2019: Quarter 3 Newsletter
Salary Reduction Agreement
As your administrative service provider, AFPlanServ monitors yearly contributions for each employee. However, we need your assistance. In order to effectively monitor and ensure contributions are only sent to your approved Providers, we need properly completed and approved Salary Reduction Agreements.
The Salary Reduction Agreement (SRA) authorizes the Employer to withhold a specified amount of compensation from the employee's paycheck for a 403(b) and/or 457(b) account, as well as to send the contribution to the Provider the employee indicated.
The form is required for all employees for whom a 403(b) and/or 457(b) contribution is being deducted. Deductions cannot be remitted without an approved SRA from AFPlanServ.
Additionally, Internal Revenue Service (IRS) best practices indicate that contributions should be remitted to the respective approved Provider as soon as administratively feasible, but no later than the 15th calendar day of the month following the date of deduction. Salary Reduction Agreementâ–ş
Did you know?
Unlike a 403(b) Plan, 457(b) Plan limits do not have to be coordinated with contributions to 401(k) or 403(b) Plans.
That means, if the Plan allows, contributions may be made to a 457(b) Plan even if the annual maximum contribution limit is reached on other retirement plans. So, a participant can contribute $19,000 to a 403(b) Plan and an additional $19,000 to a 457(b) Plan.
Billing Reminder
As part of the administrative services AFPlanServ provides, we want to remind you about the Administrative Service Fee. Per the Administrative Service Agreement between AFPlanServ and you, the Plan Sponsor, payment of fees is required for our administrative services to be provided.
The fee applies to all employees who maintain a balance in their 403(b) Plan account, regardless of employment or contribution status. And payment is required in full.
Please send either a copy of the invoice with your payment or reference the invoice number on your check. This helps ensure your payment is credited correctly. Note: all AFPlanServ payments are due within 30 days from the date the invoice is received unless other arrangements have been approved.
You also have the option to pass the administrative service fees on to your Investment Providers—however, this would become a condition of remaining an approved Provider of your Plan. If a Provider declines to pay the fee, you may pay the fee yourself to avoid losing it as an approved Provider.
To learn more about passing on this fee or if you have questions, please contact us.
Retirement Plan Check-Up
Retirement plans need regular care to keep them operating properly. Your Plan's care should include a regular review of its basic operations. This one-page checklist from the IRS is a quick way to get started.
The checklist is for you to use on a voluntary basis and includes links to a Fix-It Guide with tips on how to find, fix, and avoid potential errors.
Please remember: this checklist isn't a comprehensive review of your Plan, but it is an easy way to get started!
Frequently Asked Questions
Q: May I start, stop, or change a deduction without a Salary Reduction Agreement (SRA)?
A: No. An SRA must be completed by a participant whenever an employee elects to start, stop, or change their 403(b) or 457(b) Plan contribution. An employer may not process a contribution change without a properly executed, signed, and approved SRA.
Q: Are contributions to a 403(b) and 457(b) Plan deducted before or after tax?
A: Either. Contributions to a 403(b) or 457(b) Plan may be deducted on a pre-tax basis and on an after-tax basis if the Plan allows Roth 403(b) and 457(b) contributions, or other after-tax contributions. Please refer to your Plan Document.
Plan Reminders
Transaction processing is the majority of what AFPlanServ provides as your Plan Administrator. We deliver this service not only to relieve burden from you, but also to make sure your Plan stays compliant with the IRC.
Employers must not sign off on transaction requests. All 403(b) or 457(b) Plan transaction requests must be forwarded to AFPlanServ for approval. This enables us to maintain a single library of transaction records in the event of an IRS audit.
Please check the Operational Guidelines to ensure you are adhering to the items listed. If you have a question about these requirements, please contact us.