match contribution eligibility determined quarterly?

[Santo Gold]

Can a calendar year 403(b) plan have as a condition for matching contributions that individuals must work 260 hours each quarter and be employed on the last day of each quarter?  Is it acceptable to have contribution conditions established on a quarterly basis rather than an annual basis, knowing that ACP and 410(b) will be tested annually?

Thank you

[Peter Gulia]

I have worked many times on plan designs that involve allocation conditions of these kinds.

Consider whether your client's desired provision would fit within the IRS-preapproved documents your client would use.  Or if not, consider whether your client likes its desired design enough to spend incremental money on documenting and explaining the provisions.

 

[Kevin C]

Our pre-approved 403(b) document (ASC) allows allocation conditions applied separately to each quarter of up to 250 hours of service and employment on the last day of the quarter. Our VS 401(k) includes the same options.  Note that is a maximum of 250 hours per quarter.  Both documents prohibit the use of allocation conditions that would require more than 1,000 hours in the year to receive all or part of the contribution for the year.  From prior discussions with our document provider, they feel that you can't require more than 1,000 hours of service in a year as an allocation condition. While they didn't have a clear cite, they said 2530.200b-1(b) implies it and requiring more than 1,000 hours as an allocation condition could be considered as a disguised impermissible service requirement.