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Tag Archives: 403(b)

Correcting the “best guesses” on 403(b) Plan terms by using the first 403(b) Remedial Amendment Period under Rev Proc 2017-18

Posted in 403(b)
The IRS decided to handle this "best guess" period by announcing that any 403(b) document could be corrected under a new, special 403(b) Remedial Amendment Program, by that new RAP's end date. It announced that the beginning of the RAP was the required adoption date for 403(b) plan documents (generally, January 1, 2010). The end of the RAP would be announced once the IRS approves its first set of pre-approved 403(b) documents. Once those first pre-approved documents are released, the IRS promised to announce the "end date." It has now done that, with Rev Proc 2017-18 announcement of March 31, 2020 as the end of the RAP-which also suggest that the pre-approved documents will be released by that date. … Continue Reading

A Potential Impact of the 403(b) University Lawsuits on 401(k) Self Directed Brokerage Accounts

Posted in 403(b), Fiduciary Issues
There is a potential impact of the 403(b) University Lawsuits on the ability of 401(k) plans to maintain self-directed brokerage accounts. These 403(b) plans, with their wide variety of investments which are subject only to the control of the participants, are essentially structured in the same manner as SBDAs (without many of the security law protections that are given 403(b) participants). Should the plaintiffs succeed in their calms that it was imprudent to permit employees the ability to invest in a wide range of securities without fiduciary oversight, this may well be the death knell of SBDAs.… Continue Reading

403(b) Policy Loan’s Continued Form 5500 Reporting Problem

Posted in Uncategorized
One of the more intractable issues with which ERISA 403(b) plans sponsors must deal with every year arises from the “policy loans” issued by insurance carriers under the 403(b) annuity contracts held under the plans. There is simply no good way to report these loans on the Form 5500, and the newly proposed Form 5500 changes do not address this ongoing issue.… Continue Reading

Auditing Distributed 403(b) (and 401(a)) Contracts

Posted in 403(b), Lifetime Income, Plan Administration
How do you audit a 403(b) in-kind distribution? There is no financial transaction, no cash changes hands, there is no change in investments. It really is only a nominal change in the records of the insurer. Yet, somehow, GAAP requires that the "transaction" be verified. There is no answer, yet, to this question, which means the industries (that is, auditors, insurers, and lawyers) will be pressed for finding a standardized approach for bringing audit certainty to this process. It even becomes a bigger issue than 403(b)s: QLACs and other distributed annuity contracts are all able to be distributed as "in-kind" distributions from 401(a) plans as well, and there is no acceptable "recordkeeping" method to audit.… Continue Reading

403(b) and the Fiduciary Rule

Posted in 403(b), Fiduciary Issues
As in all things 403(b), it seems, retirement rules of generally applicability take unusual twists when applied to 403(b)plans. The DOL's fiduciary rule is not saved from that same problem. A close look reveals interesting twists in the manner in which the rule affects (or doesn't at all!) 403(b) plans, which simply do not apply to other participant directed defined contribution plans.… Continue Reading

Fiduciary Liability for 403(b) Non-ERISA Plans?

Posted in 403(b), Fiduciary Issues
In what appears to be one of the first reported appeals court cases involving school district liability under state law related to a wrongfully administered 403(b) plan a Wisconsin court found was that an action alleging a failure to exercise ordinary care in the administration of a 403(b) plan, if proven, could be a fiduciary breach under state law. This breach then may entitle the participants relief in state court. … Continue Reading

The 403(b) QLAC

Posted in Lifetime Income, Uncategorized
The QLAC seems to be in the 403(b) “sweet spot”, considering that 403(b) annuities were originally designed to provide lifetime income in the first place. However, as with all things 403(b), however, there are a few unusual twists when trying to put a QLAC in a 403(b) arrangement. Here are a few of the things to consider… Continue Reading

The “Balancing Problem” in Reporting “403(b) Policy Loans” on the Form 5500 Schedule H

Posted in 403(b)
The 403(b) annuity "policy loan" is much different. The cash from the loan is obtained from the insurer's general account, and no investment funds are ever liquidated from the participant's annuity contract. An amount equal to the value of the outstanding value of the loan remains as a "restricted" investment held in one of the annuity contract's investment funds, or in a separate account specially designed to pay a special rate of interest on that investment. The participant has no access to those funds, and the funds are released over time as the loan (with interest) is repaid to the insurer… Continue Reading

About Reporting Those Late Deposits to 403(b) Plans…….

Posted in 403(b)
Though late deferrals to an ERISA 403(b) plan do need to be reported under the Compliance portion of the Form 5500 Schedule H or Schedule I, Form 5330 cannot be filed-in spite of the silence in the Form 5500 instructions. This is because the Tax Code's prohibited transaction rules, Section 4975, do not apply to 403(b) plans-even if it is an ERISA 403(b) plan. Form 5330 is only for plans to which 4975 applies.… Continue Reading

Keeping Your 403(b) Plan In Control

Posted in 403(b)
If you have seen the November 14th edition of the IRS' Employee Plans New, you already know that "internal controls" is the latest catchphrase. And, as the IRS ramps up its audit activity with 403(b) plans, chances are that more IRS auditors will be asking 403(b) sponsors about internal controls for their plans.… Continue Reading

The EPCRS and Audit Test of the 403(b) Regulations

Posted in 403(b), EPCRS
Now with EPCRS, we are told, being on the verge of release, and with 403(b) audits beginning to enter a new, what I would call "normalized" stage, the 2007 regs will truly be put to the test.Where this will have its impact is when you have to drill down and attempt to apply the regs in detail to any particular fact circumstance....… Continue Reading

FAB 2012-2/ Q15’s Impact on 403(b)

Posted in 403(b), Fiduciary Issues
One of the more difficult questions that has arisen under the 404a-5 participant disclosure rules is related to those pesky "old" 403(b) contracts. In the multiple vendor ERISA world, where a number of vendors have been in and out of the plan over decades, the question becomes whether-and to what extent-the 404a-5 disclosures have to… Continue Reading

403(b) Plan Documents: “Planning to Amend,” by Linda Segal Blinn

Posted in 403(b)
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403(b) Fiduciary Challenges Demand Applying ERISA in Unique Way

Posted in 403(b), Uncategorized
So what are we finding as we get down to this nitty gritty of things? Most striking is the unique ways in which ERISA's fiduciary rules will need to be used in their application to ERISA 403(b) plans. It is not that the rules were never there in the past, it is just that the new rules have forced the industry and employers to more closely define their relationships and the duties for which vendors and employers will each be responsible. This process of defining roles have caused us all to look more closely at how the rules apply, in ways we have never done in the past....Let me give you an example...What are the ERISA implications of a fund substitution under individual annuities for the 403(b) plan fiduciary?… Continue Reading

Do 403(b) Distributed Custodial Accounts Currently Exist?

Posted in 403(b)
Our blog of May 26 on "Distributed Custodial Accounts" generated a number of comments, which require a bit of a "follow-on."  Ellie Lowder, one of the grand dames  of the 403(b) world, agreed with my assessment.  She mentioned  that she had discussions with the IRS on this point. Staff  just couldn’t see how distributions of… Continue Reading

Green Book Further Outlines Automatic IRA Similarity to 403(b)

Posted in 403(b), Automatic Workplace Pension
The Green Book, published May 11 by the Treasury Department, contains further details on Obama’s workplace pensions first described in his budget proposals (on which we blogged  in March). See pages 7-9 of the Treasury report for details. It really does create a new scheme of individual pensions, much akin to the 403(b) arrangements of the… Continue Reading

The 403(b) Regs Unintended Consequence: The Freezing of Loans and Hardships in a Time of Crisis

Posted in 403(b)
One of the most unfortunate and unintended consequences of the new 403(b) regulations is the freezing of hardship distributions and loans from contracts of "deselected" vendors, at a time when these funds are needed the most. What at first seemed like an almost esoteric, academic discussion of what to do with contracts which were issued… Continue Reading
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