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401(m) testing for 403(b) plans

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Assume that a 403(B) plan includes matching contributions subject to 401(m) testing. May the plan sponsor freely switch from the current year NHCE average contribution percentage to the prior year method because we're still in the Small Business Job Protection Act remedial amendment period? (I know that other exceptions potentially could work, but they don't in my client's situation.)


Notice 98-1, Section VII allows this switch during the remedial amendment period. However, for 403(B) plans, that remedial amendment period ended 1/1/1998 and hence is over. Therefore one can't switch.


Code Section 403(B)(12)(A)(i) says that 401(m) applies as if the 403(B) plan were described in Code Section 401(a). In that case, when one reads Notice 98-1, one uses the remedial amendment period for 401(a) plans, which doesn't expire until 12/31/2000 for calendar year plans. Hence, one could switch.

The 403(B) examiniation guidelines issued last year don't help resolve whether the Pro or Con argument is the correct one.

Has anyone else resolved this issue? Has the IRS taken a position on it?

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