Elective Deferrals for Adjunct Staff: How to Evaluate 403(b) Eligibility

Determining eligibility for elective deferrals for adjunct staff can be challenging for colleges and universities. Under the IRS’ “universal availability rule” (IRC Section 403(b)(12)(A)(ii))*, if an employer allows any single employee to make elective salary deferrals into a 403(b) retirement plan, that same opportunity must be extended to all employees of the organization, although certain exclusions may apply.

One of those exclusions limits employees who normally work fewer than 20 hours per week from plan participation. However, the difficulty lies in determining how to count hours for adjunct staff whose responsibilities extend beyond classroom instruction.

How can colleges and universities count hours for adjunct staff?

Because adjunct responsibilities may include preparation, grading, office hours, meetings and student support, classroom hours alone may not reflect the employee’s total service. The following three approaches can help an institution evaluate and document its treatment of adjunct staff.

1. Job Duty Method

Under a job-duty method, the institution compares an adjunct employee’s responsibilities with those of an equivalent full-time employee.

An adjunct employee performing approximately half the duties of an equivalent full-time employee would be considered to be working 20 or more hours per week. In this case, the exclusion would not apply, and the employee should be offered the opportunity to make elective deferrals.

The institution should also consider non-classroom duties before reaching an eligibility determination.

2. Payroll Review Method

The payroll review method compares the salaries of adjunct and full-time faculty within the same department. If an adjunct employee’s compensation appears to be unusually high in relation to full-time faculty compensation, the institution should determine whether its hour-counting method, mentioned below, supports classifying the adjunct faculty member instead as an employee who normally works fewer than 20 hours per week.

If that is determined, the employee would not be eligible for plan participation.

3. Hourly Method

The hourly method provides the most direct documentation. The college or university estimates the number of hours a full-time faculty member works. This estimate should include class time, office hours, grading, research committee meetings and time spent meeting with students. Then, that number should be compared with the hours worked by an adjunct faculty member in the same department.

The adjunct’s estimated hours are then expressed as a fraction of that full-time position. That factor would be the basis for applying the “fewer than 20 hours per week” determination.

What should colleges or universities do next?

When evaluating elective deferrals for adjunct staff, colleges and universities should consider the following steps:

• Review the plan document and identify the eligibility provisions that apply to elective deferrals.
• Confirm that adjunct staff are not being excluded solely because of their job classification.
• Review the institution’s method for estimating and documenting hours of service.
• Check whether any employee has failed to meet the part-time exclusion conditions in a prior measurement period.
• Compare the treatment of similarly situated employees and apply the method consistently.
• Work with legal and tax advisers to evaluate the institution’s specific facts and plan terms.

Retirement plans for Christian colleges and universities require a provider that understands the unique challenges of faith-based higher education. Learn how GuideStone's customized retirement solutions can help your institution care for employees while supporting its mission.

For more information, contact us at Info@GuideStone.org or 1-888-98-GUIDE (1-888-984-8433), Monday through Friday, from 7 a.m. to 6 p.m. C.T.