says that in determining the exclusion allowance of an employee, you treat the employee as not being employed by the employer for any period in which the employer was not a type of entity entitled to maintain a 403(B) plan. Thus, if part of an employer (the nonfederal part) was entitled to make 403(B) contributions, and part (the federal part) was not, you would count only the years the person worked for the federal part.

Note that the situation would be different if the employer as a whole was entitled to maintain a 403(B) plan, but chose to include only a segment of the employees it was entitled under the Internal Revenue Code to cover. Under those circumstances, the employee could take into account all service, even service in a position ineligible for the plan under the employer's rules.

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[Note: This message has been edited by CVCalhoun]