403(b) Employer Contribution Eligibility

[Guest PAINPA]

I am reviewing a 501c entity (Library) that has a document that states that the employer contribution is only given/eligible to employee's that work more than 35 hrs per week. The contribution is 6% non-elective. The 501c is in PA.

Am is missing something in the 403(b) arena that this can be allowed beyond the 20 hr per week or 1000 hr yearly requirement?

I am trying to help someone out but I am more a 401k guy.

[Guest mjb]

Is the library a public library? Public employers are exempt from non discrimination rules/service requirements under ERISA for employer contributions. See IRC 403(b)12©.

[Guest PAINPA]

They are a public library...

In the broadest terms... a 403(b) is a tax deferred retirement plan available to employees of educational institutions and certain non-profit organizations as determined by section 501©(3) of the Internal Revenue Code.

I am sure they are in that definition and should be subjected to the minimum 20 hrs per week way of not having to give an employer contribution.

Thanks for your help... that is why I love 401k's

[jpod]

If this is NOT a 501©, and it's a public library, you better check Section 403(b)(1)(A)(ii) and Section 170(b)(1)(A)(ii) to make sure it qualifies as an employer that can maintain a 403(b) plan. I'm inclined to think they cannot, which means you and your client have problem and you may need to pursue relief under EPCRS.

[jpod]

By the way, PAINPA, I am in PA too so if you want to talk to me about this send me an email.

[Guest mjb]

Pain- why would a public library exempt from ERISA be subject to 20hrs week/ 1000 hrs requirement? gov can establish a 503©(3) enity as a govt instrumentality.