Compliance

IRS Answers Questions About 403(b) Universal Availability Rules

IRS agents discussed student exclusions, the less-than-20-hours-per-week exclusion, eligibility for employer contributions and the once-in-always-in rule.

By Rebecca Moore editors@plansponsor.com | November 10, 2016
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In a follow-up webinar about 403(b) universal availability rules, Internal Revenue Service (IRS) agents answered questions presented by 403(b) practitioners.

Many practitioners had questions about excluding student employees.

Mary Lou Bailey-Funk, senior internal revenue agent, Office of Employee Plans, first answered the question, “If the plan document provides for anniversary of employment commencement date to determine hours of service, does the plan sponsor shift to the plan year for determining hours of service in subsequent periods?” Bailey-Funk said plan sponsors should continue to use anniversary of employment periods for determining hours in subsequent periods. “Plan sponsors can shift to using the plan year, but that must be specified in the plan document,” she said.

As for student employees, the document needs to state that student employees are excluded, and plan sponsors must operate within the terms of the plan, Bailey Funk said.

If students are allowed to participate in the 403(b), but employees who work less than 20 hours a week are excluded, students scheduled for less than 20 hours per week are not excluded. Bailey-Fund said the regulations on the exclusion of students does not condition that exclusion on hours worked.

However, she noted that if a student works more than 20 hours a week of if a student works in the summer and is not enrolled in classes, he or she may be considered an employee.

If adjunct faculty that normally work less than 20 hours a week are excluded, they would become eligible if they work more than 1,000 hours in 12-month period.

NEXT: Less than 20 hours per week exclusion

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