The efforts to get some sort of handle on how to review, assess and implement DC lifetime income programs is very reminiscent, to me, of my experiences following the system-wide impacts following the fundamental changes introduced by the 2007 403(b) regulations from the IRS-along with the rippling effect they had on the application of DOL
Let’s face it. Annuities generally are not well received in much of the retirement plan adviser community. From the historical impression that “annuities are sold, not bought;” to some advisers perceived baggage associated with being that ghastly “licensed insurance agent;” to the historically “salty” nature of a number of retail annuities; there is a lingering
The IRS’s 2007 403(b) regulations fundamentally altered the 403(b) marketplace. The imposition by of those regulations of greater responsibility on 403(b) plan sponsors for maintaining the continued tax favored status of their plans triggered, among other things, efforts by a number of employers, employer related groups and advisers to attempt to consolidate both the compliance
Many practitioners will point to the 2007 403(b) regs (the “new regs” as many of us often still call them, 16 years later…) as being a real seminal moment in the market, and probably rightfully so. However, an even more fundamental development occurred some 7 or 8 years earlier, which still has deep reverberations in
One of the inevitable results of Congress’s failure to cobble together some sort of compromise on what the most suitable “Securities Fix” would be for the 403(b) CIT is a flurry of activity to find some way to craft a solution which would permit 403(b) plans’ investments in 81-100 trusts without a statutory fix. From
One of the more curious circumstances under SECURE 2.0 arises from Act Section 128, which purports to permit 403(b) plan custodial accounts to invest in interests in Collective Investment Trusts (CITs), referred to as “81-100” group trusts in the Act.
Section 128 fixed that part of problem, as it amended the Code to permit the investment of 403(b) assets in group trusts, alongside mutual funds. But, as the Senate Finance Committee noted in its own Committee Report to the EARN Act, “In order to permit 403(b) plans to participate in a group trust, certain revisions to the securities laws will be required.” Those necessary revisions, however, never made it into SECURE 2.0
Continue Reading Secure 2.0’s Unresolved 403(b) CIT Securities Law Issue
When we assess how to implement the tremendous changes that we see on the horizon, whether it be implementing unique lifetime income vehicles, PEPs, collective trusts, or any other of the sort of the innovative programs being develop which are designed to enhance retirement security. Putting them all into play requires attention to this obscure detail.
Continue Reading The “Entity” Difference Between 403(b) and 401(a) Plans
Congress is taking a well crafted, though pretty unusual, approach to the manner in which it has chosen to allow 403(b) plans to participate in PEPs. It is doing so in a way which seems to be a recognition of the impact of the details that associate to these sorts of dramatic changes. What is noteworthy is that 403(b) PEPs are going to be enabled through changes to 403(b), and not by simply including them in the definitional sections of 413(e), and through changes to ERISA’s PEP language under Sections 3(43) and 3(44). This is critically important because had Congress chosen to simply amend 413(e), it would have opened a Pandora’s box of details which would have demanded clumsy (and perhaps extensive) regulatory fixes.
Continue Reading SECURE 2.0’s 403(b) PEP Rules Will Be, Well, Different…..
With all of the current focus on unique programs designed to enhance the attractiveness to participants and fiduciaries of adopting lifetime income programs under defined contribution plans, there is little discussion about how all of this plays out in the 403(b) market. Guarantee lifetime payouts from 403(b) annuity contracts are still alive and well, particularly in the higher eduction market which is still dominated by TIAA and its insurance products. However, with the the now-decade-long-shift in the 403(b) market to the mutual fund based group custodial arrangements designed to mimic 401(k), where do those new lifetime income programs fit?
Continue Reading 403(b) and Lifetime Income
You may’ve noticed that the SECURE Act introduced yet another new twist to the 403(b) world: the Qualified Plan Distribution Annuity Contract (“QPDAC”-you may want to look at my prior blog related to these lifetime income acronyms). Its not that Congress was singly out 403(b) plans, as 401(a) and 457(b) plansnow also have the ability to distribute QPDAC. But, as in all other things 403(b)s, there are a number of unique twists to the rules which exist solely in the 403(b) world.
Continue Reading The 403(b) “Qualified Plan Distribution Annuity Contract” Under SECURE Section 109