IRS Form 15417-C – In the world of retirement savings, 403(b) plans offer a valuable option for employees of nonprofits, schools, and certain other tax-exempt organizations. These plans allow for tax-deferred growth on contributions, but maintaining compliance with IRS rules is crucial to avoid penalties or disqualification. One key tool for ensuring this compliance is IRS Form 15417-C, which focuses on coverage and nondiscrimination requirements for employer contributions (other than matching contributions) in 403(b) plans. Within this form, Worksheet 5B – Determination of 403(b) Status plays a pivotal role in verifying that your plan meets federal standards.
If you’re an HR professional, plan administrator, or financial advisor managing a 403(b) plan, understanding Worksheet 5B can help you navigate complex regulations like those under Internal Revenue Code (IRC) Section 410(b) for coverage and Section 401(l) for permitted disparities. This SEO-optimized guide breaks down everything you need to know about Worksheet 5B, including its purpose, step-by-step completion instructions, and why it matters for your organization’s retirement program. We’ll draw from official IRS resources to keep you informed with the latest guidance as of 2026.
What Is IRS Form 15417-C?
IRS Form 15417-C is a compliance worksheet designed specifically for 403(b) plans. It helps plan sponsors evaluate whether employer nonelective contributions—those not tied to employee deferrals or matching—meet IRS nondiscrimination and coverage rules. Unlike elective deferrals, which have their own testing under Treas. Reg. § 1.403(b)-5, this form targets “other” employer contributions to ensure they don’t disproportionately favor highly compensated employees (HCEs).
The form is divided into multiple worksheets, but Worksheet 5B zeros in on determining the overall 403(b) status for these contributions. It’s not a tax return but a self-audit tool recommended during plan design, amendments, or IRS audits. The latest version, revised in April 2023, remains current, emphasizing design-based safe harbors and fail-safe corrections.
The Purpose of Worksheet 5B: Ensuring 403(b) Plan Compliance
Worksheet 5B serves as a checklist to confirm your 403(b) plan’s eligibility and adherence to nondiscrimination rules. A “Yes” response to most questions signals compliance, while a “No” flags potential issues requiring correction—such as plan amendments or operational fixes. If an item doesn’t apply (e.g., for governmental plans), mark it “N/A.”
Key goals include:
- Verifying plan applicability (e.g., excluding churches or governments from certain tests).
- Testing coverage under IRC § 410(b).
- Evaluating allocation formulas for uniformity or permitted disparities.
- Ensuring fair access to benefits, rights, and features (BRFs).
- Addressing contributions for former participants.
By completing this worksheet annually or during plan reviews, you safeguard tax-qualified status and avoid excise taxes under IRC § 4979.
Step-by-Step Guide to Completing Worksheet 5B
Follow these sections sequentially, referencing your plan document and participant data. Explanations for “No” answers must be documented for IRS scrutiny.
I. Applicability: Does Worksheet 5B Apply to Your Plan?
Start here to confirm relevance:
- Line a(i): Is it a governmental plan under IRC § 414(d)? If yes, skip the worksheet—governments are exempt.
- Line a(ii): Is the employer a church (IRC § 3121(w)(3)(A)) or qualified church-controlled organization (QCCO, § 3121(w)(3)(B))? If yes, skip.
- Line b: For non-exempt sponsors, confirm the plan offers employer contributions beyond matching. If no, the worksheet ends.
Tip: Non-QCCO employers must proceed if nonelective contributions exist.
II. Coverage: Meeting the 410(b) Minimum Participation Test
Coverage ensures a sufficient percentage of non-highly compensated employees (NHCEs) benefit from contributions.
- Line a: Does the plan include a fail-safe provision for 410(b) failures? This optional language must specify testing methods, corrections (e.g., additional NHCE allocations), and protect participant rights as of year-end.
- Sub-line i: No employer discretion in corrections.
- Sub-line ii: Rights are irrevocable.
If no fail-safe exists, note “N/A.” Inadequate language triggers a “No.”
III. Matching and After-Tax Employee Contributions
- Line a: If your plan includes matching or after-tax contributions, cross-reference Worksheet 11A for those tests. This keeps nonelective and matching evaluations separate.
IV. Employer Contributions Other Than Matching: Testing Allocation Formulas
This core section scrutinizes how contributions are allocated.
- Line a: Does the formula meet the design-based uniform allocation safe harbor? If yes, you’re done here. If no, check permitted disparity.
- Line b (Permitted Disparity): For plans using integration (favoring HCEs up to Social Security limits under IRC § 401(l)):
- i: Uniform integration level ≤ taxable wage base.
- ii: Same base and excess percentages for all.
- iii: Excess ≤ 2x base.
- iv: Difference ≤ maximum disparity (e.g., 5.7% for most plans).
- v: No excess of overall or cumulative limits.
These rules prevent “back-loading” that discriminates against NHCEs.
V. Nondiscriminatory Compensation: Aligning with IRC § 414(s)
Compensation definitions must be consistent and inclusive:
- Line a: For safe harbor formulas, does comp meet § 414(s) (e.g., last year’s W-2 wages)?
- Line b: Same for nondiscrimination testing.
Use safe harbor definitions to simplify compliance.
VI. Benefits, Rights, and Features (BRFs): Fair Access for All
- Line a: Are optional features (e.g., loans, in-service withdrawals) available nondiscriminatorily?
- Line b: No conditioning on elective deferrals.
BRFs must pass the “general test” if not uniformly available.
VII. Former Participants: Post-Employment Contributions
If applicable:
- Line a: Does the plan provide nonelective contributions post-separation?
- Line b: Nondiscriminatory allocation.
- Line c: No cash-out option.
- Line d: Compensation per Treas. Reg. § 1.403(b)-4(d)(1).
- Line e: Limited to 5 years or death.
Cross-check with Worksheet 6A for limits.
Key Definitions and Common Pitfalls in 403(b) Nondiscrimination
- Highly Compensated Employee (HCE): Earnings > $155,000 (2024 threshold; adjusts annually).
- Integration Level: Wage base for Social Security ($168,600 in 2024).
- Fail-Safe Provision: Automatic fix for coverage gaps, reducing audit risks.
Pitfalls include vague plan language or ignoring former employees, leading to disqualification. Always consult a TPA or ERISA attorney for complex plans.
Why Worksheet 5B Matters for Your 403(b) Plan?
Compliance isn’t optional—failing nondiscrimination can result in plan disqualification, taxing all assets as income. For 403(b) sponsors, this worksheet promotes equitable benefits, boosting employee retention in mission-driven sectors like education and healthcare. Regular reviews also prepare you for IRS Employee Plans Compliance Resolution System (EPCRS) corrections if issues arise.
Download and Resources for 403(b) Compliance
Access the full IRS Form 15417-C PDF here to download and complete Worksheet 5B. For broader guidance:
- IRS Publication 571: Tax-Sheltered Annuity Plans.
- Treas. Reg. § 1.403(b)-5: Full nondiscrimination rules.
- Consult IRS.gov/forms-instructions for updates.
By mastering Worksheet 5B, you’ll ensure your 403(b) plan remains a compliant, employee-friendly retirement vehicle. Have questions? Reach out to a qualified advisor today.
Last updated: February 2026. Always verify with official IRS sources for changes.