Action items for employees who are eligible for post-employment contributions

Does your 403(b) or 457(b) plan permit post-employment contributions of unused sick leave and vacation pay?

Under the 403(b) regulations a plan can be set up or amended to accept post-retirement employer contributions (ER) and/or post-severance employee elective deferrals (EE). However, under the 457(b) regulations, a plan can only accept post-severance employee elective deferrals (EE).

If your plan includes either feature, make sure your eligible employees know that they must take the following steps before their employment ends (in some cases before the payout is made available) for payroll to process the contributions. For the specific rules click here.

First and foremost, if the employee doesn't have an account set up with a plan approved investment company where they wish the money to be sent, they must establish one. In addition, they will need to complete one or more of the following forms:

  • For 403(b) plans with a mandatory post-retirement employer (ER) contribution feature, eligible employees need to complete our 403(b) Post Retirement Investment Provider Election Form, if they do not have a pre-existing election on file with us or if they wish the money to be sent to another plan approved investment company.
  • For 403(b) plans offering voluntary post-severance elective (EE) deferrals, eligible employees must execute a one-time Salary Reduction Agreement authorizing the deferral amount before any unused sick leave or vacation pay is made available to them.
  • For 457(b) plans offering voluntary post-severance elective(EE) deferrals, eligible employees must enter into a Deferred Compensation Agreement authorizing the deferral amount before the first day of the month in which the unused sick leave or vacation pay is paid.

You can make 403(b) post-retirement employer (ER) contributions on an employee's behalf for up to five years following the year the employee retires (or is no longer employed by you). Employee elective (EE) deferrals to a 403(b) or 457(b) account must be made by end of the calendar year severance occurs or, if later, within 2-1/2 months after severance of employment. Forms are available by logging in through www.planconnect.com.


Keep those monthly census files coming...it helps keep your plan in compliance

Many compliance risks can be reduced, and in some cases avoided, simply by making sure we have up-to-date and complete census data for ALL your employees, including part-time and seasonal workers.

Missing or out-of-date census data affects our ability to help you maintain a compliant plan. It also prevents us from processing plan contributions, Salary Reduction Agreements and/or transactions in a timely manner. This creates compliance risks—and those risks aren't worth taking.

So be sure to send us monthly census data for all your employees. You can easily and securely upload this information to us through the plan sponsor website at www.planconnect.com.

Visit our ConnectNow page for more information on these and other topics

If you have any questions email us at support@planconnect.com or call us at (800) 923-6669, Monday through Friday from 9:00 am to 5:00 pm ET.
 

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