(b)lines Ask the Experts – Having More Than One 403(b) Plan and Plan Type

“Our non-union employees participate in a 403(b) plan that provides for employee deferrals and employer contributions. We treat this non-union plan as subject to the Employee Retirement Income Security Act (ERISA). Our union employees participate in an employee deferral only 403(b) plan. We treat this plan as not subject to ERISA. Is this two plan approach permissible?”                                                       

Stacey Bradford, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer: 

Yes. There is no rule in the Internal Revenue Code or ERISA that limits a plan sponsor’s ability to have more than one 403(b) plan. However, the Experts would be remiss in not adding some more detail.

Ever since the final 403(b) regulations were published in 2007 and the Department of Labor (DOL) provided clarification of its interpretation of the non-ERISA 403(b) plan safe harbor in regulation 2510.3-2(f) in Field Assistance Bulletin 2007-02, many plan sponsors have had to evaluate whether their “deferral only” 403(b) plan was truly exempt from ERISA. For example, it can be difficult to have a single vendor 403(b) plan and still satisfy the safe harbor (see, for example, DOL Field Assistance Bulletin 2010-01, particularly Q&A 16).  As such, the Experts would suggest you look closely at the union plan’s non-ERISA status.

In addition, it is important to evaluate if and how the two plans should be treated for non-discrimination testing. Thankfully, in your case, it sounds like you have a union-only 403(b) plan that is the subject to bona fide collectively bargaining. As such, it appears that your only plan subject to most testing requirements would be your non-union 403(b) plan.

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.