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.
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Robert Toth
Bob Toth has practicing employee benefits law since 1983. His practice focuses on the design, administration and distribution of financial products and services for retirement plans.
QPDAC, DIA, QLAC, QPDA, GLWB, FIA, VA, RILA and Others: Welcome to the World of DC Lifetime Income
This is a pretty exciting time in the DC marketplace. Years of work from a number of different quarters seem to be finally beginning to coalesce on the notion of sanely “decumulating” assets from DC plans. I wonder if a measure of this all may not be the growing catalog of acronyms associated with annuities,…
The Limited Utility of the “One Bad Apple” Rule Fix
Common PEP problems are barely addressed by the SECURE Act’s fix to the “one bad apple” rule (called the “unified plan rule” by the IRS, under which a participating employer’s disqualification error will disqualify the entire plan), though there seems to be a common misunderstanding in the industry to the contrary. That new “bad apple” fix actually has very little operational impact on a MEP /PEP whose operations has been affected by that bad actor. It provides only a narrow remedy to a narrow issue by which a P3 or lead sponsor can get rid of an employer who causes an operational/qualification error in the plan-though it may take up to a year to do so if one is to follow the IRS’s pre-SECURE Act proposed regs.
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Master Custodial Accounts and the 403b Self Directed Brokerage Account
Nevin Adams, dropped another one of his gems (this one on cryptocurrency and “innovations” in self-directed brokerage accounts) while I was drafting this piece on 403(b) SDBAs, making my piece even more timely. Its a striking case in point of another unique feature showing the differences between 403(b) plans and 401(k) plans: Not…
The Secret World Of “API” and Beyond: Technology Driven Retirement Plan Challenges
Conni and I have lurked in the netherworld of retirement plan administration for decades now, working on those things nobody ever sees. One of the ways we explain what we do to friends and family is with a story about their own 401(k) and 403(b) plans. What we tell them is that when they go…
The Massive Influence of Retirement Plans on Capital Markets: the Days of ERISA as a “Backwater” are Long Gone
The Investment Company Institute, the main mutual fund trade group in Washington DC, issued last month its retirement report for the 2020 fourth quarter with $22 trillion attributable to retirement plan assets alone, which is virtually the same size of the the market capitalization of the companies traded on the New York Stock Exchange as of years’ end 2020, reported to have been $24.49 trillion. Adding in the 12.2 trillion held in IRAs, these assets constitute over 2/3 of the reported value of all publicly traded securities in the US., at $50.9 trillion. This influence seem to be rarely discussed…
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A Frank-and Fun-Conversation on Annuities with Mike Webb
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.
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A Technical Analysis of How “Small Amount” Cash-Outs Under 403(b) Plans Work
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.
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“Plan Aggregation” Update: Find Pooled Plan Providers In E-Fast2; SECURE Act Section 202’s “Group of Plans” Comes to the Forefront
None of the MEPS, PEPS, GoPs or CITs are silver bullets in and of themselves; but instead they are all tools to an end with substantially different features. But they all do commonly use the aggregated power of a collection of plans of unrelated employers to provide (each in different measure) advantageous investment pricing and selection; professional fiduciary services; and reduced compliance costs to a sorely underserved market. Benefit professionals have been educating themselves to familiarizing themselves with each of these arrangements, but this is not particularly a simple task. This is reflective of the fact that successful operation of MEPS, PEPs and GoPs (in particular) are heavily dependent on technology which is not easy to either build or maintain. They actually require a high level of sophistication and a substantial investment in technology to pull effectively accomplish. This “meptech” is at the heart of it all, used for the unique sort of data collection, manipulation, consolidation and control which is fundamental to success with these platforms. There a couple of “meptech” developments worth noting. I am hopeful to occasionally post developments here from time to time as they arise.
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The Hidden Importance of Plan Administration in Time of Tragedy
The federal government’s response to widespread personal tragedy has nearly always involved adjusting the rules to retirement plans. So many of these rule changes come at benefit professionals with great speed and little guidance, yet we need to make them work. This is because the work we do is critically important to people’s lives, though we rarely see it because of the focus on making the damnable rule changes somehow fit into our already overburdened processes and systems. This impact also shows up when the tragedy is personal and not just societal. So I invite you to reflect, during this holiday season of celebration, on the actual, real, individual impact of what we do. Beyond the administrators, the lawyers, the actuaries, the accountants, the writers, and the consultants is buried very real meaning.
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