Do you think this will fly? A non-profit currently sponsors a 401k PSP. They are having trouble with the 401(k) test. Should they consider amending the 401(k) provision out of the plan (making it a PS only plan), then start a non-ERISA 403(b) that accepts only 403(b) contributions? This would solve the 401(k) test, correct?
Thanks
Full Version: non-profit has a 401k, wants to start a 403b
Most non-profits don't pay well enough to have any HCEs, so the fact that this one is having a problem implies that they are both relatively large and have poor participation. Would adding a match help persuade NHCEs to defer? If so, problem solved. If not, adding a safe harbor match should be relatively inexpensive and solve the problem.
Administering both a PSP and a 403(b) sounds expensive incredibly time consuming to me.
Administering both a PSP and a 403(b) sounds expensive incredibly time consuming to me.
QUOTE (K2retire @ Apr 25 2009, 11:08 PM) 
Most non-profits don't pay well enough to have any HCEs, so the fact that this one is having a problem implies that they are both relatively large and have poor participation. Would adding a match help persuade NHCEs to defer? If so, problem solved. If not, adding a safe harbor match should be relatively inexpensive and solve the problem.
Administering both a PSP and a 403(b) sounds expensive incredibly time consuming to me.
Administering both a PSP and a 403(b) sounds expensive incredibly time consuming to me.
What about adding a nonelective contribution source to the 403(b) plan and freezing or terming the 401(k) plan? Fees could be prohibitive to this option but it may end up being less expensive than a SH contribution. Some sponsors don't like matching for people who have terminated either which is what happens with SH contributions.
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