Annual notice required to satisfy universal availability?

[403BWilder]

The 403(b) regulations require 403(b) plan sponsors to provide an effective opportunity to eligible employees to make 403(b) deferrals to the plan.

According to 1.403(b)-5(b)(2), this requirement is satisfied by providing a notice to the employees at least once a year that tells the employees that the 403(b) plan is available, and also tells them how to make or change the amount of their 403(b) deferral election.

1. What does this annual universal availability notice referenced in the regulations look like? Is there a published or sample form?

2. If there isn't a published or sample form, what other types of notices and documents satisfy the annual universal availability notice requirement?

3. When is the annual universal availability notice distributed? Does it have to be no later than 12 months after the last notice, or literally no less than once per plan year? (For example, is a notice provided in January 2018 followed by a notice provided in July 2019 okay?)

4. Are all eligible employees supposed to get the annual universal availability notice every year, regardless of whether they are actively deferring to the plan or have previously declined to defer?  If yes, what if they're currently in the midst of a deferral suspension following a pre-7/1/2019 hardship distribution? Or, what if they've just exited a deferral suspension due to a pre-7/1/2019 hardship?

5. Do plan sponsors need to get employees's signatures or otherwise record the date that they sent the notices to eligible employees and the date the eligible employees received the notices in order to document that they have satisfied the universal availability requirement?

 

[Patricia Neal Jensen]

  1. Annual Notice Form is usually included in your document package.  Ask your vendor.  If you can't find one, let me know and I will help.

2. and 3. Our firm sends these out in the fall on calendar year plans along with all the other required notices.

4. For ease of administration, we recommend a mass distribution to all employees.  Also, posting, etc.

5. Although it would be lovely to have executed acknowledgement of receipt of such notices, we usually use a "business standard" distribution.  In other words, the notice is published on a specific date and emailed to all Participants (assuming they all have email addresses) and then note of this activity and the date it took place is made and retained.

FINAL Comment:  Don't forget all 403(b) plans have to be restated for PPA by March 31, 2020.

PNJ

UNIVERSAL AVAILABILITY NOTICE

Charity X. 403(b) Plan

 

 

This notice provides important information about your rights to defer compensation I Charity X. 403(b) Plan (the "Plan").

 

The Plan Administrator is: Charity X

Address: 2021 Ventura Blvd

Phone number: 818-297-7685

 

Am I eligible to make elective deferrals?

You are eligible to make elective deferrals if you are employed b yCharity X. or any affiliate who has adopted the Plan.

 

You can start making elective deferrals immediately upon your hire date.

 

What are elective deferrals?

Elective deferrals are contributions you may make out of your compensation to the Plan. You may contribute to the Plan on a pre-tax or after-tax basis.

 

Pre-Tax contributions are made to the Plan out of your compensation before taxes. Your contributions are only taxed as compensation once you receive a distribution from the Plan.

 

After-tax elective deferrals are known as Roth contributions. Roth contribution are made by you on an after-tax basis, but if certain requirements are met, a "qualified distribution" from your Roth contributions will not be taxed when you take them out of the Plan (see the Summary Plan Description for more information). There are no income limitations on who may make a Roth Contribution.

 

Roth Contributions are made in the same manner as pre-tax elective deferrals. You must designate how much you would like to contribute on a pre-tax basis (normal 403(b) contribution) and how much you would like to contribute as an after-tax Roth Contribution. You are not required to make any Roth Contributions. You may designate all of your elective deferrals as pre-tax contributions.

 

The sum of your Roth contributions and pre-tax elective deferrals may not exceed the annual limit on regular 403(b) contributions.

 

Please note that Roth Contributions are not suitable for everyone. Please consult with your tax advisor before making any Roth Contributions to the Plan.

 

What are the limits on elective deferrals?

Federal law limits the amount you may elect to defer under this Plan and any other retirement plan permitting elective deferrals (including both other 403(b) and 401(k) plans). You are limited to contributing $19,000 (for 2019) during any calendar year. Your Plan may further limit the amount of your elective deferral. Please see your Summary Plan Description for further information.

 

If you are age 50 or over, you may defer an additional amount, called a "catch-up contribution", of up to $6,000 (for 2019).

 

The total amount that may be contributed to the Plan on your behalf in any year may not exceed the lesser of 100% of your compensation or $56,000 (for 2019).

 

How do I make or change my deferral election?

You may make or change your deferral election by returning a deferral election form to the plan administrator.

 

Once I make a deferral election, how often can I change, stop, or re-start the election?

You may change or re-start your deferral election once each pay period. You may stop your deferrals at any time.

 

The plan administrator may establish additional rules you will need to follow when making your deferral election. Your deferral election is only effective for compensation you have not received yet. The plan administrator may also reduce or totally suspend your election if they determine that your election may cause the Plan to fail to satisfy any of the requirements of the Internal Revenue Code.

 

Can I direct how my elective deferrals will be invested?

Yes, you can direct how your elective deferrals will be invested from among the different investments offered under the Plan.

 

You may make or change your investment elections by returning an investment election form to the plan administrator.

 

Subject to any additional restrictions placed on investment timing by the actual investment, you may change your investment elections daily.

 

If you do not make an investment election your account balances will be placed in investments selected by the plan administrator.

[EPCRSGuru]

I will be interested in the responses from people more expert than I, because I had similar questions.  I was never able to find samples or much helpful information.  We decided to take the opportunity to create a nice marketing piece that encourages people to defer.  We send it out every December and include the updated 415 maximums and contribution limits.  We send it to all eligibles, whether or not contributing, and explain the logistics of enrolling and changing contributions.  It seemed like a chore at the beginning but it turned out to be very effective and fun to create.

[ERISADC]

A service provider is now telling my client, who sponsors a 403(b) Plan, that in addition to the now-familiar annual notice of universal availability, they have to also provide a so-called "415 notice" annually.  This notice essentially tells participants that if they operate a business that they are "in control" of, separate and apart form the sponsor of the 403(b) Plan they participate in,  and that other business sponsors a qualified plan, then they are responsible for making certain that they do not exceed the 415 annual additions limit, when aggregating contributions to both the 403(b) plan and the plan of the other business they control. This allegedly is a relatively new requirement, in the recent year or two.  Does anyone know the source of this notice requirement?

[ERISADC]

Evan Giller has solved the mystery.  He writes:

"I think I can solve this mystery for you, and, in fact, may be somewhat responsible for spreading the word on it. In fact, just yesterday I mentioned it in a presentation on 403(b)s at the NIPA conference. So maybe your client was on the Zoom.

"This comes from the pre-approved volume submitter 403(b) document at least, so far, the TIAA and Fidelity ones, although I think it may well have been a requirement for all of them. The plan document has a provision that obligates the plan sponsor to send out a notice to participants about the aggregation rule. Here it is, and see (D) regarding the notice:

"CONTROLLED EMPLOYER/QUALIFIED DEFINED CONTRIBUTION PLAN.

"(A) Application of this Section. If a Participant in a 403(b) Plan owns or controls more than 50% of another employer maintaining a 401(a) or 401(k) plan, the 403(b) Plan is a Defined Contribution Plan maintained both by the controlled employer and by the Participant. In applying the Annual Additions Limit, the Participant must aggregate the 403(b) Plan contributions with all other contributions he/she receives under any qualified 401(a) or 401(k) Defined Contribution Plan the controlled employer maintains.

"(B) Control. For purposes of applying the Annual Additions Limit under Section (A), the Plan Administrator determines control under Code §§414(b) or 414(c), as modified by Code §415(h), in accordance with the rules of Treas. Reg. §1.415(f)-1(f).

"(C) Annual Additions. For purposes of this Section, Annual Additions include the following amounts in addition to amounts described in Section 4.05: (1) amounts allocated to an individual medical account (as defined in Code §415(l)(2)) included as part of a pension or annuity plan maintained by the Employer; (2) contributions paid or accrued attributable to post-retirement medical benefits allocated to the separate account of a key-employee (as defined in Code §419A(d)(3)) under a welfare benefit fund (as defined in Code §419(e)) maintained by the Employer; and (3) allocations under a simplified employee pension (SEP) described in Code §408(k). However, the amounts described in (1) and (2) apply solely for purposes of the applying the dollar limitation of Section 4.05(B)(i) and do not apply for purposes of the percentage limitation of Section 4.05(B)(ii).

"(D) Annual Notice to Participants. The Plan Administrator will provide written or electronic notice to Participants that explains the limitation in this Section 4.04 in a manner calculated to be understood by the average Participant and informs Participants of their responsibility to provide information to the Plan Administrator that is necessary to satisfy this Section. The notice will advise Participants that the application of the limitations in this Section will take into account information supplied by the Participant and that failure to provide necessary and correct information to the Plan Administrator could result in adverse tax consequences to the Participant, including the inability to exclude contributions to the Plan under Code §403(b). The notice will be provided annually, beginning no later than the later of (1) the year in which the Employee becomes a Participant, or (2) the first Plan Year which begins after the Employer adopts this document."

"I don’t think there’s any particular penalty for failing to send out the notice, except that you’re not operating the plan in accordance with its terms. And, of course, if the plan is not on a VS, there is no such rule that applies to it. In other words, the IRS made this up and is enforcing it through the document."

[Evan later confirmed that this new provision is contained in the LRMs for pre-approved 403(b) documents.]