Paired ERISA 403b and Non-ERISA 403b??

[Guest Hardy Eubanks]

A 501©(3) client has a non-ERISA 403b program and wants to add an ERISA 403b plan for a matching feature only. If this is done, the vendor (Vanguard) for the salary deferral funds says that they will no longer be able to handle the funds since the funding contracts are enforceable solely by the employee. Funds would not be combined as the trustees of the ERISA plan want to direct the investments of the matching dollars. I know contribution limit tests would need to be run on the combined contributions, but other than this, is this a viable plan design? Any other options (I know we could add a 401(a) plan, but the results look the same)?

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[MWeddell]

Yes, it's a viable plan design, and placing the match in a 401(a) plan also is viable.

I don't understand Vanguard's objection either. I'd guess that future employee deferrals are now subject to ERISA as well as the match.