Trade Publication Article

IRS Announces Transition Relief for 403(b) Plan Exclusions of Part-Time Employees

Ferguson-Allen, Audra J, Sears, Christopher S, Sciscoe, Schulstad Tara, Gauss, Robert L, Merlau, Raven

2019

Overview

[...]the employee could not be properly excluded from the 403(b) plan for 2013, because she worked at least 1,000 hours during the preceding 12-month exclusion period. [...]under the OIAI rule, the employee cannot be excluded from the 403(b) plan under the part-time exclusion for any year after 2012. TRANSITION RELIEF In 2015, the IRS issued sample plan document provisions - referred to as listings of required modifications or LRMs - for 403(b) plans, which made clear that the IRS interpreted Treasury Regulation 1.403(b)-5(b)(4)(iii)(B) to include the OIAI rule. Since LRMs are directed to drafters of pre-approved plans, many employers sponsoring individually designed plans were still not aware of the IRS' interpretation. [...]if Employee A started on June 1, 2015, and Employee B started on August 21, 2015, the relief period ends on May 31, 2019 for Employee A and on August 20, 2019 for Employee B. The relief provided in Notice 2018-95 applies to both operational errors and plan document errors. * Operational Errors: During the transition relief period, a plan will not be treated as failing to satisfy the conditions of the part-time employee exclusion merely for failing to apply the OIAI rule correctly. * Plan Document Errors: Sponsors of individually designed plans have until March 31, 2020 to correct errors in their plan document regarding the OIAI rule.

• Publisher: Aspen Publishers, Inc
• Subject: Allen, Robert L / Employees / Employers / Health savings accounts / Part time employment