Ask the Experts February 8, 2011

(b)lines Ask the Experts – When a Deferral is not “Elective”

February 8, 2011 (PLANSPONSOR (b)lines) – “I was told that the “mandatory” salary reduction contribution provided for in my employer’s 403(b) plan does NOT count against the 402(g) elective deferral limit. Is this correct?”
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Michael A. Webb, Vice President, Retirement, Cammack LaRhette Consulting, answers:    

That is correct. The “mandatory” contribution, though it is a salary reduction, is actually NOT an elective deferral. The reason is that Code Section 402(g) and related regulations provide for an exception from the elective deferral limit for so-called “mandatory” salary reduction contributions that are: a) a condition of employment, or b) pursuant to a one-time irrevocable election by the employee at the time of initial eligibility to participate in the salary reduction agreement. The election must be truly irrevocable; if the employee can change his/her mind at any time in the future and be permitted to make the “mandatory” contribution, the contribution would then be considered to be an elective deferral subject to the $16,500 402(g) limit.  

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It should be noted that this “mandatory” contribution is considered to be an employer contribution for nondiscrimination testing purposes, but NOT for tax withholding purposes. Thus, FICA would be withheld from such contributions.  

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. 

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Deals and People February 7, 2011

TRS of Texas Names New Executive Director

February 7, 2011 (PLANSPONSOR.com) - The Teacher Retirement System of Texas (TRS) Board of Trustees has announced the appointment of Brian Guthrie as the system’s new executive director, effective September 1, 2011.
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As TRS executive director, Guthrie will oversee pension plan and related benefits for TRS — the sixth largest public pension fund in the United States — which serves active and retired Texas public education and higher education employees.   

According to the announcement, Guthrie has served as TRS deputy director since September 2008. Previously he was deputy director of the Governor’s Office of Budget, Planning & Policy, Austin.  

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Guthrie obtained a Masters in Public Affairs from the LBJ School of Public Affairs at the University of Texas-Austin and obtained BA’s in Economics and History from Franklin and Marshall College, in Lancaster, Pennsylvania.   

Current TRS Executive Director Ronnie Jung will continue to serve in that capacity until September 2011. Jung has agreed to then serve as executive liaison to the TRS board where he will assist Guthrie and the trustees during a period of transition through January 31, 2012.

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