Tech Talk: 403(b) Plans and Optional Retirement Plan Provisions

Q. Can a pre-approved 403(b) plan have an optional retirement plan (ORP) provision? Would it fall under the mandatory contributions?

A. ORPs can take on various different components of a 403(b) plan. They are not all the same.

For example, an ORP in the state of Texas is specific to the Texas Code for Institutions for Higher Learning where there is both an employer contribution and employee deferrals. This ORP does not provide for loans or hardship withdrawals, so many institutions set up another 403(b) deferral plan for the employee contribution.

Some ORPs have their own 403(b) pre-approved plan document; others need to be incorporated within a prototype/volume submitter document—and, yes, some pre-approved 403(b)s have language that will incorporate such contributions and refer back to the “plan” for the ORP if there is one.

Mandatory contributions are only those that are coming from employees that are required, and usually an after-tax contribution. But, again, this will depend on the ORP in question and the state law for that state.