NTSAA Finds Confusion about Universal Availability

January 11, 2011 (PLANSPONSOR.com) – The National Tax-Sheltered Accounts Association says many 403(b) sponsors still do not know what the minimum requirements are to comply with universal availability rules.

According to NTSAA’s 2010 403(b) Compliance Resolution Summit report, in a workshop facilitated by Steve Banks, TSA Consulting Group, Inc.; Roxanne Marvasti, Esq.; and Teresa Ward, Oppenheimer Funds, Inc., it was noted that fulfilling universal availability under the IRS rules means providing meaningful opportunity, including meaningful notice to employees, and that meaningful notice can or may help increase participation.  

NTSAA recommends that 403(b) sponsors, in consultation with legal counsel, should:  

  • Provide notice of availability at least once a year, and consider more often;  
  • Document the process and procedure for notifying eligible employees;  
  • Consider developing and maintaining a recordkeeping system with respect to such notices, including but not limited to use of a variety of methods so that all eligible employees are made aware of the right to participate;  
  • Consider including in the notice: 
    • Product provider and local financial representative contact information, as well as employer contact information; and  
    • Full enrollment and benefit description; and 
  • Instruct employees on the enrollment process (e.g., employee educational programs made available in both seminars and online). 


In another workshop facilitated by Susan D. Diehl, PenServ Plan Services Inc.; and Carol Gransee, OppenheimerFunds, Inc., it was recommended that sponsors look at multiple options to provide the notification as one may not be viewed as reasonable or meaningful. Options include: benefit fairs, Web site, paystubs and any other method necessary to ensure that all eligible employees receive notification.   

The report warned that meaningful notice is required once a year, but multiple notifications may be required to reach all eligible employees hired throughout the year. If the 1000 hour rule is used to exclude certain employees, sponsors must monitor the hours worked by employees. Noting that the employee is “part-time” is not good enough. 

If Universal Availability requirements are not met, the recommended correction methodology is to fund eligible employees’ accounts that were not provided the option to defer. This contribution is made to the plan as a QNEC (qualified nonelective contribution), so the plan would have to permit employer contributions or be amended to accept employer contributions.