* Except,of course for governmental 403(b) plans and non electing churches……
It is difficult to maintain the non-ERISA status of a 403(b) arrangement. Those who wish to do so really have to work at it, with the irony being that “working at it” just may be what triggers ERISA status for those plans. In essence,
We have been extensively researching, writing on and developing the concept of providing lifetime income from defined contribution plans for some 15 years. The work has resulted in a patent; several major independantly published research papers; the outlining of some of the important concepts which underline the proposed QLAC regs and its key revenue ruling; and the development of more than one retirement product. If you look closely, you’ll see that that many of the major whitepapers published on lifetime income are well based on this extensive work we have published. Some of the work really is groundbreaking; for example, we propose a useful fiduciary process which can be used by fiduciaries in the purchase of annuities, in our NYU paper.
This blog has carried much of that material for the past 5 years, since February, 2009. We’ve now compiled those pieces here for use by employers, vendors, actuaries, advisers and attorneys who may be struggling to support lifetime income in defined contribution plans.Continue Reading A Useful Compendium of Lifetime Income Guidance for Defined Contribution Plans
Consider EPCRS’ “Under Examination” rules. If a plan is “Under Examination” it generally cannot take advantage of the more favorable VCP; and SCP is limited- meaning the plan sponsor would need to rely upon the more expensive Audit Cap to fix the problems.
Continue Reading “When All Else Fails, Read the Regulations….”
A more complete and up to date description of how lifetime income can work in a DC plan is in order. Evan Giller (newly Of Counsel with Boutwell and Faye) and I put together the attached piece entitled “Regulatory and Fiduciary Framework for Providing Lifetime Income from Defined Contribution Plans.” It is originally appearing in the New York University Review of Employee Benefits and Executive Compensation – 2013. Published by LexisNexis Matthew Bender. Copyright 2013 New York University.” In the paper, we’ve drawn upon our long experience with retirement plan annuities, mixing it well with all of these new developments.
Continue Reading A Regulatory and Fiduciary Framework for Providing Lifetime Income from Defined Contribution Plans
The 403(b) annuity “policy loan” is much different. The cash from the loan is obtained from the insurer’s general account, and no investment funds are ever liquidated from the participant’s annuity contract. An amount equal to the value of the outstanding value of the loan remains as a “restricted” investment held in one of the annuity contract’s investment funds, or in a separate account specially designed to pay a special rate of interest on that investment. The participant has no access to those funds, and the funds are released over time as the loan (with interest) is repaid to the insurer
Continue Reading The “Balancing Problem” in Reporting “403(b) Policy Loans” on the Form 5500 Schedule H
Though late deferrals to an ERISA 403(b) plan do need to be reported under the Compliance portion of the Form 5500 Schedule H or Schedule I, Form 5330 cannot be filed-in spite of the silence in the Form 5500 instructions. This is because the Tax Code’s prohibited transaction rules, Section 4975, do not apply to 403(b) plans-even if it is an ERISA 403(b) plan. Form 5330 is only for plans to which 4975 applies.
Continue Reading About Reporting Those Late Deposits to 403(b) Plans…….
A little noticed class action law suit first filed against TIAA-CREF in 2009 is finally coming home to roost for many fiduciaries of 403(b) plans-without many affected plans even having a clue that they have become members of that class action.
Continue Reading Complications for 403(b) Plan Fiduciaries Under the TIAA Class Action: The Striking Impact of LaRue and the Cy Pres Notice
In an almost stealth-like way, innovation is creeping into the marketplace and creating ways to address critical retirement issues, even without an incubator. Though these programs can do little to address what I view as the basic retirement inadequacy issue-that is, employers are generally moving away from the traditional notion of building adequate retirement programs into their employment models-they are making progress toward making the best of what we’ve got.
Continue Reading Aggregation Models, Plan Loan Insurance, Lifetime Income Patents: Addressing Retirement Security by “Looking Through the Wrong End of a Telescope”
Multiple Employer Plans continue to be an issue for not only PEOs, but for a number of organizations which has successfully used the MEP method in the past to provide “scale” which is otherwise unavailable in the smaller end of the 401(k) marketplace.The DOL Advisory Opinion 2012-04 has caused us to take a closer look at how to otherwise achieve this scale. Scale in investments and services, we find, is still possible without using MEP, and in ways which tend to have a lower risk profile for both the MEP sponsor and participating employers.
Continue Reading Using an Aggregation Program as a Solution to the Multiple Employer Plan Risk
When considering these new plan document rules and the new EPCRS together, there is a massive volume of sometimes difficult detail in the guidance. Much of it is thoughtful, some of it controversial and, I would venture to say, some of it innovative. For example, it ventures into the world of effectively requiring pre-approved plans while staying within its regulatory bounds (as we’ll be discussing in future blogs). The most striking aspect of this effort, however, is what seems to be a newly institutionalized view that 403(b) plans are, in fact, much different than 401(a) plans, and often demands much different treatment.
Continue Reading Bringing Some Sanity to Calamity: 403(b)’s New Document Rules