The IRS’s 2007 403(b) regulations fundamentally altered the 403(b) marketplace. The imposition by of those regulations of greater responsibility on 403(b) plan sponsors for maintaining the continued tax favored status of their plans triggered, among other things, efforts by a number of employers, employer related groups and advisers to attempt to consolidate both the compliance
One of the more curious circumstances under SECURE 2.0 arises from Act Section 128, which purports to permit 403(b) plan custodial accounts to invest in interests in Collective Investment Trusts (CITs), referred to as “81-100” group trusts in the Act.
Section 128 fixed that part of problem, as it amended the Code to permit the investment of 403(b) assets in group trusts, alongside mutual funds. But, as the Senate Finance Committee noted in its own Committee Report to the EARN Act, “In order to permit 403(b) plans to participate in a group trust, certain revisions to the securities laws will be required.” Those necessary revisions, however, never made it into SECURE 2.0
Continue Reading Secure 2.0’s Unresolved 403(b) CIT Securities Law Issue
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.
Continue Reading The 403(b) “Qualified Plan Distribution Annuity Contract” Under SECURE Section 109
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.
Continue Reading The 403(b) Hardship Distribution Which is Not a Hardship Distribution Under the Proposed Regulations…..
The IRS decided to handle this “best guess” period by announcing that any 403(b) document could be corrected under a new, special 403(b) Remedial Amendment Program, by that new RAP’s end date. It announced that the beginning of the RAP was the required adoption date for 403(b) plan documents (generally, January 1, 2010). The end of the RAP would be announced once the IRS approves its first set of pre-approved 403(b) documents. Once those first pre-approved documents are released, the IRS promised to announce the “end date.” It has now done that, with Rev Proc 2017-18 announcement of March 31, 2020 as the end of the RAP-which also suggest that the pre-approved documents will be released by that date.
Continue Reading Correcting the “best guesses” on 403(b) Plan terms by using the first 403(b) Remedial Amendment Period under Rev Proc 2017-18
There is a potential impact of the 403(b) University Lawsuits on the ability of 401(k) plans to maintain self-directed brokerage accounts. These 403(b) plans, with their wide variety of investments which are subject only to the control of the participants, are essentially structured in the same manner as SBDAs (without many of the security law protections that are given 403(b) participants). Should the plaintiffs succeed in their calms that it was imprudent to permit employees the ability to invest in a wide range of securities without fiduciary oversight, this may well be the death knell of SBDAs.
Continue Reading A Potential Impact of the 403(b) University Lawsuits on 401(k) Self Directed Brokerage Accounts
Conundrums can be caused by the “mismatching” of the 403(b) rules to pension professional, as well as the lawyer , registered rep and CPA, under their ethical rules.
Continue Reading The Unusual Matter of 403(b) Ethics
One of the more intractable issues with which ERISA 403(b) plans sponsors must deal with every year arises from the “policy loans” issued by insurance carriers under the 403(b) annuity contracts held under the plans. There is simply no good way to report these loans on the Form 5500, and the newly proposed Form 5500 changes do not address this ongoing issue.
Continue Reading 403(b) Policy Loan’s Continued Form 5500 Reporting Problem
How do you audit a 403(b) in-kind distribution? There is no financial transaction, no cash changes hands, there is no change in investments. It really is only a nominal change in the records of the insurer. Yet, somehow, GAAP requires that the “transaction” be verified. There is no answer, yet, to this question, which means the industries (that is, auditors, insurers, and lawyers) will be pressed for finding a standardized approach for bringing audit certainty to this process. It even becomes a bigger issue than 403(b)s: QLACs and other distributed annuity contracts are all able to be distributed as “in-kind” distributions from 401(a) plans as well, and there is no acceptable “recordkeeping” method to audit.
Continue Reading Auditing Distributed 403(b) (and 401(a)) Contracts
As in all things 403(b), it seems, retirement rules of generally applicability take unusual twists when applied to 403(b)plans. The DOL’s fiduciary rule is not saved from that same problem. A close look reveals interesting twists in the manner in which the rule affects (or doesn’t at all!) 403(b) plans, which simply do not apply to other participant directed defined contribution plans.
Continue Reading 403(b) and the Fiduciary Rule