IRC 403(b) Tax-Sheltered Annuity Plans – Written Program: Optional Provisions
A written 403(b) program may contain optional provisions and all material terms and conditions related to these provisions. The following are examples of optional provisions:
- Automatic contribution arrangements (automatic enrollment) – Allows an employer to automatically enroll eligible employees in its plan unless an employee elects otherwise.
- Designated Roth accounts – Allows employees to designate elective deferrals as designated Roth contributions (which are included in gross income), rather than traditional, pre-tax elective contributions.
- In-service contract exchanges – The plan may limit contract exchanges to vendors approved under the plan. The plan can only permit contract exchanges from a plan vendor to non-plan vendor if the non-plan vendor enters into an information sharing agreement.
- Plan-to-plan transfers – Allows current and former employees to make plan-to-plan transfers only under the following conditions:
- the receiving plan permits transfers;
- the participant’s benefit after the transfer is at least equal to the prior benefit; and
- the receiving plan’s distribution restrictions are at least as stringent as those of the transferor plan.
- Elective deferral catch-up contributions:
- Five-year employer contribution provision for retired/terminated employees – Nonelective employer contributions may be made for up to 5 years following an employee’s severance of employment but these contributions are subject to nondiscrimination testing (except for governmental plans) and annual contribution limits.
- Loans – Must limit the maximum amount that can be borrowed to the lesser of:
- 50% of vested account balance or $10,000 (whichever is greater); or
If the plan allows loans, employers must provide plan vendors with adequate information to administer the loans properly.
- Hardship distributions – Allows distribution of elective deferrals if stated criteria are met. Employers must provide plan vendors with adequate information to administer the distributions properly, including the criteria for making the hardship distributions.
- Employer’s right to terminate the plan – Must include provisions allowing the employer to eliminate future contributions for existing participants and allow a distribution of accumulated benefits with a right to roll over eligible rollover distributions to an eligible retirement plan or an IRA.
- Sample Plan Provisions – To assist in drafting 403(b) prototype plans
- Model Plan Language for Public Schools – Provisions that public schools may use to draft a written program that reflects the final 403(b) regulation’s requirements Other types of eligible employers may also use tailor the model language to use for their 403(b) plans.
- Recent Guidance Affecting 403(b) Plans
- 403(b) Plan and Related Publications
- Frequently Asked Questions – 403(b) Tax-Sheltered Annuity Plans
- Retirement Plans FAQs – About automatic enrollment, loans, hardship distributions, designated Roth accounts and more