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Bob Toth has more than 30 years of experience in employee benefits law. His practice focuses on the design, administration and distribution of financial products and services for retirement plans.

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?

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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.
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For all the noisy support being generated for the changes to Multiple Employer Plan arrangements in RESA and SECURE, little notice is being given to the provisions which are likely to have a much more meaningful impact on the ability for smaller plans to obtain the advantages of scale: the rules permitting the “Combined Annual Report for Groups of Plans.”
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One of the more curious results of the failure of the Bipartisan Budget Act of 2018 to amend 403(b)(11) to provide for the same hardship relief that was granted to 401(k) plans is that the “hardship” distribution of QNECs and QMACs aren’t really hardship distributions.

This has a very real practical and operational effect.
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The comment letter addresses the DOL’s main concern in initially prohibiting non-PEO commercial enterprises from becoming MEP sponsors. The Department is concerned that allowing any commercial enterprise to sponsor a MEP  would turn ERISA into a purely “commercial” statute. Any company- whether or not it is a large financial service company or a smaller service provider-who can meet all of the MEP sponsor compliance rules should be entitled to sponsor a MEP, and the marketplace would be better for it. And ERISA would maintain its validity as a strong, employment based set of laws.
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There is a difficulty, which is inherent to bulk IRA programs: IRAs are individually owned investment contracts, which are under the control of the former participant-even though they are set up by the former employer. Using negative consent triggers fiduciary status. This also demonstrates that there is a whole range of other laws which come into play when dealing with IRAs. 
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The key to the regulation is the DOL’s extensive request for comments. It has identified are two major, unresolved issues for comment. The first is what should constitute a “corporate MEP.” The second The seconds the pooled employer plan, the classic MEP of unrelated employers. The DOL proposes drawing this line at the “substantial employment function.”
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One of the key  EBSA National Enforcement Projects is the “Plan Investment Conflicts Project” or PIC project. It is the “next generation” of fiduciary compliance programs that the DOL has developed over the years, with this one building on those past programs which had looked at compensation conflicts, 408(b)(2)  compliance and 404(a)-5 disclosures. It appears to be using standard, plan level investigations to instigate reviews of selected practices of large financial service companies, as opposed to having to open large service provider investigations to get to the answers being sought.  
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The SEC proposed Rule 30e-3 3 this past June which will fundamentally rework the manner in which mutual fund prospectuses and other fund reports are delivered to shareholders. This proposed rule, if made final, would effectively make electronic delivery of these reports the default-much in the same way as currently being proposed for the electronic delivery for required ERISA notices.This impacts 403(b) and 401(a) operations, as well as efforts to make ERISA e-delivery a default.
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Effective January 1 of this year was the right of participants to an extended period to rollover their defaulted loan amount, if the default arose following unemployment or the termination of a plan. The statue has a fundamental flaw: it confuses the rules related to the taxation of the loan with the distribution rules related to defaulted loans. The practical effect of this confusion is that it is virtually impossible to effectively use.
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