Eligibility for 403(b) plans?

[Guest]

Do the qualified plan eligibility rules apply to 403(B) plans for employer contributions? For instance, may a sponsor of a 403(B) plan who makes a 4% contribution require 3 months of service and more than 20 hours per week. Obviously, this is not permitted for qualified plans. Also, may the employer impose a last day requirement to receive the employer contribution? Thanks.

[Guest Jim Knight]

It's my understanding (and I am not a 403(B) pro) that voluntary 403(B)s cannot place the service requirements you mention, but that a 403(B) that pairs salary reduction contributions with employer contributions, can impose service requirements (and also requires a plan document and ERISA/REA compliance). You say that qualified plans cannot place service requirements?

[Guest]

My question related to the specific eligibility of 3 months and 20 hours a week. A qualified plan cannot combine months and hours of service. For instance, a qualified plan that requires 3 months eligibility cannot also have an hours of service requirement. Can 403(B)'s do what my example has done?

[Carol V. Calhoun]

The nondiscrimination rules of 403(B) plans, except as regards salary reduction contributions, are identical to those for qualified plans. See Code section 403(B)(12)(A)(i), which specifically cross-references the Code sections covering nondiscrimination by qualified plans.

Of course, if you have a state or local governmental plan, it may be exempt from at least most of the nondiscrimination rules, regardless of whether it is a 401(a) or 403(B) plan.

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