2021: Quarter 1 Newsletter
Monitoring of Plan Limits
To help ensure that contributions do not exceed the annual allowable limits, AFPlanServ works with you to monitor contribution limits for employees currently participating in your plan.
This monitoring helps lower the risk of having excess contributions and allows for corrective action to be taken prior to the end of the tax year, or as soon as administratively possible. In the event a participant is found to have contributed more than the IRS annual limit, we will notify you, the participant, and the provider that received the contributions to ensure the excess is corrected in a timely manner.
To help reduce the risk of excess contributions and keep your plan compliant, you are responsible for ensuring that a salary reduction agreement is completed by each employee who elects to participate and contribute.
AFPlanServ will review and approve all salary reduction agreements and return copies to you for recordkeeping. You are required to keep a copy of all approved salary reduction agreements on file for each participant currently contributing to your plan. This allows for proper monitoring of contributions and helps provide protection against exceeding the annual contribution limits.
Have you completed your “lookback” test?
If your 403(b) Plan excludes all employees who work an average of 20 hours or less per week—or 1,000 hours or less per year—you must complete two tests to ensure no one is being excluded in error. The first test is completed on the employee’s date of hire, and the second test is a “lookback” test completed each subsequent 12-month period or every plan year.
Ensuring these tests are completed is essential, as improper exclusion of employees who otherwise are eligible to participate can put your plan at risk of non-compliance. If you have immediate questions or concerns, please contact our office.
Multiple 403(b) Providers Benefit Participants
With growing uncertainty about whether pensions can fully cover retirement expenses, 403(b) Plans are becoming more important to teachers. And, according to the National Tax-deferred Savings Association (NTSA), participants benefit from being able to choose between multiple 403(b) providers.*
Districts who offer a choice of multiple providers tend to see greater 403(b) participation. In fact, the American Society of Pension Professionals & Actuaries found that reducing the number of providers hurt participant rates based on case studies in four states.*
Outside vendors offer support with communications, compliance, financial transactions, and recordkeeping. Offering multiple providers can help provide:
- greater familiarity with the plan;
- deeper engagement; and
- higher satisfaction with the plan.
If you would like more information on how to add a new vendor to your 403(b) Plan, please contact us.
Frequently Asked Questions
Q: Will AFPlanServ approve transaction requests for former employees?
A: Yes. Former employees who still have active 403b/457b Plan account balances are still participants of the plan. The balance is considered an asset of the plan and must be approved to be withdrawn, transferred, rolled over, or exchanged. This also applies to approval of plan loans.
Q: Does AFPlanServ require its own paperwork, in addition to my provider's paperwork?
A: AFPlanServ requires its own Plan Loan Approval form to be completed. Each provider may also require its own paperwork for each type of transaction.
Plan Reminders
Each year, AFPlanServ provides a Sample Eligibility Notice to help satisfy the Universal Availability requirements.
You may use it as a template for your custom notification or distribute the sample in its entirety.
Please check the Operational Guidelines to ensure you are adhering to the items listed. If you have any questions, please contact us.
If you need more information about your role as the Plan Sponsor, we're happy to help!