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Employer Contibutions By Seniority

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I'd think you'd be delighted to be working for an employer that want to actually contribute to your 403(b) over and above what you yourself contribute. Any kind of matching funds is money from heaven. Make sure you get it if offered by contributing up to at least the amount they match.


What do you see wrong with your employer rewarding employees for their long service? Is there another way you'd like to reward employees?


Surely your employer is using a "years of service" in the formula for the amount they are going to provide you when you retire?






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Guest Chuck Yanikoski

If your employer is a public school or a church, it is not subject to ERISA non-discrimination rules, and therefore (in the absence of a union contract) there would probably be no solid basis to challenge the formula.


If the employer is a hospital, a 501©(3), or private school or college, however, it generally IS subject to ERISA if employer contributions are being made. This is not my main area of expertise, but I do know that ERISA non-discrimination testing is much simpler for 403(b) than for other kinds of plans. In particular, the main distinction is between Highly Compensated Employees (HCE's), who by definition are people in senior management roles and/or who make over a certain relatively high annual salary (I believe it is $90,000 in 2004, but I might be off a little). If the long-years-of-service group also happens to be the HCE group, then the plan might fail the test. But there is often not a strong correlation along these lines, however, and so even a highly discriminatory plan might not be discriminatory by government definition. And again, if it is a public school or church plan, it generally doesn't matter in any case.


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