Public University 403(b) plans

[Guest Carolie]

What sections of ERISA are 403(B) plans established at public universities subject to? Are these plans subject to discrimination testing (i.e. ADP testing). Are there other tests that are requirred as with 401(k) plans (i.e. minimum coverage/participation).

I beleive that these plans are subject to the annual maximum of 25% or $10k, is this correct? Any other testing requirements I need to be aware of??

Thank you.

[Guest CVCalhoun]

The good news is that these plans are not subject to the non-Code sections of ERISA. Employer matching contributions to them are subject to the ACP tests, because the ACP tests are imposed under Code section 401(m), which is the method of bringing employee after-tax and matching contributions into compliance with Code section 401(a)(4), and state and local government plans are exempt from Code section 401(a)(4) by Code section 401(a)(5)(G). And salary reduction (i.e., employee pretax) contributions are not subject to either the ADP or ACP tests, but only to the requirement of Code section 403(B)(12)(ii) that they be available to all employees, with limited exceptions.

However, these plans are subject to a series of often complex limits on the amount which can be contributed. In general, these plans are subject to (a) the 25% or $30,000 limit of Code section 415©, and (B) the maximum exclusion allowance limitation of Code section 403(B)(2). Salary reduction, but not employer, contributions are subject to the $10,000 limit of Code section 402(g), although in some instances this limit may be raised as high as $13,000 by Code section 402(g)(8).

And this is only the beginning. Code section 415©(4) provides various elections which can be made to modify or eliminate various of the limits, if their conditions are met. And the maximum exclusion allowance calculation can in some instances be extraordinarily complex, e.g., if the employer also contributes to defined benefit plans. (See the regulations under section 403(B).)

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[Note: This message has been edited by CVCalhoun]