Qualified Organization Catch-Ups

[austin3515]

Who is responsible for figuring the amount of someone's eligible catch-ups in a 403b? The participant or the employer? The IRS publication 571 appears to be worded such that it is the participants responsiblity. So need the employer simply get representation from the employee?

[QDROphile]

IRS says that a 403(b) plan cannot be administered by participants (meaning the participant is responsible for compliance relating to the participant). I think the limitation on the catch-up fall into falls into that category.

[austin3515]

I apologize, but I cannot tell if your suggesting it is the participant's or the employer's responsibility? It's your parenthetical note that seemed to throw me off...

[QDROphile]

I don't think the plan can leave it to the participants to determine what amount of catch-up is permitted. The plan can require the a participant to provide the plan administrator with the information that demonstrates the availability. Most of that information is information that relates to the employer (compensation, service, past contributions), so the interesting question is whether or not the administrator has to independently verify, or just has to reasonably believe the presentation. And I suspect that a lot of participants would start by asking the employer for the information to be included in the presentation.

Also, depending on how you read the regulations, one wonders if a 403(b) plan can choose not to include the catch up feature in the plan.

[austin3515]

You're saying that because they need to have an opportunity to defer the max under universal availabiltiy?

Every prototype I've ever seen (ok, so it's only 2 - TIAA and Corbel) gives you the choice of whether or not to include it.

[QDROphile]

Good. The feature should be optional, especially because so many organizations are not equipped to administer it properly. But section 1.403(b)-5(b) leaves one wondering. Since "contract" is everything in 403(b), I guess the reference to the contract as the limiting factor allows the plan terms not to provide for the catch up feature as long as no contract offers it. Does that mean that sponsors have to investigate all contract details or get representations from the contract providers? Ha!