Employer Controlled Nonelective

[Blinky the 3-eyed Fish]

Hi All,

I am asking this for a colleague.

Has anyone come across a 403(b) plan that receives employer nonelective contributions in which the employer controls the investment of the contribution, not the participant? The participant deferrals are subject to participant direction in individual custodial accounts but the employer would like to have the nonelective contributions in a separate custodial account in which they select which mutual funds that the contributions will be invested in, similar to typical trustee-directed arrangement in a profit sharing plan. I can’t find anything in the regulations that prohibits this but also can’t find anything that specifically allows for it.

[mbozek]

Hi All,

I am asking this for a colleague.

Has anyone come across a 403(b) plan that receives employer nonelective contributions in which the employer controls the investment of the contribution, not the participant? The participant deferrals are subject to participant direction in individual custodial accounts but the employer would like to have the nonelective contributions in a separate custodial account in which they select which mutual funds that the contributions will be invested in, similar to typical trustee-directed arrangement in a profit sharing plan. I can’t find anything in the regulations that prohibits this but also can’t find anything that specifically allows for it.

You wont find anything in the IRS regs because IRC 403b does not regulate investment of assets in the plan. In theory it would be permissible where the plan fiduciary is investing employer contributions made after a certain date and employees direct the investment of their own contributions but it will be complicated to manage and there will need to be disclosure to the participants.

Is the this plan subject to ERISA?

[Blinky the 3-eyed Fish]

Yes, the plan is subject to ERISA.