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Charter School 403(b)

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A charter school 403(b) plan provides that all employees who work 10 or more hours a week are eligible to participate in the plan. Plan also establishes a minimum deferral of $10 per month.

My understanding of Universal Availability is that no minimum age or service requirement is allowed for eligibility to make elective deferral contributions. Statutory exclusions for elective deferral contribution eligibility:

  • Employees whose annual contributions will be less than $200
  • Employees eligible to make salary deferral contributions to another 403(b), governmental 457(b), or 401(k) plan sponsored by the same employer
  • Non-resident aliens with no U.S. source income
  • Students performing services described in IRC Section 3121(b)(10)
  • Employees who normally work less than 20 hours a week (lower number of hours can be selected) subject to certain conditions.

Does the charter school 403(b) plan design comply with 403(b) regulations?

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The exclusions are permissibly applied to eligibility for elective deferrals, as the law says, but they must be written into the document.  

$10 per week is less than "annual contributions ....of $200;" and 10 hours a week is less than 20 hours a week (the exclusion itself says that a lower number of hours can be selected).

This seems pretty straight forward to me so I am concerned that I am missing the point of your question.

The option of using such  exclusions would be in a pre-approved 403(b) document (which this plan sponsor has to have by March 31 of this year... next month).  They are old in their origin and application.  They both were used more when individual annuities were the/ a dominate funding vehicle for 403(b) plans.  I also discourage their use because plan sponsors err in application and that can create other problems.  Please remind the client that these exclusions MUST be written into the document if they are to be used. 

Let me know if I missed the point here!


Patricia Neal Jensen, JD

Vice President and Nonprofit Practice Leader

|Future Plan, an Ascensus Company

21031 Ventura Blvd., 12th Floor

Woodland Hills, CA 91364

E patricia.jensen@futureplan.com

P 949-325-6727

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