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Eligibility Periods for 403(b) Plan Deferrals

Q. Can a non-church 403(b) plan require that eligible employees fulfill a 90-day eligibility period before they can begin deferring into the plan?

I have always understood this to be as soon as administratively possible and that some employers provide up to 30 days after notice of eligibility is provided. There is a lot of information about this on the web, but none of it is really conclusive.

A. Before the final 403(b) regulations were issued in 2007, the IRS indicated verbally that 90 days for an entry date was probably ok, but only if the employer imposed a similar period for all employee benefits. When the IRS issued their sample plan language for 403(b)s (LRMs), the “entry date” language was inserted for the first time that indicated basically a 60-day entry – provide the enrollment material within 30 days of hire, and then permit the employee to take another 30 days to decide whether to defer or not. The IRS has permitted the new plans to have up to a 60 days entry. The problem is how to correct the 90 days that many employers used before the new IRS-approved plans. It is something that must at least be highlighted in the restatement recap page of the Adoption Agreement and the employer should know that they cannot use the 90 days at least from the restated year forward. The NTSA Government Affairs Committee has sent the IRS comments on this and potentially other restatement issues, but has not heard back as of this writing in January 2017.