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My wife recently set up a new 403b account. Her employer gave her a choice between two 403b account providers. My wife was the first employee to set up a 403b account with one particular provider without a financial adviser as an intermediary. As a result, there was some confusion in getting things set up correctly for making the deposits into the account.

Due to the confusion, her employer made an error and her initial contribution was classified as an Employer Contribution when it should have been an Employee Contribution.

Is this something that is worth taking the trouble to have corrected?

Some additional information:

  • For 2017, my wife will not exceed her $18k overall employee contribution limit, even with this error.
  • She is not a highly compensated employee.
  • The employer does not offer an employer match so employer contributions are not normal for the employer and their vesting schedule is not described anywhere that I can see. However, the contributions in my wife's account appear to be 100% vested.
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    Are employer contributions fully vested from day one? Is she a "highly compensated employee" for purposes of 403(b)'s rules regarding those (broadly, over 120k, or an owner, etc.)? – Joe Nov 13 '17 at 16:45
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Yes, get this fixed.

There is obviously an problem between HR, the payroll company and the 403b provider. You want to make sure that this doesn't become a common mistake that will impact your wife and other employees.

You want to avoid the situation where 2 years from now if your wife leaves the company, they don't return all the initial contribution because the vesting isn't 100%.

You want to avoid a situation where what gets sent to the IRS and what appears on your wife's W2 match reality. That money was a deduction from her paycheck, and it should reflect that. It can also cause an issue for your employer because the reports will show it as an employer expense when it was one your wife paid.

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