Forcing a Choice Between Health and 403(b) Match

Q. The school district in which I work is planning to make employer contributions to the 403(b)s of employees who do not need the health insurance benefit. Is that permissible?

A. No, it is not. Giving a choice between a health insurance benefit and a 403(b) employer contribution would trigger the constructive receipt rules, which would cause the value of the normally non-taxable health insurance benefit to be taxable. Additionally, this could create a Code Section 125 plan — and 403(b) plans cannot be included in such a plan.