Compliance Checklist

This checklist outlines key compliance areas for a 403(b) plan -- refer to it periodically to make sure your plan conforms to 403(b) regulations.

The checklist is meant to serve as a guide; it is not intended to be a comprehensive list of all 403(b) compliance requirements, so answering “yes” to each question may not mean your plan is 100% compliant.

Consult  your legal counsel or tax advisor to determine the compliance activities and administrative process reviews that best fit your organization’s individual circumstances.

This checklist is generally applicable to public school employers. Information specific to non-ERISA 501(c)(3) non-profit and ERISA employers will be available shortly. If you have questions about your non-ERISA 501(c)(3) non-profit or ERISA plan, contact AXA Equitable at 800 628-6673 or EV.Collections@axa-equitable.com 

I. Plan Setup

1. Are you eligible to sponsor a 403(b) plan? 

To be eligible, you must be a public education employer under IRC 170(b)(1)(A)(ii) (public school, community college, state college/university, or a department of education) or a 501(c)(3) organization.

2. Do you have a procedure in place to monitor plan transactions (e.g.,contributions, contract exchanges, hardship withdrawals, loans, and required minimum distributions) and the universal availability requirement? 

All 403(b) contract exchanges are limited to your plan’s approved investment providers and/or investment providers with whom you have an information sharing agreement. AXA Equitable offers sample information sharing and hold harmless agreements.

3. Have you confirmed your investment providers’ (and, if applicable, your TPA’s) responsibilities in providing copies to all involved parties? 

4. If your plan includes an automatic enrollment feature, have you confirmed that your state’s statutes permit automatic enrollments? 

II. Approved Plan Investment Provider(s)

1. Are your plan’s approved investment providers listed in your written plan? 

Only approved investment providers can receive employee contributions and transfers. To be an “approved” investment provider, the provider must be listed in your written plan (see Section III). 

2. Have you given each of your approved investment providers a list of all your approved providers and a list of all other investment providers with whom you have information sharing agreements?

3. Have you instructed your approved investment providers to:

a. Limit transfers to your plan’s approved investment providers? 

b. Limit exchanges (to or from your 403(b) plan) only to approved investment providers or to investment providers with whom you have information sharing agreements?

4. Do your approved investment providers furnish you—and your TPA, if applicable—with periodic reports or website access to employee data demonstrating that they are performing their compliance-monitoring responsibilities? 

5. Do you have a procedure to add/drop approved investment providers? 

6. Do the annuity contracts and/or custodial accounts available through your plan’s investment providers contain the following provisions, which are required for employee contributions to be considered qualified 403(b) contributions:

a. State the contract is not transferable (annuity contracts only)?

b. State the employee’s 403(b) contribution limits (all contracts)?

c. Include provisions to have an eligible rollover distribution directly transferred to another qualified plan that accepts such distributions or to an IRA (all contracts)?

III. Written Plan

1. Do you have a written plan? 

The written plan does not have to be in a single document; however, the IRS suggests that 403(b) plans with multiple investment providers adopt a single written plan document.

AXA Equitable offers plan documents free of charge for public schools and non-profit 501(c)(3) employers as long as AXA Equitable is an approved provider in their plan. A plan document is also available for ERISA plans for a small fee .

Find out how to obtain a plan document  

Churches and qualified church-controlled organizations (QCCOs) are not required to adopt a written plan unless the plan is established as a 403(b)(9) retirement income account.

2. Does your written plan:

a. Specify all terms and conditions under the plan, such as eligibility, benefits, types of employee contributions permitted (pre-tax, Roth [if available], and catch-up contributions), contribution limits, and distributions? 

b. Include the plan’s requirements on loans, hardship withdrawals, rollovers, exchanges, and transfers? 

c. List all approved investment providers available to receive contributions, exchanges, and plan-to-plan transfers?

d. Identify the party administering your plan i.e., you, a TPA, or other parties?

3. Do you have a procedure in place to amend your written plan to reflect changes in the plan and/or the regulations?

IV. Universal Availability Requirement

1. Is your 403(b) plan available to all eligible employees, including:

a. Full-time and part-time common-law employees who are not eligible to participate in another salary deferral plan you sponsor, such as another 403(b) plan, or a 401(k) or 457(b) plan?

b. Employees who contribute at least $200 per year?

c. Employees who normally work 20 hours or more per week and are either expected to work 1,000 hours or more in their year of hire, or worked 1,000 hours or more in the prior year?

This requires that records be kept on hours worked. (To avoid maintaining records on hours worked, you can simply permit all common-law employees to participate.)

2. Does your plan allow new participants to start contributing to the plan without the need to meet:

a. A service requirement?

b. A minimum age requirement?

403(b) regulations permit a service and/or minimum age requirement for employer contributions (if offered) but not for employee contributions.

3. Do you have a procedure in place to provide employees with both a written notice i.e., an “annual meaningful notice” about their eligibility to participate in the plan and a meaningful opportunity to participate in the plan or make changes to their current contributions at least once a year?

The IRS’s position is that the plan is not actually available if employees are not aware of it. AXA Equitable can provide a sample annual meaningful notice. 

4. Does your written notice (i.e., “annual meaningful notice”) cover:

a. Eligibility requirements (who can and cannot participate in the plan)? 

b. Enrollment procedures (how and when to enroll)?

c. Types of employee contributions permitted (pre-tax, Roth if available, and catch-up contributions)? 

d. How and when contribution amounts can be changed?

e. Sources for additional information, including information on approved investment providers? 

The notice can also satisfy the requirement to provide employees with an effective opportunity to enroll or change contribution elections at least once a year.

5. Do you offer employees access to educational workshops that review your 403(b) plan, enrollment periods, and available investment providers?

While not a requirement, we strongly recommend you conduct workshops at least quarterly. Your local AXA Advisors financial professionals are always available to conduct workshops as well as one-on-one employee enrollment meetings.

V. Administrative Procedures

1. Salary Reduction Agreements

a. Does your salary reduction agreement collect information about employee investments in other pre-tax retirement plans—e.g., other 403(b) plans, 401(k) plans, SIMPLE IRAs, or SARSEPs—which is needed to calculate an employee’s maximum available contribution under your plan?

AXA Equitable can provide you with a sample salary reduction agreement.b. Do you have a procedure in place to:

Retain copies of all current salary reduction agreements?

Reject salary reduction agreements if the contribution levels will exceed deferral limits?

 2. Contributions

Do you have a procedure in place to:

a. Stop accepting employee contributions when employee contribution limits are reached?

b. Stop accepting all contributions for an employee when the IRC 415(c) limit is reached?

c. Obtain and maintain documentation for all catch-up contributions?

The IRS selects one of the three tax years prior to the current tax year for its audits. Therefore, you should retain the documentation for three full years after the year for which it was developed.

d. Remit contributions as soon as administratively reasonable following the date on which the amounts would have otherwise been paid?

Contributions should be remitted no later than the 15th business day of the month following the month contributions were made. In many states, however, statutes require a faster remittance. Check your state statutes to determine if a shorter time frame is required.

e. If applicable, designate employer versus employee contributions?

f. Correct excess contributions?

3. Loans (if permitted in your plan)

a. Does your plan’s loan form collect information on all plan investment providers to whom an employee directs contributions (including contributions to other plans where you permit loans)?

AXA Equitable can provide you with a sample loan request form.b. Do you require your plan’s approved investment providers to respond to loan information inquiries from other approved plan investment providers—or your TPA, if applicable—within five days, so loan requests can be processed on a timely basis?

c. Do you require your investment providers to enforce participant loan repayments and limit aggregate loan amounts as required under IRC 72(p)? 

Defaulted loans or loans in violation of IRC 72(p) may be deemed a taxable distribution and reported as income to the participant.

d. Does your plan prohibit new loans for employees who have outstanding defaulted loans with your 403(b) plan or any other retirement plan you sponsor?

Note, if you permit employees with outstanding defaulted loans to take new loans from your 403(b) plan, you must require that the new loans be repaid through payroll deductions.

4. Hardship Withdrawals (if permitted in your plan)

a. Are your employees required to provide documentation verifying that hardship withdrawal requests meet the definitions and requirements for hardship in the IRC 401(k) regulations?

AXA Equitable's sample hardship withdrawal request form requires such documentation.

b. Is there a procedure in place to have your payroll department suspend voluntary employee contributions to all of your 403(b), 401(k), and 457(b) plans for six months after a hardship withdrawal?  

5. Non-grandfathered Orphan Accounts

Have you made a reasonable, good faith effort to coordinate information sharing for non-grandfathered orphan accounts held by providers that were at one time part of your plan?

A non-grandfathered orphan account is held by a current employee and is either:

• An account for which, between January 1, 2005, and December 31, 2008, you forwarded contributions to an investment provider that, as of January 1, 2009, is neither one of your plan’s approved providers nor a provider with whom you have an information sharing agreement;

• An account in your plan that was exchanged between September 25, 2007, and December 31, 2008, for an account with an investment provider that as of January 1, 2009, is neither one of your plan’s approved providers nor a provider with whom you have an information sharing agreement; or

• An account with an investment provider that after January 1, 2009: (1) is dropped as an approved provider under your plan, (2) continues to receive exchanges from other accounts held by your employees, and (3) does not execute an information sharing agreement with you after being dropped from your plan.

VI. Employer Contributions (if offered)

1. Do state and local laws permit you to make employer contributions to your 403(b) plan?

2. Do any employees for whom you want to make post-employment contributions have contracts that could affect your ability to do so?

For example, a superintendent’s contract may not permit any amendments, or a collective bargaining agreement may require equal treatment for all members.

3. Does your written plan describe your employer contribution guidelines, including:

a. Eligible employees?

b. Employer contributions remain in your control?

c. Employer contribution limits?

Note, for post-employment contributions, if your plan replaces unused sick leave or vacation pay (or other types of severance pay), language needs to be included in your plan specifying that amounts will be made as employer contributions up to the eligible contribution limit and that any balances will be paid to the employee as compensation.

d. For post-employment contributions:

The purpose of the employer contributions?

What employees must do in exchange for the contributions, e.g., retire at a certain time, stay in your employment for a specific time period, etc.?

The need to perform calculations for each eligible employee to determine maximum contribution amounts?

4. If you make post-employment employer contributions, do you ensure that employees do not have a right to elect these contributions in cash?

You cannot give employees a choice between post-retirement contributions or some other arrangement, such as a cash payment. If you do, the IRS would consider the post-retirement contributions to be employee contributions and disallow the contributions.

Employees cannot make contributions after they have severed employment (except from certain types of compensation they would have received had they stayed, and then only if that compensation is paid before the end of the calendar year of severance, or, if later, within 2½ months following severance). Employer contributions are allowed for up to five tax years following the tax year of severance.

GE44480 (rev 3/09)