The DOL released to Field Assistance Bulletin 2009-2 on July 20th, which provides much needed Title 1 reporting relief for 403(b) plans. 

So, first of all, our hats off to Ass’t Sec’y Borzi, for what looks to be one of her first public acts, and to the Good Bob Doyle, for showing true leadership in assisting a critical sector of our society which has been unduly burdened at a time their scarce resources are most needed elsewhere.   

Here’s what the relief does:

 The 2009 Plan Year for 403(b) Plans has been recognized as a "Transitional Year."  This means that if an annuity contract or custodial account  to EITHER a former employee or current employee:

  1. was issued before January 1, 2009;
  2. had all contributions, or rights to contributions,  to it cease prior to 1/1/09;
  3. has all of the rights enforceable against the insurer without involvement by the employer; and
  4. holds only fully vested amounts,

assets in that contract will be excludible from the 2009 Form 5500 and 5500-SF.  Even better, those former employees owning those contracts will not need to be counted as participants toward that 100 participant threshold for large plans. (As an aside, there is a technical question about current employees: though they may be excludable by virtue of a pre-2009 contract, they may then be includable because of operation of the universal coverage rule, even if not owning a post 2008 contract).

Pretty incredible. Simple, clear and adminsterable.  Just for kicks, you may want to try to re-read Rev. Proc. 2007-71 again, just to appreciate how valuable the DOL’s guidance really is.

It is not Nirvana by any stretch of the imagination. First of all it is all only transitional, but granted when it is needed the most and in a very timely fashion. We now have time to discuss the nature of permanent relief. Secondly, it is only for reporting purposes, not other Title 1 purposes such as spousal consent and others.

Next, though is a practical problem.  The third requirement mandates that all rights are enforceable without involvement of the employer. In the current environment, with vendors demanding employers’ approval of all distributions from all contracts- even of those deselected vendors with no contributions after 12/31/2008 which employers have otherwise excluded from their plans- employer approval may make those contracts ineligible for exclusion from the 5500 and participant counts.

This is a bit sad, as often employers will sign these vendor imposed forms as a matter of convenience just as a way to help employees who need the money- lending truth to the axiom that no good deed will go unpunished.

Who knows. Perhaps Andy Zuckerman’s fine staff (and they truly are a good bunch) is penning tax relief right now which would mirror that granted by the DOL……

I have updated this with a further blog with the following:


 The DOL’s release of FAB 2009-2 may well more significant than I took at first glance. Soon after blogging on the release of the FAB and how it sets us up to develop a more permanent solution, Ellie Lowder and my colleagues Evan and Monica let me know of a different view: they believe that the relief only make sense if it applies to all years-as the data collection requirements in future years for those old contracts will only get worse, not better. The NTSAA has taken this position in a notice to their members.

The FAB itself is silent on the specifics of its application to future years, and it is clear that the DOL was focusing on the immediate problems posed by the 2009 Form 5500. But I’m now convinced after to talking to a number of colleagues that there is little reason to believe that this same reasoning will not apply to future years.  Should this position hold sway, and I believe it will, this is a pretty incredible move on the part of the DOL . It  addresses the most troubling of the new generation of 403(b) Title 1 issues.

The DOL’s Lisa Alexander and I will be talking about those other pressing 403(b) Title 1 issues at ASPPA’s  "DOL Speaks" in Washington on September 14 and 15. Come join us!