Provide mandatory notices at enrollment for universal availability.
All 403(b) public education employers must follow the rules outlined in Internal Revenue Code Section 403(b)(12)(A)(ii) which are applicable to voluntary employee contributions to the 403(b) plan.
Essentially, if any employee is given the opportunity to participate in making voluntary salary reduction contributions, then almost all employees must be given the same opportunity. Employees must be eligible to make voluntary contributions no later than 60 days after they are hired or sooner depending on the 403(b) plan document.
The only employees that can be excluded from the opportunity to make voluntary contributions are those described above. In order to satisfy this requirement a “meaningful” notice must be provided to employees regarding their availability of deferring into the plan at least annually.
A model written notice should include:
- identification of the eligibility requirements;
- the enrollment procedures;
- the types of employee contributions available;
- how and when contribution amounts can be changed; and
- information on approved investment providers.
It is also recommended that one keep a record of the notice and a documented procedure for providing the notice. Employers should also consider implementing multiple methods to provide notice; examples include:
- employee education sessions on 403(b) plans,
- bulletin board flyers,
- payroll stuffers,
- new employee orientation materials; and
- employee handbooks.
Signatures are not required, but keep in mind that the IRS on audit is looking for proof of receipt; therefore, a best practice may be some kind of employee sign off of receipt or possibility at any educational event.
Provide other required notices at enrollment, such as “deemed” control group (owning outside business).
Editor’s Note: This is an occasional feature in the NTSA Advisor. This tip is taken from the 403(b) Plan Sponsor Guide, which is being made available to school districts nationally to assist them in understanding how to improve 403(b) plan participation and savings rates to help employees achieve a comfortable and timely retirement.
The 403(b) Plan Sponsor Guide is part of the content contained in the NTSA Certified Retirement Education Specialist (CRES) materials. The NTSA Certified Retirement Education Specialist (CRES) program and designation has been developed in order to equip advisors to be qualified and available to teach the NTSA educational program, which is designed to provide teachers with the basics of planning for retirement and improve their retirement readiness. More information about CRES is available here.
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