ACP testing under 403(b) plan with matching feature and after-tax cont

[Guest Joanne Blythe]

New to the 403(B) world. We currently have a 403(B) plan with employer matching feature that is only offered to a certain group of employees. This plan also allows after tax contributions (immediate participation). There is a one year wait for the employer match.

We are currently performing the ACP test for the matching portion of the plan. It is my understanding that I need to include "all of those employees eligible to made after tax contributions" and not just those who are actually making the contributions. If I am reading this correctly, won't my ACP test now include all participants eligible for the plan and not just those eligible for the match (the one year wait would not come into play since there is no wait for the ability to make after-tax contributions.

I would appreciate any feedback I can get.

[Guest gaaberggillespie]

You are correct in that you must include all eligible employees in the ACP calculation, the same as for a 401(k) plan. However, you can now ignore those Non-highly Compensated employees who have not met the statutory requirements for participation (1 year of service and minimum age 21). This is permitted for plan years beginning after 12/31/98. See IRC Section 401(k)(3)(F).

You msut also include the employer contributions in with the employee contributions for purposes of calculating the minimum exclusion allowance unde the TSA plan. See IRS Publication 571.

Hope this information helps you.

[Guest Joanne Blythe]

Thanks, Gloria, it does help.