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FICA Alternative "OBRA" Plan


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A fire district established a FICA alternative plan paying 7.5% of compensation for all eligible participants. To comply with Section 3121(b)(7)-2, contributions are invested in a fixed investment (no variable investments) and benefits must be 100% nonforfeitable. The employer wishes to add an additional employer contribution of 7.5% of compensation subject to a vesting schedule and invested in separate account options allowed under the group annuity contract. Are there any issues the employer faces in adding this additional contribution to the FICA alternative plan?

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