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Employer Contribution

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I now have another question.

 

Does anyone know the rules regarding empoyer contribution in a 403 b?

 

The organization I am working for would like to contribute an amount that is the same for all emplyees regardless of their income.

 

I have read alot of matching funds, but my organization would not be interested in that.

 

Does anyone have any information on this?

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There are two issues, discrimination and limitations.

 

The discrimination one is very easy. Not a problem.

 

The limitation issue could be a problem, depending on demographics. The basic limitation is 100% of earned income for the last year of service. Unless the determination is close, think of earned income as gross compensation. The last year of service is not the last calendar year, it's the period ending at the end of the plan year and looking back on full time equivalent year. This means part-timers get a higher limit. There is a special rule for church plans and the normal 414(v) catch-up is available.

 

Because the special rules generally increase the limitation, the quickest way to check is to look at current year earned income. If everybody's OK, you're done; if not, look more closely. Then, when you announce it, say something like "The Internal Revenue Code limits the amounts we can put into ____________, and we are required to apply those limits."

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So what you are saying is that the employer cap is as much as one has earned thus far? For example, if an emplyee starts to work in November and this plan will take affect in December, the emplyer can only contribute as much as this employee has made till December?

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