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Included in this category are employees of public schools and state colleges or universities.
A public school system eligible to adopt a 403(b) plan is a state-sponsored educational organization that normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on.
As an alternative, many employers simply permit all employees, regardless of hours worked, to make elective deferrals. Employers must provide all eligible employees with an annual notice concerning the opportunity to make salary deferrals to a 403(b) plan offering elective deferrals.
For example, a school often hires substitute teachers whose work schedule is unpredictable.
There are only three categories of funding arrangements that can be used for a 403(b) plan: 26 C. Without such a central document for a comprehensive summary of responsibilities, there is a risk that many of the important responsibilities required under the statute and final regulations may not be allocated to any party. Employer involvement in those activities can jeopardize the non-ERISA 403(b) plan status.
Such prohibited exercises of discretion include determinations authorizing, directly or indirectly through a third-party administrator: FAB 2007-02; FAB 2010-01; Dep’t of Labor Adv. The following sections outline the qualification rules for all 403(b) plans to be eligible for tax-favored status under 26 C. See 403(b) Plan Distributions for further discussion on distribution requirements. As provided in the final regulations, the existence of a written plan facilitates the allocation of plan responsibilities among the employer, the issuer of the contract, and any other parties involved in implementing the plan. Consider advising a tax-exempt employer that wishes to maintain non-ERISA 403(b) plan status to exclude from its written plan document any provisions concerning hardship withdrawal distributions, loans, plan-to-plan transfers, and acceptance of rollovers. The IRS has provided model language for 403(b) plans designed to satisfy requirements under I.
An exemption from ERISA Title I (governing reporting and disclosure, participation and vesting, funding, and fiduciary requirements) is available even for 403(b) plan sponsors that are subject to ERISA if the arrangement meets certain requirements that minimize employer involvement (non-ERISA 403(b) plans). § 2510.3-2(f); see Dep’t of Labor Field Assistance Bulletin 2007-02 (July 24, 2007) (hereinafter, FAB 2007-02); FAB 2010-01. The circumstances that may be considered by an employer desiring to limit the non-ERISA 403(b) plan funding media or products or annuity contractors include (but are not limited to): Id. Certain employer activities designed to ensure that a 403(b) plan continues to be tax compliant under I. This is because employers have an interest separate from acting as their employees’ authorized representatives in ensuring that the 403(b) plan’s annuity contracts and custodial accounts are tax compliant.
The DOL has provided guidance on other issues concerning the safe harbor, as discussed in the following sections. § 403(b) are permissible activities that will not take a non-ERISA 403(b) plan out of the safe harbor.
Only certain types of employees are eligible to participate in a 403(b) plan, essentially restricting 403(b) plan sponsors to certain tax-exempt organizations, schools (including colleges and universities) sponsored by state and local governments, and ministers or their employers or deemed employers.