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403(b) plan participants: Getting “noticed”

Understanding IRS requirements for employers’ annual notice obligation to employees

Written by Linda Segal Blinn

A reminder for public schools and 501(c)(3) organizations with 403(b) plans as year-end approaches – employers have an annual notice obligation to employees to meet Internal Revenue Service (IRS) requirements.

Universal Availability Notice

The Universal Availability rule ensures that if the employer allows one employee to defer salary into the 403(b) plan, all eligible employees will have the same opportunity—except those the law allows to be excluded and the 403(b) plan identifies the employee classification(s) not eligible to make deferrals into the 403(b) plan.

Employee deferrals (and Roth 403(b) contributions, if permitted under the 403(b) plan document) to a 403(b) plan are considered nondiscriminatory if:

  • An employee (with certain limited exceptions) has the ability to defer compensation of at least $200 per year into the 403(b) plan; and
  • The employer provides notice of the ability to make such contributions to the 403(b) plan to all eligible employees (regardless of whether they are currently participating in the 403(b) plan) at least once a year. 

What should the 403(b) Universal Availability Notice include?

This “Universal Availability” notice must inform employees of:

  • The opportunity to make elective deferrals (and/or Roth 403(b) contributions, if permitted under the employer’s 403(b) plan document);
  • The time to make an election;
  • Plan rules regarding when and how often during the year employees may change their current election; and
  • The maximum amount permitted to be deferred to the 403(b) plan.

Universal Availability Notice timing matters

According to the IRS, the notice that the employer provides must be a meaningful notice. That means the timing of the notice should be reasonably calculated, so the employee receives and has a reasonable amount of time to decide whether and how much to defer.  

How can the Universal Availability Notice be delivered?

There is no one preferred means of providing the Universal Availability Notice. An email notice from the employer may be one option, but this approach presumes that all employees have access during the work day to employer email. If employees (such as custodial staff, cafeteria workers or grounds crew) do not have access to such emails during the work day, an employer may want to consider an alternate means of notice for such employees – perhaps a payroll stuffer or some other form of a paper notice.

Annual Additions Contribution Limit Notice

If the employer has adopted an IRS pre-approved 403(b) plan document, the IRS requires the employer provide an additional notice once a year to 403(b) plan participants. This notice — the Annual Additions Contribution Limit Notice— is designed to monitor the IRS annual additions contribution limit. 

In general, the IRS annual additions contribution limit takes into account all contributions (other than the age 50+ catch-up contribution) allocated to a participant account under the 403(b) plan. In 2021, this limit is 100% of compensation up to $58,000 and is subject to annual IRS cost-of-living adjustments.

However, there are circumstances where the IRS rule requires other plans to be aggregated with this employer’s 403(b) plan for this limit – namely, contributions allocated to:

  • Any other 403(b) plans in which the individual participates, regardless of whether that 403(b) plan is offered by the same or a different employer; and
  • Any other defined contribution 401 plan or simplified employee pension plan in which the individual participates, if that individual has more than a 50% ownership interest in the employer sponsoring that defined contribution plan.

What’s the purpose of the Annual Contribution Limit Notice?

The purpose of the Annual Contribution Limit Notice is to remind individuals who participate in other plans during the year that they may need to provide their 403(b) plan sponsor with information about these additional contributions made outside of the 403(b) plan. This is to assist the employer in monitoring the IRS annual additions contributions limit. IRS rules provide that any excess over that year’s annual additions contribution limit must be a corrective distribution from the 403(b) plan by the end of the year in which the excess occurred.

Best practices for providing annual notices

  • Keep it simple.  Consider combining both the universal availability notice and the annual additions contribution notice with other information (such as a code of conduct) that an employer sends annually to their employees. For new employees, these notices may be included in paperwork (their W-4, benefit elections, and the like) provided to new hires.
  • Save the documentation. If the IRS were to audit the 403(b) plan, they may ask to see what notices were provided and a census list of those employees to whom those notices were sent. Remember that that IRS generally audits three years back from the current tax year, so be sure to retain records at least three years from the current tax year.

If you have questions or would like assistance, reach out to your Voya Relationship Manager.


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This information is provided by Voya for your education only. Neither Voya nor its representatives offer tax or legal advice. Please consult your tax or legal advisor before making a tax-related investment/insurance decision.

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