403(b)

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Mike Webb,  (formerly of Cammack Consulting, now being part of Captrust) who has been one of the true 403(b) thought leaders in the country for a number of years, runs a podcast series called called “Revamping Retirment.”  Mike wanted to have a conversation with me about annuities. We do talk about 403(b)’s in the video, of course, but also of many other annuities issues, like  the reluctance of sponsors to take up lifetime income, the value of annuities as well as their problems as they are currently being sold in the market. This resulted  in a refreshing  22 minutes of great conversation.
Continue Reading A Frank-and Fun-Conversation on Annuities with Mike Webb

The minute differences between 403(b) plans and 401(k) plans are often inconvenient, at best, and sometimes they produce serious conundrums in plan administration which can be difficult to resolve.
Prominent among these is the issue of “small amount” cash-outs from 403(b) plans. The ability to cash out small amounts for terminated participants is especially important for a number of “small plan” filers, who are on the cusp of having to comply with the large plan audit rules because of long lost terminated employees with individual contracts who are still counted int the plan’s census-even after eliminating those you can under Rev. Proc. 2007-71.
Continue Reading A Technical Analysis of How “Small Amount” Cash-Outs Under 403(b) Plans Work

There is no “vesting on partial termination” for 403(b) plans, and no need to track the “20%” rule for vesting on partial terminations for a 403(b) plan. That rule simply does not apply. This his true for both ERISA and non-ERISA 403(b) plans.
As a practice note, if you have mistakenly applied that “partial termination” vesting rule to a 403(b) plan, you may have an operational error.
Continue Reading Are There “Partial Terminations” of 403(b) Plans ?

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 The CARES Act Participant Loan Payment Suspension Rules Take an Unusual Approach in Making the Change; 403(b) Policy Loans Affected Differently

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 403(b) and the SECURE Act: The New 500 Hour, Long Service Rule Does Not Apply to 403(b) Plans

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 Take Note of An Important New Amendment Requirement Buried in New 403(b) Remedial Amendment Period Rules

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 403(b)’s 15 year Long Service “Catch-Up” Is an “Attractive Nuisance” To Be Avoided in Plan Restatements

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.
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Continue Reading A Common Misunderstanding of the “Student” 403b Exclusion Arises During Document Restatement Process

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 The Enduring Value Rev Proc 2007-71 in Dealing With Legacy 403(b) Contracts…. and Should it be Updated?