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I have a very simple question with what seems to be a very elusive answer:  When did the universal availability requirement first apply?

I'm looking at an early 1990s document from a major provider that has an age 21 and one year of service requirement in order to be eligible for deferrals.  I'm struggling with how that would have been permissible.  Code Section 403(b)(12)(A)(ii) was certainly in effect back then.

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Well - it was the wild west back in the '90s for §403(b) arrangements. Looks like that section applied for plan years 1988 and later, and clarification came out in 1989 - so I'm guessing the document provider didn't restrict it. 

This paper is from 1995 - but explains the earlier history pretty well I think. 


"Prior to 1986, there were no nondiscrimination rules applicable to 403(b) plans. TRA '86 added separate nondiscrimination rules for non-salary reduction and salary reduction contributions under clauses (i) and (ii), respectively, of IRC 403(b)(12)(A). These rules generally must be satisfied in operation for plan years beginning after December 31, 1988. Pending the issuance of regulations or other guidance, Notice 89-23, 1989-1 C.B. 654 (extended by Notice 92-36, 1992-2 C.B. 364), provides guidance for complying with the nondiscrimination rules. Specifically, Notice 89-23 deems a 403(b) plan to satisfy nondiscrimination if either the employer operates the plan in accordance with a good faith, reasonable interpretation of section 403(b)(12) of the Code, or in accordance with the safe harbors set forth in the Notice. A. Salary Reduction Contributions Salary reduction contributions are tested separately for nondiscrimination under clause (ii) of IRC 403(b)(12)(A). Nondiscrimination with respect to salary reduction contributions generally is satisfied only if each employee may elect to defer more than $200 annually. Thus, for salary reduction contributions to a 403(b) plan, there is no nondiscrimination analysis of the amounts contributed. The test focuses on eligibility and generally requires universal eligibility. There is no requirement to offer the opportunity to make salary reduction contributions. Once that opportunity is offered to any employee, it must be offered to all employees in order to satisfy this requirement."

I'm a stranger on the internet. Nothing I write is tax or legal advice. 

I'd like a witty saying here, but I don't have any. When in doubt, what does the plan document say?

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Thank you both.  Kevin, it's not a church plan, but thanks for that thought.

J, that paper provides an excellent discussion of the historical context of these rules.  It appears that the universal availability requirement very clearly applied when the document was adopted.  The only argument I can think of in defense of including these age and service eligibility conditions in the document is that, at the time, there was a "reasonable, good faith interpretation" standard for 403(b)(12) compliance, and perhaps we could argue that this sponsor determined (reasonably and in good faith) that 403(b)(12)(A)(ii) only applied to employees who met minimum age and service under the plan.  However, something tells me that Bob Architect would not have bought that argument.  In fact, there is a particularly unhelpful sentence in his paper (in the paragraph after the language you quoted), which reads "Unlike a qualified plan, there is no minimum age and service exclusion."

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