THIS INFORMATION APPLIES ONLY TO Non-QCCOS* WHO EXCLUSIVELY USE THE SERVANT SOLUTIONS RETIREMENT PLAN
The Servant Solutions Retirement Plan that your organization provides to your employees is a valuable benefit to retain talented, energetic staff. Servant Solutions will help your organization understand and comply with the regulations so that your organization and retirement plan participants avoid adverse tax consequences.
The IRS published regulations that fully took effect on Jan. 1, 2009. These regulations - which impact all 403(b) plans, including church plans - are not difficult to implement if your organization’s retirement plan is solely with Servant Solutions. Below, you will find explanations of the regulations that impact your organization along with resources that will help you move toward compliance.
Written plan document requirement
Employers that provide a 403(b) plan must maintain written documents that describe all material plan provisions. Your organization must adopt a written plan which conforms to the regulations. The written plan can incorporate materials from other documents such as written policies, employee handbook descriptions and other related documents but the documents that comprise your plan must include all important information, including, but not limited to the following:
- Identification of eligible employees
- Statutory (legal) contributions limits
- Time and form of benefits
- Distribution restrictions
The Servant Solutions Retirement Plan provides general documentation for most of these provisions. However, because each organization has flexibility related to certain plan provisions, your organization must develop and maintain additional written rules and procedures regarding your arrangement that address the following issues:
- Which employees are eligible to participate in the retirement plan; and
- What contributions the organization will make on behalf of its employees.
Servant Solutions makes compliance easy!
To help you with this, Servant Solutions has prepared an Eligibility and Participation Schedule to document the additional written rules and procedures, unique to your organization, that relate to your use of the Servant Solutions Retirement Plan. In order to comply with the regulatory requirements, your organization needs to take the following steps:
Step 1 - Annually review your copy of the Servant Solutions Retirement Plan.
Step 2 - Print, complete and retain a copy of the Eligibility and Participation Schedule to document the additional written rules and procedures, unique to your organization, that must be addressed. This Schedule is considered part of your organization’s retirement plan. You do not have to send this Schedule to Servant Solutions but you do need to be sure to keep an updated copy in your files at all times. And, of course, you will need to be sure that you follow the rules and procedures that you set out in the Schedule.
Universal availability. Certain 403(b) plans are subject to annual retirement plan nondiscrimination testing that demonstrates the plan does not discriminate in favor of highly compensated employees in design or practice. Plans subject to testing include 403(b) plans of employers such as nonprofit hospitals, colleges, universities and some children’s and retirement homes. Under one of these nondiscrimination rules, plans of these employers must satisfy the “universal availability” requirement. In simple terms this means that if you allow one employee to make personal tax-deferred contributions (salary reduction deferrals) to the plan, you must let all employees make personal tax-deferred contributions. Certain limited groups of employees can be excluded from making personal tax-deferred contributions to the plan, and these exclusions must be stated in the written plan document. For example, one of the groups of employees that can be excluded from the universal availability requirement is “employees who normally work fewer than 20 hours per week.” Violation of the universal availability rule is best avoided by allowing all employees to make Participant Before-Tax Contributions (salary reduction deferrals) to the plan.
Effective opportunity required. As a part of the universal availability requirement, the IRS wants to ensure that employers take steps to make all employees aware of their right to participate in the retirement plan. Therefore, the regulations require employers to demonstrate that employees are being provided with “an effective opportunity” to make elective deferrals (personal tax-sheltered contributions). According to the IRS, whether this standard is being met depends on specific “facts and circumstances” such as whether the employer provides ongoing notice to employees of the opportunity to make elective deferrals. In essence, the regulations are sending a message to all employers to make, and continue making, employees aware of the tax deferral opportunities available to them under their retirement plan
Requirement to follow plan terms. As mentioned earlier, all 403(b) plans must be documented in writing. A failure to follow these written plan provisions can result in adverse tax consequences for individual plan participants and/or all plan participants, depending upon the nature of the failure.
If you make contributions to the Servant Solutions Retirement Plan as your sole retirement plan, that is all you have to do. But if you use multiple vendors, or if any contributions were made after 2004 to a 403(b) vendor that was not authorized to receive contributions on January 1, 2009, there are special rules you have to follow. Please review the information prepared for organizations using multiple vendors.
Servant Solutions has been dedicated to enhancing the financial security of our plan participants for well over 60 years. Our employees stand ready to help you. Please contact us or call (800) 844-8983 for additional information.
This information should not be considered tax or legal advice. Servant Solutions stands ready to assist your organization as you work with your legal and tax advisers by providing resource information that you and your adviser may find beneficial.