Can a 403(b) plan still be ERISA exempt if the employer makes contributions under a 401(a) plan to match the 403(b) deferrals?

[Guest RSG]

If an employer exempt under Code Section 501©(3) limits its activities in sponsoriing a 403(b) plan to what is described in the DOL regulations (2510.3-2(f)) for exemption from being an ERISA-governed plan, plus maintaining a 401(a) plan that provides matching contributions linked to the employees' elective deferrals under the 403(b) plan, is the ERISA exemption for the 403(b) plan lost (thereby requiring limited 5500 filings for the 403(b) plan and other steps to comply with ERISA)?

[mbozek]

The regs exempt a 403(b) plan from ERISA if it is limited to employee salary reduction contributions. If the employer match goes to the qualified plan, the 403(b) plan is not receivng any er contributions.

[MWeddell]

Although the issue's resolution isn't clear, I tend to disagree with mbozek's response. If you think about it, the employer (or an outside payroll provider hired by the employer) will be using the 403(b) deferral data in order to compute the what the match is in the 401(a) plan. This might be going beyond the "maintaining records" provision of Labor Reg. 2510.3-2(f)(3)(iv). Also, the match may change the "completely voluntary" nature of a non-ERISA arrangement in Labor Reg. 2510.3-2(f)(1).

Others may come to a more aggressive conclusion (I already admitted the resolution isn't clear), but I tend to give my clients conservative advice on this issue because the worst result is for the client to treat the arrangement as non-ERISA and later have it determined that it is subject to ERISA.

Here are some other threads on this issue although neither one really got a full-blown debate going:

http://benefitslink.com/boards/index.php?s...t=0entry22263

http://benefitslink.com/boards/index.php?s...t=0entry64104

[mbozek]

The regulations are written to exempt a specific situation- voluntary employee contributions to a 403(b) plan. Since the employer contributions go to a separate plan subject to ERISA the SR plan is not subject to ERISA. Employers maintain separate 403(b) plans for the ee contributions to avoid spusal consent provisions for loans and distributons.