The final 403(b) regulations require that there be a written plan document in place before 2009. Our 403(b) document is available now — and will be available on the 401(k) Portal very soon. (Contact Martha Kirwin at 973-492-1880 for more information.) Below is the second in our series of FAQs on the final 403(b) regulations.

2.         WHAT ARE THE 403(b) ELIGIBILITY RULES?

The Requirements Under Salary Reduction Arrangements
Special nondiscrimination requirements are imposed for salary reduction arrangements.  A tax-deferred arrangement that allows salary reduction contributions is not covered under §403(b) unless the option to make such contributions is made available to employees on a nondiscriminatory basis. All employees of an eligible employer may make deferrals to a §403(b) plan under the universal availability rule.  An employee also has the right to designate §403(b) deferrals as designated Roth contributions if the Plan offers that feature. 

Moreover, the employer cannot require minimum dollar or percentage contributions as a condition of participation other than reasonable de minimis contribution levels.  Employees who participate in an "eligible deferred compensation plan" [as defined in §457, a §401(k) plan, or another §403(b) plan] maintained by the employer that permits salary reduction arrangements, as well as those whose contribution under the plan's maximum percentage would be less than $200, may be excluded from these rules.

A binding salary reduction agreement must be in effect when the amounts contributed are earned, and the agreement must be irrevocable as to compensation earned while it is in effect. 

A §403(b) plan sponsor may require an employee to contribute a fixed percentage of compensation unless the employee affirmatively elects to receive the amount in cash.  Where a newly hired or current employee has an effective opportunity to elect to receive an amount in cash or have that amount contributed by the employer to an annuity contract, those contributions made on the employee's behalf in lieu of cash compensation will not fail to be considered to be made under a salary reduction agreement merely because the contributions are made by negative election. 

The frequency that an employee is permitted to make a salary reduction agreement, the salary to which such an agreement may apply and the ability to revoke such an agreement are determined under the rules applicable to cash or deferred elections under §401(k).