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Wednesday, August 4, 2021

A List of Issues Found in 403b Plans

Compiled from lists published by the IRS, DOL and Auditors, here are 10 items to check and review to make sure your 403b plan is operating in line with IRS and DOL expectations:
1. Universal Availability Issues:
a. Excluding “part time” employees without using or having the 20 hour rule in the plan document or misusing the 20 hour rule. No document should use the phrases “part time” or “full time” in 2018. Such language is an invitation for the DOL or the IRS to ask the plan sponsor for the definition used and to discover that the plan sponsor is using health insurance rules in a 403(b) plan (an expensive mistake).
b. Using a waiting period before employees are permitted to defer
c. Failing to have “proof documents” for employees who were notified but declined deferral opportunities
2. Excess 402(g) contributions (deferral limits are 402(g)). This includes (especially) improper use of the 15 Years of Service Catch Up rule (ineligible employer; improper application of lifetime limit; improper ordering of Age 50 Catch Up and 15 YOS Catch Up); failure to include Roth contributions
3. Plan Loans that violate IRC Section 72(p): failure to make timely loan repayments; defaults not noticed or treated properly; loans from multiple vendors that, in aggregate, exceed the 72(p) limits

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