A 403(b) label, salary reduction, or tax-exempt employer status does not decide §412. First determine whether the arrangement is an employee pension benefit plan established or maintained by an employer; then test Title I, Part 4, property, handling, exemptions, and compliant coverage. 29 C.F.R. §2510.3-2 29 U.S.C. §1002 29 U.S.C. §1112
The retirement-plan guide places this 403(b) analysis alongside the other retirement plan routes.
Start with the facts, not the plan label
- 1Confirm an employee pension benefit plan exists.
- 2Test Title I coverage and then Part 4 applicability.
- 3Identify plan funds or other property.
- 4Identify each natural person whose actual authority creates a risk of loss.
- 5Test any person- or institution-specific exemption.
- 6Only then calculate amount, confirm form, and recheck live surety and filing materials.
Governmental, church, and private-employer routes
A governmental plan is excluded from Title I, and a church plan is excluded unless an election under IRC §410(d) applies. If either exclusion applies on the facts, §412 does not apply because Title I does not apply. A private employer’s 403(b) can be Title I-covered, but still needs the remaining property and handler analysis. Use the governmental and church plan guide for that classification and election review. 29 U.S.C. §1002 29 U.S.C. §1003 Internal Revenue Service, IRC §410(d) discussion FAB 2007-02
The salary-reduction safe harbor requires every condition
A 403(b) annuity or custodial-account program funded through salary reduction or foregone salary is not established or maintained by the employer only if it meets every condition in 29 C.F.R. §2510.3-2(f): complete voluntariness; rights enforceable solely by the employee, beneficiary, or authorized representative; only listed, limited employer functions; and no direct or indirect consideration or compensation to the employer other than reasonable compensation to cover expenses the employer properly and actually incurs while performing its duties under the covered salary-reduction or foregone-salary-increase agreements. 29 C.F.R. §2510.3-2
Salary reduction alone is insufficient. Actual operation matters: discretionary employer determinations concerning transfers, distributions, hardship withdrawals, QDROs, loans, or eligibility are examples DOL identifies as outside the safe harbor. FAB 2007-02
When a Title I 403(b) has property
For a Title I-covered arrangement, identify funds or property and each natural person who can create a fraud-or-dishonesty loss. A custodian or provider’s possible institutional exemption is person-specific; it does not answer whether employer or committee personnel handle property. 29 C.F.R. Part 2580 29 C.F.R. Part 2580, Subpart F
The participant contributions guide addresses the timing, property, and handling questions raised by salary-reduction contributions.
“Handling” is a functional, natural-person test: it can include custody, transfer power, disbursement or signature authority, final investment authority, or supervisory responsibility over handling functions. Physical contact alone is not the test, and controls can affect the risk analysis; they are not an independent exemption. 29 C.F.R. §2580.412-6 FAB 2008-04, Q5–Q8 and Q18–Q21 Use the functional handling guide for a role-by-role review.
Complete the review
If the facts reach §412, calculate protection from the amount each nonexempt handler handled—not automatically from year-end assets—and verify the bond’s form and no-deductible requirement. Confirm the surety against Treasury’s live list and use the instructions for the applicable Form 5500 filing year. 29 U.S.C. §1112 29 C.F.R. §2580.412-11 U.S. Department of the Treasury U.S. Department of Labor, Part VI, line 9d
See the requirements guide for form and surety review and the coverage guide for the calculation method.
For shared, blanket, or scheduled coverage, see the multiple-plans guide to evaluate each plan's available protection. Complete the annual renewal review when handlers, amounts, terms, plans, or reporting facts change.