A public school district is setting up a 403(B) plan for administrators. The district will be providing a matching contribution which will vest over time. After 3 years, the district's contribution will be 60% vested. After 4 years, it will be 80% invested. After 5 years, it will be 100% vested. The District was told to set up two accounts for the 403(B) contributions. The administrator's contributions would go into one account and the District's contributions would go into the other account.

The District has asked whether it has to file the simplified ERISA 5500 form. I know that generally a public school district's plan would not be subject to ERISA because it would be considered a governmental plan. Does this situation change that general rule?

What about the other employees? Do they have a 403b of their own? Does it also provide for an employer match?

So long as a governmental entity is maintaining the plan, and it is only for governmental employees, it is exempt from the Form 5500 regardless of whether it contains employee salary reduction contributions, employer contributions, or both.

The more important question, though, is whether there is a 403(B) plan for non-administrative employees that at least permits employee salary reduction contributions. (The plan for the other employees need not provide for the match.) If not, the plan for administrators would violate the "universal availability" rule of Code section 403(B)(12), which is the only nondiscrimination rule that still applies to state and local government plans.

The school district also has a 403(B) plan for the teachers with a matching contribution by the district after the teacher has completed so many years of service. Unlike the administrators' plan, however, the district's contribution vests immediately rather than over time. Thanks so much for the information.

Are the employees also covered by a public employee retirement system?

Peace,
Joel L. Frank

Yes, they are also covered by a public employee retirement system.