403(b) Universal Availability Requirements
An employer sponsoring a 403(b) plan must allow all employees to make elective deferrals to the plan if any employee has the right to do so, with these exceptions:
Employees who normally work less than 20 hours per week
Students performing services described in IRC 3121(b)(10)
Non-resident aliens described in IRC 410(b)(3)(10)
Employees who are eligible to make elective deferrals to another qualified plan sponsored by the same employer
If any employee who falls under the less than 20 hours per week or student exclusion can make elective deferrals, then all employees who would fall under that exclusion must be allowed to make elective deferrals 403(b) plans may not exclude employees based upon generic classifications such as:
Part-time
Temporary
Seasonal
Adjunct Professor
Collective bargaining unit member
The IRS has been actively examining plans that may have inappropriately excluded eligible employees from participating based upon historical or industry practice. In the past, it was common for colleges to exclude adjunct professors or athletic coaches from participating in their plans. Hospitals sometimes did the same for on-call or casual nurses.
403(b) plan sponsors should review their plan provisions and procedures to ensure they comply with the universal availability requirements.
Schreiber Accounting and Advisory can help you understand how the universal availability requirements may apply to your 403(b) plan. The firm also offers 403(b) and 401(k) plan audit services. Contact the firm for more information.
The 2021 Plan Sponsor's Desk Reference is full of information relevant to HR, accounting, and finance professionals responsible for administering 401(k) and 403(b) defined contribution plans. Download here.
Material discussed is for informational purposes only. It is not to be interpreted as investment, tax, or legal advice. Individual situations vary, and this information should only be relied upon when coordinated with individual professional advice.