Nondiscrimination

Our TDA plan excludes certain employees from participation because they are scheduled to work less than 20 hours. What happens if we discover they have worked 1,000 hours in a given year?

If, on the date of hire, an employee is expected to work less than 1,000 hours in the year, but they actually end up working more than 1,000 hours for that first year, you’re okay. But you will not be able to exclude an employee under the 20-hour rule if, in fact, they actually worked more than 1,000 hours in any previous year.

We have a safe harbor plan and do not have to do the nondiscrimination testing. Will these new regulations require us to start testing?

There are a number of safe harbors. There are safe harbor plans for noncontributory (employer-funded) 403(b) plans under Notice 89-23, which are referred to as the disparity safe harbors. If you satisfy one of those, you satisfy all your nondiscrimination testing requirements for years prior to 2009. Those safe harbors will be eliminated beginning in 2009. However, other safe harbors are available for contributory plans to satisfy matching test requirements, and those safe harbors continue to apply. They have not been repealed by the final 403(b) regulation.

Next: Contribution Limits - 15 Year Catch-Up And Age 50+ Catch-Up >

© 2013 and prior years, Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), New York, NY 10017