Benefit, rights and features in 403(b)

[Guest dietpepsi]

We had a transfer plan that had a match formula based on years of service. Per 1.401(a)(4) regs, non-uniform match is a benefit, right or feature. I performed a current availability test on the match and it failed for several years. The client determined a reasonable business classification to give certain people additional match to make the current availability test pass. We filed VCP since we were outside of the correction period of 9 1/2 months. After several discussions with the IRS agent regarding whether or not the client did an ACP test (they did) and whether or not this was really a demographic failure, the IRS sent the VCP back saying the submission is ineligible under EPCRS. So in the eyes of the IRS, if the match is tested in ACP, no further testing is needed.

I called the IRS for an explanation and the agent told me since this is a 403(b) plan, they have goodfaith reliance until the new regulations are finalized. My opinion is Notice 89-23 gives goodfaith reliance for employer other contributions, but not match.

The prior carrier was also doing the testing but not correcting as they went along. I find it interesting that I am not the only one doing this testing on a 403(b) plan. Any other opinions?

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