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What Plan Documents are used to establish an annuity as a 403(b) annui


Guest Woodworker

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Guest Woodworker

We have some relatively old documentation for our TSA Annuities. I am looking for more up to date forms that are used for TSA annuities.

I have visited with someone at the IRS, and he was as helpful as he could be. He did turn me on to this forum. Anyway, he let me know that some information was required in a plan document, but could only provide me some general information. I am looking for some guidance on what needs to be attached to the policy to make the annuity a 403(B) annuity.

The IRS man explained that the plan document should include contribution rules, rollover/portability rules, distribution rules, matching rules including top heavy testing criteria and eligibility rules.

Our old form had an Employee-employer compensation agreement, an employee request for Purchase of Tax Sheltered Annuity Retirement Plan, and Annuity Purchase Agreement and an acknowledgement.

I know some of the items referenced in the old form are way out of date. Can I get some feedback on what other companies have on their forms?

Thanks,

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The answer depends on several factors:

1.Is the plan subject to ERISA? Non ERISA plans are not subject to any requirement for written documents and plan provisons can be kept to a miniumum. Plans subject to ERISA can contain provisions required by IRC and ERISA.

2. Does the plan provide for employer contributions? Plans with employer contributions need additional provisions stating the method for making contributions. Plans with salary reduction need only have provisons for making employee contributions.

3. Type of funding. 403(B) plans can be funded by either annuities or mutual funds. There are different plan provisions for each. Mutual funds usually have a custodial agreement to hold the assets. A plan for church employees can be funded by a retirement trust.

4. Type of plan. Most 403(B) plans are designed as money purchase pension plans if they provide for employer contributions. However, some plans provide for discretionary employer contributions and can be treated as a profit sharing plan.

There is no simple answer. One place to look is the IRS audit guidelines which lists all of the potential IRS provisons applicable to 403(B) plans. The audit guidelines should be on the IRS web site.

One comment: from your thread it appers that the documentation for your plans was limited to an employee election for salary reduction and purchase of an annuity.

mjb

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I'm making the assumption here that you are with the insurance company writing the annuity contract, as opposed to the employer maintaining the plan. Presumably, whatever contract you write would have to be approved by your state insurance commission? I don't know whether you can get any information on forms of contracts which have been approved in your state.

If you want to see the 403(B) audit guidelines, they are available by clicking here. However, they were issued in May, 1999, and have not yet been updated for EGTRRA. Alternatively, you might want to look at Publication 571, which was recently updated for EGTRRA. But in either case, remember that you are developing only the contract for the investment medium, not the plan document. Thus, matters such as who is covered, whether there are employer contributions, etc., would typically be covered by the employer adopting the 403(B) arrangement, not by you. What you need to do is to make sure that the contract terms do not cause the employer to be unable to comply with 403(B).

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The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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Guest Woodworker

Thank you for the information you shared. It is true, that I work for an insurance company that writes annuities used as funding vehicles for 403(B) arrangements.

I am interested, more specifically, it documents attached to each annuity policy which is already approved by the state in which we issue the policy. We do have, for example, an ammendment which allows loans against the annuity that comply with the IRS guidelines for 403(B) arrangemnts.

I am more concerned that our salary reduction agreement may not be adequate, or that our service provider agreement may not be quite what it needs to be. We also have what we call an agreement for purchase of a tax sheltered annuity, which tries to describe some aspects of how 403(B) plans work in general, and we also have an acknowledgment that is to be signed by the employer.

I need to know what these docuemnts need to have in them to be appropriate for thier purpose.

As I was doing research about these kinds of arrangements, I have learned about Plan Descriptions, and I think that is what you are referring to in your post, Carol. I do work for a Multi-line company that is very much in the market for insuring churches. It would seem that 403(B) plan set up would be a natural part of a service that we could provide or at least help with.

So being able to tell a client what is important about a 403(B) plan description could be of some value, but I understand that it would be more the responsibility of the employer to deveolp a plan than it would be a responsibility of the service provider.

I hope that makes sense, and maybe clears up what I am looking for.

Thanks.

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