I would think that it is a basic law of physics that, whenever you attempt to apply a number of different and complicated principles to a single object, that the consequences on that object will be hard to predict, or even readily ascertained.

So it is with a potential impact 408(b)(2) may have on many 501(c)(3) sponsors of ERISA 403(b) plans. It shows up when you take an 403(b) ERISA plan, impose a fundamentally new set of basic principles (by way of the 2007 403(b) tax regulations); revoke its exemptive relief  from reporting requirements (the Form 5500); while nearly simultaneously superimposing a tremendous new disclosure scheme (participant and service provider disclosures);  there are inevitably going to be some unusual results.

Take a typical example. A hospital sponsors an ERISA 403(b) plan with 10,000 current employees. Over time, it has merged with a number of different hospitals, each which had separately maintained its own 403(b) arrangements in the past with a wide number of vendors. The hospital, in anticipation of the problems with the 2007 tax regulations, consolidated all the affiliates plans into a single platform on 1/1/2009.

Over its history, though, it and its affiliated hospitals had selected and deselected a number of other vendors (no one is quite sure how many) many with whom they have long lost contact.

All of these contracts over the history of the plans have been owned by the individual participants. Though the employer did have an audit done, it did not report many of those "lost" deselected vendor contracts, as it didn’t know much about them or the vendors. They reported those old plans as merging with the 2009 Form 5500.

The deselected vendors all still have some old contracts that participants have hung onto,  even after those participants have left the employee of the hospital. The records of the vendor shows that these were ERISA contracts, and that they earn a "mortality and expense", or some other contract charge, and they are indeed "recordkeepers" for the investments in those contracts as defined by 408(b)(2). In order to prevent that compensation from being prohibited, and from the need to be prudent, the vendor decides to make the required disclosures to the hospital’s "responsible plan fiduciary-" with whom they have not had contact for many years.

Imagine that fiduciary’s surprise when it receives these "blasts from the past," the ghosts of decisions made long ago, often by folks with which they were never affiliated with at the time decisions were made. 

The hospital never knew about these contracts for which they are receiving disclosures, but can’t ignore them.  They have just completed all of their work with regard to participant fee disclosures, but now someone is telling them that there may be a dozen more companies’ investment products upon which they have to report. They also just filed their 2010 Form 5500, and didn’t report many of these contracts as assets of the plan.  

Now what? This is just one scenario, they are others which may be likely once vendors seek to comply with 408(b)(2) on their books of old ERISA contracts. Though the regulator view may be that this flushing of old contracts is a good thing, it can actually be quite a mess to sort through-including whether or not you still have relief and can exclude them from compliance responsibility under Rev Proc.2007-71, and just at a time when the IRS is beginning their 403(b) 2009 audits. I suspect that the management of the problems can only resolved by closely looking at all of the particular facts which will apply to the plan.

I leave it to your imagination as to the myriad of difficulties this may cause; as there are potentially many. I also may be wrong, and this may never happen…….

 I have had the pleasure recently of making a presentation to the National Society of Compliance Professionals Midwest Compliance Meeting with Chris Guanciale of PlanMember Services. The NSPC is a nonprofit membership organization dedicated to serving and supporting compliance officials in the securities industry. What we had to say to them was not particularly good news for these overworked professionals. 

There has been a distant relationship in the past between the application of securities law and the application of ERISA. See, for example SEC Release 33-6188 (among other releases) where the SEC describes its essentially "hands off " position with regard to retirement plans.

Over the past few years, with the new found activism of the DOL and the growing impact of retirement plans in the securties market (as of 3rd quarter last year, retirement plans-both ERISA and non-ERISA- had a value equal to about $16 trillion, which was some 88% of the value of publicly traded securities in the Unitied States. Individual account plans like most 401(k) and 403(b) plans, are a "mere" $4 trillion dollars of that total, or some 23% of the value of publicly traded securities), this distance has been "shortening". I have blogged a number of times on this point. 

So now we have the new 408(b)(2) regs, which I often term as potential "business busters" because they speak to the fundamental basis of doing business in this very large retirement plan marketplace: getting paid for the services provided. If you are in this business, compliance with 408(b)(2) is a fundamental issue, because it is a prohibited transaction exemption. Without compliance with 408(b)(2), the business often cannot receive some of their compensation for services related to ERISA retirement plans.

The sorts of things 408(b)(2) covers are at the heart of the Security Compliance Professionals’ practice: disclosure, particularly with regard to fees generated off of investments. It seems that "Compliance" is really the only institutional structure many financial firms have under which they can implement, manage and control their 408(b)(2) practices.  And any new "fiduciary" rules only further complicates this task.

Attached is the outline provided for this presentation. Hopefully, you’ll find it helpful. 

It has been a while since I jumped on the blogging trail, but the question "What comes first, the Written Plan or the Implementation Date?"  seems more and more like…  "the Chicken and the egg." 

Taking this one step at a time, there are a significant number of employer/plan sponsors, administrators and others tackling this question.  I have had a number of conversations with individuals and groups that began pulling together the "Written Plan" for their 403(b) plan(s) and were simply stumped when posed with defining the original start date of the plan.  I have found this question alone can be the primary reason a "written plan" was not finalized for some 403(b) plans.  

Once we get past the "chicken and egg" conversation, the conversation progresses to somewhat of a dart board effect.  Well, a reasonable guess would be to date the plan as of 01-01-2009, but your investments would possibly age prior to that date.  Another reasonable guess is the oldest date on the first investment contract or account holding current assets.  There is a solid argument for this approach, but it can result in a bit of an art, rather than a science. 

Sometimes the right answer is very much tied to your facts and circumstances, within reason.  If you can identify the date of the first contribution or funding to your 403(b) plan, begin there and work forward.  Read on for additional challenges that have surfaced while capturing the "written plan"…

  

Continue Reading First things first… kind of like the chicken and the egg!

When the insurance industry began seriously developing the "living benefits" under annuity products for the retail marketplace a few years back, I dubbed them as "not your grandpa’s annuity." This is because they were attempting to address the concerns that the market had about traditional annuities, which are seen as irrevocable, inaccessible, invisible and inflexible. ( I have blogged on this a few times in the past.  Click on the "401(k) Annuitization" link at the right sidebar to see the posts).

It is encouraging to see the discussion now seriously moving to the provision of these types of products from retirement plans.  

Much of this new discussion is focused only something called "guaranteed minimum withdrawal benefits," or "GMWBs." Under these sorts of arrangements, a systemic monthly withdrawal is made from the participant’s account under the annuity, which will be guaranteed for the participant’s lifetime-even when the account balance runs out.  This is a popular program in the non-plan marketplace, and (at the appropriate price) can be well suited as a distribution option under a 401(k) plan.

GMWBs are not the entire story, however, as there is a whole range of "living benefits" beyond GMWBs which may be appropriate for distribution under a 401(k) plan. This list includes things like:

  • variable annuitization, which provides lifetime income while giving the policyholder some level of equity or "equity-like" participation;
  • guaranteed minimum account value programs (GMAB), which lock in investment gains over a period of time;
  • guaranteed minimum income benefits (GMIB), which insure the purchase of a minimum income stream beginning at a certain time, regardless of underlying equity performance; and
  • a guaranteed lifetime withdrawal benefit (GLWB), which insures the ability to withdrawal benefits at a minimum level for a lifetime.

The legal issues in providing these benefits are all very similar, and are addressed in my newly updated article for BNA Pension & Benefits Daily, "Annuitizing From § 401(a) Defined Contribution Plans: A Technical Overview."  For those with far too much time on their hands, and wanting to read a more extensive discussion on the topic, I am reposting the Tax Management Memorandum on "Income Guarantees in Defined Contribution Plans." 

 

But, first, another note of introduction……

It is with great pleasure to announce that my friend and fellow pink-shirted compatriot (many of our industry colleagues may fondly remember THAT story!) Sandy Koeppel has decided to join us as Of Counsel, and to have some fun following his illustrious career at Prudential.  Together with myself, Phil Troyer and Conni Toth, we intend to continue to contribute helping make the U.S. retirement system – which we are all so passionate about – work better. Sandy brings a tremendous wealth of experience in guaranteed lifetime income from employer plans to the marketplace (I invite you to read his bio), and intends to continue to carry this torch. Between us all, we offer substantial knowledge of the design, marketing and distribution of these products.

Sandy, as he mentions below, has also formed Plan Income Consulting & Evaluation Services, LLC (PLICES), a consulting firm which has affiliated with this firm and which provides advisors, vendors and employers consulting services related to guaranteed income products.  

Drop Sandy a note at sek@rtothlaw.com.

Now, his first blog:

The shift from Defined Benefit to Defined Contribution plans as the primary workplace retirement vehicle has eroded the confidence and jeopardized the retirement security of a vast number of American workers and their families. The recently published EBRI 2011 Retirement Confidence Survey finds that confidence among workers in their ability to have a comfortable retirement has dropped to an all-time low. According to the EBRI survey,

"the percentage of workers not at all confident about having enough money for a comfortable retirement grew from 22 percent in 2010 to 27 percent, the highest level measured in the 21 years of the RCS. At the same time, the percentage very confident shrank to the low of 13 percent." The RCS further states that "56 percent of workers expect to receive benefits from a defined benefit plan in retirement, only 37 percent report that they and/or their spouse currently have such a benefit with a current or previous employer. Therefore, up to 19 percent of workers may be expecting to receive the benefit from a future employer—a scenario that is becoming increasingly unlikely, since private-sector employers, in particular, have been cutting back on their defined benefit offerings."

These findings along with other results of this survey are disturbing and demonstrate that American workers not only are uninformed but feel challenged, concerned, and threatened about potential declines in their future lifestyle in retirement.

 With the passage of the Pension Protection Act, Congress recognized the need to instill defined benefit-like outcomes into the defined contribution plan universe. The PPA enables plan sponsors to include in their DC plans features such as automatic enrollment, automatic contribution escalation and gain fiduciary protection by offering qualified default investment alternatives deploying professional money management. These important first steps do much to replicate for workers the defined benefit plan experience in the asset accumulation stage. However, up to now, most DC plans do not offer the critical and essential missing piece to assure retirement security: guaranteed lifetime income. There are many reasons for this failure. Chief among them include: legal uncertainty about the rules and standards that apply to the choice of providers; unsettled tax issues (e.g. applicability of qualified joint and survivor annuity rules) associated with new and innovative forms of guaranteed lifetime income; cost and administrative burdens; lack of demand among participants; lack of guidance from the Department of Labor delineating between advice and education for distribution planning and the availability of out-of-plan (retail) vs in-plan (institutional) guaranteed lifetime income solutions if it is desired.    

 

Continue Reading For Guaranteed Lifetime Income in DC Plans: (ITS) Time Has Come Today

Working through the technical terms of 408(b)(2) is not much different than putting together a picture puzzle. There are a lot of pieces which fit together in some very precise ways. But, in the end, the disclosures which are required are pretty straightforward and-even given the work needed to describe certain ”wrapped” services and estimating their costs- can be made very simply. Keep in mind Asimov’s concept of “Minimum Necessary Change," upon which I blogged a while back.

Long pages of disclosure are not necessary or warranted. 

There are certain keys to making it work, and making the disclosure simple. Keep a few things in mind:

  •  Are you really a “Covered Service Provider” (CSP) that has to make a disclosure (see, for example, my piece on annuity investment accounts)? Remember, a CSP has a direct contract or arrangement with the plan, and that is the party that has to disclose-and only certain service providers are subject to disclosure rules. So, for example, a TPA which doesn’t maintain the financial records (such as where a 401(k) plan is funded with allocated group annuity contracts; or for most 403(b) plans which are funded with individual annuity and custodial contracts);  whose fees are paid directly by the employer or the plan; and for which the TPA doesn’t receive 12b-1 fees, commissions, or other indirect compensation are not CSPs and need not disclose under the new reg.
  • Are you an affiliate or a subcontractor? If so, you don’t need to disclose, but the CSP needs to disclose what they pay you. This generally may include insurance agents who sell annuity contracts to 401(k) or 403(b) plans, and who are likely to be "subcontractors" because of their servicing the contract with things like enrollment services.The caution to those folks: make sure you understand what the actual CSP is saying about you.
  • Make sure you are a “recordkeeper” before you commit to making financial disclosures. Many TPA’s are not 408(b)(2) recordkeepers on much of their business.
  • Keep the disclosures simple, short and sensible. Check existing documents first, as most of the required disclosures may already be in the existing service agreement, policy or other existing agreement.
  • For those who will receive indirect comp from a number of sources, try to standardize what you say about them, and create a short disclosure statement. Only send to those plans which generate that comp.
  •  Over-disclosure is as bad as under-disclosure. Review and edit the description of indirect comp programs that others give you, to make sure it actually applies to you and properly describes your role in it all.
  • Tweak your contract form to accommodate what you say in the disclosure, if necessary. Many existing contracts will not need to be changed to meet the rules.  Even then, however, consider incorporating some helpful changes when renewing the contract.

It does get a bit messier where data on the underlying investment needs to be disclosed, but even this is straightforward and can be simply made from existing data from accessible sources, and can be made in a standardized format.

Follow these guidelines, and you may be surprised with how simple the 408b2 disclosures may really be.

 

 

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Any discussion on any tax issue addressed in this blog (including any attachments or links) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any transaction or tax-related position addressed therein. Further, nothing contained herein is intended to provide legal advice, nor to create an attorney client relationship with any party.   


 

 Generally unnoticed in the DOL’s proposed fiduciary reg was the implicit recognition that the commissioned based sales function is important to the operation of the market, and that you can “sell” until the cows come home (a good friend tells me, by the way, that the cows actually do eventually come home),  or until you become a fiduciary.  Anyone familiar with the successful salesperson knows that they are only able to sell once they establish a level of trust with the plan fiduciary, which is why trade organizations are taking the DOL to task on the requirement that the salesperson, in order to be recognized as not being a fiduciary, must then advise the fiduciary (with whom a relationship is being forged) that he or she may have adverse interests to the plan.

However that language is eventually finalized, it raises an important question that hasn’t really been addressed well, being a sort of red-haired stepchild of ERISA: Just what is “sales”and how are commissions treated? Finding your way through it can be trying, as if its a practice in ERISA metaphysics, mysticism and alchemy.

It starts with the basic question of whether or not “sales” is considered a service. It does seems almost metaphysical, and would be amusing if it didn’t have a very real impact.   Commissions from pure sales of an investment product to a plan from a party without an existing relationship to a plan (either on its own or through an affiliate) does not seem to be governed either by 408(b)(2) or by the prohibited transaction rules.  “Sales,” by itself does not seem to be a service covered by 408(b)(2), and the payment of a commission to a someone who is not a party of interest may raise fiduciary concerns if too much is paid, but it is NOT, in itself, a prohibited transaction.  But there are times where sales and the payment of commission may eventually be considered services, where there becomes an ongoing, supportive relationship.

Lets go over some “pure sales” scenarios, with the impact of “sales as service” perhaps being handled in a future blogs:

Continue Reading ERISA Metaphysics, Mysticism and Alchemy: Sales Compensation

 The IRS issued its long awaited guidance on the termination of 403(b) plans, with Revenue Ruling 2011-7. TEGE was well attuned to the challenges of terminating 403(b) plans, and its staff moved quickly to address some of the basic issues related to this "newly found" ability, provided by the 403(b) regulations, to treat the 403(b) plan termination as a distributable event. The delay in the final issuance of this guidance was due to factors well beyond the control of the TEGE, which had pressed to have it approved much earlier.

A number of practitioners are likely to be disappointed by the limited scope of this ruling. However, it establishes a fundamental structure within which to work, and clarified things at which we could only guess in the past.  A number of issues are left unresolved, which I hope will be addressed over time by the IRS. But this provides us with an important starting point.

In dealing with anything as complex and new as a 403(b) termination, guidance will be a mixed bag. Here, there are Clarifications and things that still leave us In the Fog. 

Clarifications

  1. We now know the process to be followed under which the IRS will recognize a plan as being terminated and as a distributable event occurring: a binding resolution; notification to participants and beneficiaries of the termination; 402(f) notice of rollover rights; cessation of all 403(b) contributions to other 403(b) plans within the controlled group (or at least, per the regs, 98% of the group); and distributions are made within 12 months, including distributions of  "a fully paid individual insurance annuity contract."
  2. Certificates under a group annuity contract will be considered as the distribution of  a "fully paid individual insurance annuity contract" as long as all of the other rules are met.
  3. The distributed annuity contract will still be considered a 403(b) contract.
  4. Amounts from this distributed contract can still be rolled over.
  5. The IRS formally recognized the legitimacy of the group custodial arrangement

In the Fog

  1. The revenue ruling is silent on whether or not, or under what conditions, the distribution of a custodial account can be treated as a "fully paid individual insurance annuity contract." I would hesitate to treat this silence as meaning it can’t be done, as the ruling doesn’t change the legal basis used by those who distribute custodial accounts. it may exist. But the custodian must agree to the "distribution"  treatment if that is what you choose-and, in any event, the revenue ruling doesn’t provide support for this position.
  2. It cites "Situation #3," where a participant elects payments from a custodial account upon termination of the plan, either cash or in kind. It is silent on what happens when no election is made. I assume the termination then fails, but this is unclear. 
  3. There is no guidance on what constitutes delivery of a "fully paid" contract. Hopefully, in the case of an individual contract, it merely means notifying the individual that the contract is no longer part of the plan. 
  4. It creates some confusion on vesting in non-ERISA governmental plans: the tax regs don’t seem require full vesting of non-vested amounts on termination, as they are treated as 403(c) monies. It only requires that 403(b) amounts be non-forfeitable. I THINK all this ruling says is that the 403(c) amounts can never become 403(b) upon termination if they do not vest-but that is unclear.
  5. The ruling is silent on what happens to the distributed (and rolled) amounts if all of the assets cannot be distributed by the end 12 month period-which can be a real problem for 403(b) plans which generally doesn’t exist for 401(k) plans.

AND, perhaps the Grandest Fog:

How does a distributed contract, with no employer being responsible for it, maintain its status as a 403(b) contract? A colleague has pointed out that it appears to require a permanent grandfather of the rules as of the date of  distribution-which is incredibly unworkable from a vendor view given the amount of change that occurs in this area. Or, as my good friend and mineral collector Evan Giller colorfully puts it, it preserves each year’s then current rules "like bugs in Amber…" (though, as Evan also points out, Amber is not really a mineral).

There are other questions along the same lines.  Can you roll funds into it, as permitted under 403(b)? Can you process loans, and can the vendor rely upon participant representations? What of transfers and exchanges?

This Revenue Ruling also raises a related question, for future guidance, that is, the question on whether or not there will be a determination letter process for 403(b) terminations.

This is a nice start. But there is still a lot of work to be done.

 

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Any discussion on any tax issue addressed in this blog (including any attachments or links) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any transaction or tax-related position addressed therein. Further, nothing contained herein is intended to provide legal advice, nor to create an attorney client relationship with any party.   


 

 

The DOL’s newly delayed 408(b)(2) regs are particularly striking in that they demonstrate a growing sophistication, and efficiency, on the part of the EBSA staff in its approach to retirement plan financial products and services. The regs are short, by almost any measure of federal regulations, yet they are packed with meaningful rules which will apply in different ways to different product and services.  

The marketplace is a fast moving one, with complex instruments and services being used in new and unusual ways. Keeping up with this whirlwind is a challenge for the industry and employers, let alone a government regulatory agency which must somehow craft rules which have broad application to ever-shifting, complex and unanticipated circumstances.  Though not always successful, the DOL is approaching its learning curves impressively-including the way in which continues to seek to know and understand what it does not.

A prime example of this is the manner in which the 408b2 rules apply to variable investment accounts within the annuity contracts used to fund 403(b), 401(k) and other 401(a) plans. What is fascinating is that the word "annuity" only shows up with regard to IRAs;  the words "individual," "group," "variable," "fixed," "registered," or "non-registered"-all of which are descriptors of a variety of different sorts of annuity contracts- never show up; and the word "insurance" only appears once. Yet, it provides clear guidance on how these investment products are to be regulated. 

Lets take a quick look at the way the rules apply differently to registered variable annuity separate accounts (lets call these "Type 1" for purposes of this blog) typically used in the 403(b) market, and the way they apply to non-registered variable annuity separate accounts (which I’ll call "Type 2") typically used in 401(k) plans.

This, by the way, is important for plan sponsors to know because they have to sort out whether they are receiving the disclosures they need, and report it to the DOL if they are not.


Continue Reading Annuity Investment Accounts and 408(b)2

This was modified 12/28 at 6:18 a.m.  

The IRS issued Revenue Ruling 2011-1, under which it will allow the combining of 403(b) assets with 401(a) assets in the 81-100 trusts.

Or maybe not. Take a look at the details, and it really doesn’t seem to be able to do much of what it says  can be done.  What it really is is another shining example of how complicated it is when Tax, Labor and SEC rules clash.
 
Here’s what I think the relevant pieces are and how they (don’t) fit together. It all becomes a problem for those 81-100 trusts which unitize their investments (as is typical), while 403(b)(7) plans are based upon the holding of the actual share as its ownership interest. Unitizing those shares creates all sorts of problems. Its not that 403(b)(7)s cannot hold units, its just that they have to be in the form of registered shares under the Investment Company Act of 1940:
 
• Under a 403(b) custody arrangement, the 403(b) plan participants have legal rights related to the underlying assets which don’t exist for the 401(a) participants outside of the employer stock arena. Unlike a 401(a) trust, a 403(b) custodial account is like an IRA account, in that it itself is NOT viewed as an investment vehicle needing to be registered under this ’40 Act . The custodial account holds registered shares and must still honor the 403(b) participant as the shareholder of the mutual fund share it holds on the participant’s behalf-meaning the reserving of the prospectus delivery, proxy voting and confirmation delivery (except as covered by the Schwab 10b-10 No-Act letter) rights under securities laws.  A 401(a) trust could act as such a 403(b) custodian as long as those interests in the underlying assets were honored.
 
• There are two kinds of 81-100 trusts:  common/collective trusts (maintained by certain regulated trust companies) for plans of unrelated employers; and master trusts for plans of an employer or related employers.
 
o They both provide unitization of their investments, but these types  of 81-100 trusts are typically not registered as investment companies under the Investment Company Act of 1940. This is generally because of the exemptions from registration for 401(a) plans, for non-401(a) church or governmental plans and their group trusts. If the collective trust is registered, it is not going to be a 81-100 trust (see below).
 
o However, there is no ’40 Act exemption for a non-governemental, non-church unitized group trust  which holds unitized 403(b) plan assets. This means that a 81-100 trust holding 403(b) assets may need to be registered as an investment company under the ’40 Act.
 
• For the common/collective trust, if it is registered (as sometimes they are, and thus usable by non-governmental/non-church 403(b) plans), it is not really a trust with comingled assets under 81-100. It is, instead, a registered investment company which sells its shares to plans. The shares of these trusts become the plan asset; the underlying trust assets are not plan assets.  403(b) plans and 401(a) plans are purchasing shares, not “collectively investing” in an investment which is unitized. It is therefore not really 81-100 (or needing to be so).
 
• For the single employer (or related employers) master trust arrangement
 
o Using an existing 401(a) master trust investment vehicle in which to combine and unitize 403(b) assets raises the question of whether or not that master trust loses its registration exemption. At a minimum, the language of that master trust vehicle would be required to pass through the shareholder rights to the 403(b) participant. Using the model language in Rev Rul 2011-1 won’t cut it by itself.
 
o No master trust is currently needed for 403(b) plans of related employers, as the custodial account is treated in the same manner as the IRA trust, as there should be (though who knows what is really happening in the market) no unitization of the investments.
 
So what does it all mean in the end?

 1.  Only public school/university and church 403(b) plans should be able to use a non-registered common/collective 81-100 trust with unitized interests to combine 401(a)/457(b) and 403(b) assets, but they should first check in with a security lawyer to make sure of it (or get a representation from the vendor). These trusts will need to recognize and pass through shareholder rights to the 403(b) plan participants in ways not available to the non-403(b) plans, which will be a challenge in a unitized arrangement. The IRS, as part of this ruling, appears to be recognizing that a holding a non-regisaterred unit in a 81-100 trust  qualifies under 403(b)  for the rule that a custodial account only holds registered investment company shares.

It doesn’t look like 403(b) plans of private (non-church) employers will be able to use this non-registered group trust absent an SEC No-Act letter. 

2.  For non-church, non-governmental plans, the unitized 81-100 trust may need to be registered as an investment company. But then it really isn’t a 81-100 trust. “Combining”  403(b) and 401(a) assets under this circumstance only means each plan buying the trust’s registered shares-which are reported as registered investment company shares on the Form 5500, not as a CCT. There would be no Form DFE for a CCT, either, on these units.
 
3. Using a 81-100 master trust for the single employer is not currently needed to combine 403(b) plans, as there should be no unitization going on. Using it to combine and unitize with 401(a) plans of the employer, however, may prove to be difficult. It has some security law risk and will require that 403(b) participants be “passed through” certain rights not available to 401(a) participants, and doing it in a unitized envirronement. This could be a nightmare to pull off. The same practical effect can be arrived much easier by using a single vendor for both the 401(a) and 403(b) plan.
 
What would be really nice is some sort of unequivocal statement from the SEC that including 403(b) assets in a 401(a) group trust doesn’t screw up the group trust’s exemption. But until then, we have to work these gyrations some how.
 
…But then there is still that nasty problem of the 403(b) plan assets not being able to use the 401(a) cash fund in the 81-100 trust, even if you are a public school or university that could even use one of these things. See my related blog on this matter.
 
 
 

Any discussion on any tax issue addressed in this blog (including any attachments or links) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any transaction or tax-related position addressed therein. Further, nothing contained herein is intended to provide legal advice, nor to create an attorney client relationship with any party.