401k and 403b at the same time?

[cpc0506]

Can a non-profit sponsor both a 403b and a 401k plan at the same time? If so, what are the advantages to having two plans?

[QDROphile]

Yes and not much. Administratvie burden increases.

Edit: Sorry, big oversight. Usually you have a second section 415 limit so employer contributions can be greater than with a single plan. Most nonprofit organizations are not that generous. It can work for organizations that are not subject to discrimination rules.

[MoJo]

I agree with QDROphile - and would add that where I've seen k's and b's in the same employer - each plan was for different employee groups. Indeed, in the medical field, many times you will find a "conglomerate" (controlled group, if you will) that has multiple not-for profits and for-profits under the same umbrella. Clearly the for-profits can't participate in a 403(b), and "legacy" 403(b) plans can't be "converted" to a k plan. So, plenty of mixtures.....

[Flyboyjohn]

How do you meet the universal availability rule on the 403b?

[MoJo]

IRC Section 403(b)(12)(A)(ii) provides:

(ii) all employees of the organization may elect to have the employer make contributions of more than $200 pursuant to a salary reduction agreement if any employee of the organization may elect to have the organization make contributions for such contracts pursuant to such agreement.

...

For purposes of clause (ii), there may be excluded any employee who is a participant in an eligible deferred compensation plan (within the meaning of section 457) or a qualified cash or deferred arrangement of the organization or another annuity contract described in this subsection.

Emphasis added. As long as the (k) plan covers those employees not eligible for the (b) plan, you pass universal availability.

[Flyboyjohn]

So essentially the folks eligible for the k plan have to be eligible to defer from date of hire also

[EBDI]

Couldn't both the 401k and 403b have a 1 year/1000 hours eligibility?

[MWeddell]

The employee deferral portion of the 403(b) plan must have immediate eligibility. The universal availability rule in the 403(b) regulations will then force any employees who are eligible for the 401(k) plan to have immediate eligibility over there.

You may required age 21 and/or a year of service for employer contributions.

[EBDI]

Does the universal availability also carry over to the 401k plan if the 403b plan is a non ERISA 403b plan?

[MWeddell]

Yes.

The universal availability rule is in Code Section 403(b)(12). Whether it is subject to ERISA or not does not matter.