Universal Availability - Part-Time Employees

[Guest Tom:]

Is it permissible for a 403(b) plan to have an age 21 requirement for elective deferral eligibility with respect to employees working less than 20 hours per week? Treas. Reg. Section 1.403(b)-5(b)(4)(i) provides that "if any employee listed in paragraph (b)(4)(ii)(E) of this section [referring to excluding employees who normally work fewer than 20 hours per week] has the right to have section 403(b) elective deferrals made on his or her behalf, then no employee listed in that paragraph (b)(4)(ii)(E) of this section may be excluded under this paragraph (b)(4)." Does this prohibit a 403(b) from requiring an employee who normally works fewer than 20 hours per week from making elective deferrals, merely because the employee has not satisfied an age 21 requirement?

[Kevin C]

The Reg section you cited prevents you from allowing some of the <20 hour per week people to defer while excluding others. You have to either include all of the <20 hour per week people or exclude all of them.

In most cases, I'd say the <20 hour per week exclusion is more trouble than it is worth. You lose the ability to use the exclusion if a single person who could be excluded is allowed to defer, even if it is by mistake. If the plan is ERISA covered, you can have a situation where ERISA forces you to include someone who could be excluded as <20 hours per week under the IRS Reg.