The structure and the language used by the drafters of the CARE Act in their crafting of the new participant loan repayment suspension rules seem to be both rare and stunningly broad: it appears to mandate, as a matter of federal law, that each loan repayment due through December 31, 2020  by COVID qualifying participants are suspended for one year.

This is actually a big deal. Section 2202(b)(2) of the CARES act, which mandates the suspension, did fool with the amortization schedules, or the timing and taxation of defaults under  Section 72(p) of the Tax Code, which is the section which governs the tax aspects of loans. In fact, it did not amend Section 72(p) at all.  Nor did it amend any part of ERISA Section 408(b)(1), which hold the ERISA rules governing loans.
Continue Reading

Under Section 112 of the SECURE Act, sponsors of “cash or deferred arrangements”  arrangements must allow long-term employees working more than 500 but less than 1,000 hours per year to make elective deferrals to their plans. At first glance, one may be under the mistaken impression that this is a rule which applies to all elective deferral plans, whether they be 401(k) plans, 403(b) plans or 457(b) governmental plans.  But impression is likely wrong: the statute, by its terms,  clearly only applies to elective deferrals under 401(k) plans, not 403(b) or other plans.
Continue Reading

One of the most important rules which really hasn’t gotten a lot of press is the very new rule under Rev Proc 2019-39 that any “discretionary” 403(b) amendment must-as of January 1, 2020- be adopted by the end of the plan year in which the change to the plan’s operation was made (a “discretionary” amendment, by the way, is one which not required by law).This is actually a very significant change, and one which should not be overlooked.
Continue Reading

Code Section 402(g)(7) seems to have a gift for certain 403(b) plan sponsors (that is, for “qualified organizations, being educational organizations, hospitals, home health service agencies, health and welfare service agency, church, or convention or association of churches): the annual elective deferral limit for participants in these plans with “15 years of service” with the qualified organization these plans can be as much as $3,000 greater than the existing limit for everyone else, up to a lifetime maximum of $15,000. You should, however, pause at that moment, and consider the details of what it takes to be able to support providing this benefit. It’s not what it seems to be, and it truly has become an “attractive nuisance.”
Continue Reading

Those organizations which do take advantage of the Student FICA Exclusion are often well versed in its use, but that knowledge may or may not spill over into those responsible for making plan document choices under the 403(b) plan. It is too easy sometimes to simply choose that exclusion without recognizing the details of that exclusion-especially when the employer is also choosing to exclude “students” (and not necessarily just those with the FICA exemption) from receiving any employer contributions, and may want to exclude all student employees from making elective deferrals.

Continue Reading

It has now been a dozen years since the IRS issued Revenue Procedure 2007-71, which was written in response to the logistical difficulties which arose from the mammoth changes imposed by the 2007 changes to the 403(b) regulation. The value of this  Rev Proc endures; and is particularly helpful when plans restate their 403(b) plan docs and need to do things like name their vendors;  have Information Sharing Agreements; and try to make plan redesign decisions.
Continue Reading

DOL’s new Field assistance Bulletin, 2019-01 is designed to correct common MEP Form 5500 filing issues. The most telling stories about this FAB is that (1) it establishes the data  groundwork that both the DOL and the IRS need to determine what requirements will need to be imposed when RESA and SECURE (or their successors) eventually pass; and (2) for those who argued that this data is somehow an unwarranted imposition of an administrative burden on MEP operations need to be prepared, I think, for a substantial new set of regulations over time designed so that the agencies have sufficient information to fulfill their mandate.
Continue Reading

It is a very common practice in the 403(b) market for an employer to specifically identify the percentage of compensation it will deposit as an employer contribution to their 403(b) plan: percentages as high as 8, 10 or 12% are not uncommon, especially in higher education. There had been a raging debate in the past as to whether or not this practice of identifying a specific percentage of compensation as the employer formula made the plan a “money purchase plan.” It has been typical for 401(a) plan sponsors to treat plans with set percentage of compensation as “Money Purchase Plans”, where the employer has not reserved the right to, instead, make it a discretionary profit-sharing contribution. But does this rule apply to 403(b) plans?

Continue Reading

The Portman-Cardin Bill, the “Retirement Security and Savings Act of 2019,” introduces sweeping changes to 403(b) plans by expanding their investment universe. These changes, however, also required modification to the Securities Laws otherwise applicable to 403(b) plans in order for them to work. A few, critical, issues have gone unanswered in the legislation, and there are a number of transition issues which we will have to be addressed.
Continue Reading