It\u2019s an odd mistake, but this is the third time I\u2019ve had to handle it in the last 10 years: representing an employer that was sold a retirement plan that they weren\u2019t supposed to have. Weird? You bet, but it happens and it happens because you have retirement plan providers who made a mistake.<\/p>\n
A union can\u2019t sponsor a 403(b) plan. A government unit can\u2019t start a new 401(k) plan since the 80s. A city housing authority can\u2019t have a 403(b) plan. Yet each time, they had a retirement plan provider that had them sponsor a plan they shouldn\u2019t have had. Mistakes happen, but these are big mistakes. A mistake that requires submission of the plan to the Internal Revenue Service\u2019s Voluntary Compliance Program and the odd outcome is that these plans end up being mothballed and not terminated.<\/p>\n
If you\u2019re a non-government employer, you could have a 401(k) plan. 403(b) plans are for not for profits, schools, and universities. Just make sure your provider knows when you are an ineligible employer.<\/p>\n
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