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403(b) Irrevocable Election

Guest WD2

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We are taking over a 403(b) plan and putting them on our document. Currently their document allows the participants to make a one-time irrevocable election of 5% (along with elective deferrals into a separate plan). If they opt in, they get a 5% nonelective contribution from the ER. In our restatement, we would like to change the wording to allow the participants to make an irrevocable election but not specify the amount. If they did make at least 5% they would get the ER contribution. This would enable some of the HCEs to specify a higher % (several want to put in the $15,500 in "regular" deferrals and then put in another 10% of salary in "irrevocable" elections).

First, is there any problem allowing the employees to choose the deferral % they want to specify in an irrevocable election? I understand that once they do specify the percentage that they cannot change it.

Second, most of the employees made a 5% irrevocable election under the original plan. If the election they originally made was irrevocable, can an employee change it when providers and/or documents change? If not, does this mean that the employer is basically stuck forever with the original plan design? I also understand that the irrevocable election has to be made when the ee first becomes eligible. Since most employees were eligible a while back, does that mean that they would not be able to take advantage of the increased flexibility in a restated document?

One last thing -- the employer contribution is currently subject to the 5% irrevocable election -- you don't get it unless you contribute 5%. Under what conditions would the ER contribution have to satisfy 410(b)? Thanks!


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