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Scottyd

Forced Contributions

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Hello all,

 

I recieved this question from a reader of my e-newsletter, does anyone know for sure the answer?

 

"I have a somewhat interesting question. I work at a university and am being forced to contribute to our 403 b. The question I have is: can entrance into a 403b be mandatory or employment is terminated? I have asked our HR manager and that's what he told me: "You don't want to be terminated do you?" I have reasons to not enter into this retirement plan--due to a terminal medical condition, and the money afforded to this program could best be put into my pocket now, versus my beneficiaries. Any suggestions?"

 

Thanks for your help,

 

ScottyD

 

P.S. Our very own Dan Otter is speaking today at the Securities Industries Association on the topic of how RSA/LSA would affect 403(b) - wish him luck!!!

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Scotty,

 

I wonder if the reader is a part-time employee (working less than 20 hours per week)? The reason I ask is that the 403(b) plan may be a social security alternative plan that the employer has established for part-time employees.

 

Mike

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Guest Chuck Yanikoski

I am 99% sure that the employee does not have any recourse here. The problem is that if the employees have the right to opt out of the contributions, then they become elective deferrals, and everybody in the plan would then have the mandatory contributions included under the elective deferral limit. As the plan stands now, the mandatory contributions are NOT elective deferrals, and employees may make voluntary contributions up to the full federal limit, in addition to the mandatory contribution.

I think that the only way out might be to amend the plan document so that the contributions are mandatory except for employees with certain demonstrated medical conditions, but even if that worked, the employer is unlikely to want to do that, because (apart from the nuisance of it) then this particular employee's preference would become the rule for everyone.

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