Service based Discretionary Contribution

[Christine Roberts]

Is regular 401(a) and 410(B) nondiscrimination testing required for a discretionary employer contribution to a 403(B) plan, based on years of service, where there is only one HCE in the plan (albeit one who would receive the service based benefit)? My understanding is that no discrimination issues are raised if only NHCEs are eligible for the service based benefit.

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[Dowist]

I think you're still covered by Notice 87-23 (not exactly sure about the -23), which says 403(B) plans are subject to discrimination testing, although the standards are somewhat relaxed.

The service based contribution would have to meet the nondiscrimination rules either through the 401(a)(4) regulations, or the safe harbors provided in the Notice.