It is a very common practice in the 403(b) market for an employer to specifically identify the percentage of compensation it will deposit as an employer contribution to their 403(b) plan: percentages as high as 8, 10 or 12% are not uncommon, especially in higher education. There had been a raging debate in the past as to whether or not this practice of identifying a specific percentage of compensation as the employer formula made the plan a “money purchase plan.” It has been typical for 401(a) plan sponsors to treat plans with set percentage of compensation as “Money Purchase Plans”, where the employer has not reserved the right to, instead, make it a discretionary profit-sharing contribution. But does this rule apply to 403(b) plans?

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