“The workers in question generally lose their jobs in six months when the project is over, though of course they can work on projects in the future. The work is full-time, so the “normally works less than 20 hours per week “exemption form the universal availability requirement would not work (the vast majority of such employees are expected to work more than 1,000 hours). Is there any way to exclude these employees from the right to make elective deferrals to the 403(b)? These employees are generally offsite and it is thus difficult to communicate with them regarding their right to make elective deferrals to the plan.”
Michael A. Webb, vice president, Cammack Retirement Group, answers:
Unfortunately, there is no specific exclusion for “temporary” employees from the right to make elective deferrals under the universal availability requirement for 403(b). The employees who the plan may exclude from the right to make elective deferrals are quite limited, and includes employees in the following categories:
- Employees who will contribute $200 or less annually;
- Employees who participate in a 401(k) or 457(b) plan, or in another 403(b) plan;
- Nonresident aliens with no U.S. source income;
- Employees who normally work less than 20 hours per week (note that hours MUST be tracked in order to administer this exclusion); and
- Students performing services described in Code §3121(b)(10) (generally, those enrolled in a post-secondary educational institution performing services for that institution).
The “temporary employees” do not appear to fit into any of these categories. Of course, they will likely not defer more than $200 in a year, so it is possible that the first exclusion could be used to indirectly exclude such employees. However, the $200 elective deferral minimum would need to be applied to ALL employees, not just the “temporary” employees in question, and the temporary employees would still need to be provided with an “effective opportunity” to defer more than $200 to the plan in a given year, which means that such employees must still be notified of their right to make elective deferrals to the plan.
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