Anyone familiar with faculty early retirement plans and effect on 403(

[Guest Albert Lin]

Hello:

Is anyone here familiar with faculty early retirement plans (FERPs)? We have a client who is considering implementing such a plan. One benefit would be the continued contributions towards an existing 403(B) annuity plan.

In particular I am hoping someone can point me towards a good reference source. I've reviewed many research sources and none adequately explain how a proper Plan Amendment can be drafted without violating the nondiscrimination rules.

The regulations contain references to early retirement windows, but these references appear to be within the context of defined benefit plans and not defined contribution plans/403(B)s.

I have seen two letter rulings discussing FERPS within 403(B)s, but they annoyingly state that the IRS is expressing no opinion as to whether the FERP has a nondiscriminatory impact. I imagine you simply apply the general safe harbor rules under Notice 89-23, but only because I have no better guidance.

Any help would be appreciated!

Albert

[Guest CVCalhoun]

Is this a public university or a private one? I would agree that a private university would have a hard time implementing such a program due to the nondiscrimination rules. But public universities are exempt from almost all the nondiscrimination rules.

----------------

Employee benefits legal resource site

[Guest Albert Lin]

It is a private university. The letter rulings I referenced were 9233030, which dealt with a public university.

The second ruling was 9625043, which dealt with a 501©(3) organization. Since our university is a valid 501©(3) organization I feel the rulings apply. It's hard to get a handle on how the nondiscrimination rules would apply to the continuing contributions made after a faculty member takes early retirement.

[Kirk Maldonado]

The Higher Education Amendments Act of 1998 amended the Age Discrimination in Employment Act to provide that such early retirement incentives for tenured faculty do not constitute impermissible age discrimination. This amendment is found in 29 USC 623(m).

However, I am also looking for articles, etc. on this topic. Has anybody seen anything worthwhile?

[mbozek]

Are the faculty members HCEs , e.g., earn in excess of $90,000? If not then the nondiscrimination rules do not apply and employer can contribute up to 40K. Employees with 15 yrs service can contribute an additional 3k to the 403(B) plan. Also employer could establish 457(B) plan and provide for deferral of 11k + catch up. Employer could also establish a severance plan under ERISA and pay up to two years salary in a lump sum or periodic payments. There are many options and you should consult with counsel to determine the best options.