Universal Availability Rule

[Ken Davis]

We are a public institution that is generally exempt from the non-discrimination rules applicable to retirement plans. However, the "University Availability Rule" for elective salary deferrals to 403(b) plans applies to public institutions.

We have been told by a 403(b) plan provider that this rule is to be applied at the plan level. By that they mean all employees (with some exceptions not important here) must be allowed to make an elective salary deferral to the 403(b) plan, but that certain investment options may be restricted to a group of less that all employees.

Is that a correct interpretation of the Universal Availability Rule?

Thanks,

Ken Davis

Univ. of South Alabama

[Guest GeerTom]

Actually, universal availability is applied at the employer level. For public entities "this requirement applies separately to each entity that is not part of a common payroll." There is a special rule for some geographically distinct units that have been historically treated as separate for benefit purposes. There are also excludible categories of employees.

More relevantly, the rule only discusses contributions, not investments, so on its face your adviser is right.

One element that has always concerned me, as an opportunity for regulatory mission creep, is that the effective availability rule, which is generally read to require just an annual notice of the contribution option, says "an effective opportunity is determined based on all the relevant facts and circumstances, including notice of the availability of the election, the period of time during which an election may be made, and any other conditions on elections." Could an agent say investment availability is a relevant fact or circumstance? Suppose your janitors can pick only a money market fund, but your deans and provosts can have any fund they want? Is this phrase a useful tool for attacking that? Will it be used that way?

This is a theoretical concern, though, not one in today's real world. For now, you're fine.

Tom Geer

[Ken Davis]

Actually, universal availability is applied at the employer level. For public entities "this requirement applies separately to each entity that is not part of a common payroll." There is a special rule for some geographically distinct units that have been historically treated as separate for benefit purposes. There are also excludible categories of employees.

More relevantly, the rule only discusses contributions, not investments, so on its face your adviser is right.

One element that has always concerned me, as an opportunity for regulatory mission creep, is that the effective availability rule, which is generally read to require just an annual notice of the contribution option, says "an effective opportunity is determined based on all the relevant facts and circumstances, including notice of the availability of the election, the period of time during which an election may be made, and any other conditions on elections." Could an agent say investment availability is a relevant fact or circumstance? Suppose your janitors can pick only a money market fund, but your deans and provosts can have any fund they want? Is this phrase a useful tool for attacking that? Will it be used that way?

This is a theoretical concern, though, not one in today's real world. For now, you're fine.

Tom Geer

Thanks, Tom. That's exactly what was behind my question. Just seemed that universal availability should drill down all the way into investment options. But, as you say, for now it's not an issue.

Ken