Application of Nondiscrimination Rules

Q. Are there nondiscrimination rules that apply to employer contributions to employees’ 403(b) accounts?

A. Yes, nongovernmental and non-Church 403(b) plans must satisfy the nondiscrimination requirements for both employer nonelective and matching contributions.
An employer’s nonelective contributions must satisfy all of the following nondiscrimination requirements in the same manner as a qualified plan under Internal Revenue Code Section 401(a):

• Code Section 401(a)(4) – relating to nondiscrimination in contributions and benefits;
• Code Section 410(b) – relating to minimum coverage;
• Code Section 401(a)(17) – limiting the amount of compensation that can be taken into account; and
• Code Section 401(m) – relating to matching and after-tax employee contributions.