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403(b) Vendor Selection for non-ERISA plans


Guest smithgd

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How much can or should a school district get involved with vendor selection and still keep a plan "non-ERISA"? In assisting a financial planning client, I discovered that the school system she works for has a list of vendors that seems to be a haphazard list of the first 25 insurance companies that any employee came forward and asked for. Very few on the list seem to be quality choices and many major players are missing. I would like to approach the school system to help them rationalize this process of selecting vendors. So my question is, How much can the sponsor get involved? Can there be a procedure that limits the number of vendors? Can or should any "due dilligence" be done? I would appreciate any comments or information on the subject? Thanks

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Geoff

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Are you talking about a private school, or a public school district? A public school district, being a governmental entity, is not subject to ERISA rules regardless of how much employer involvement there is. It is only nongovernmental entities which need to worry about the DOL regulations concerning the extent of employer involvement.

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Employee benefits legal resource site

Employee benefits legal resource site

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 PeterGulia

While Carol is right that a local government school district can do anything without fear of ERISA, the school district should consider state law.

In most states, one or more state statutes and other state law may affect the school district's powers and responsibilities in selecting or admitting 403(B) providers. In some states, a school district must admit almost every 403(B) issuer. In at least one state (Ohio), a school district must permit each employee his/her choice of agent or broker.

I have not looked at Maine law.

Also, a school district must be cautious to avoid breaching any collective bargaining agreement or duty to bargain.

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<< I would like to approach the school system to help them rationalize this process of selecting vendors>>

Are you trying to sell an engagement or help a client?

If you are trying to help a client, I recommend that you tell her to pick whom she would like to invest with and then start working her way up the command to find out what is involved with adding a new vendor to the list (keeping your name private).

My cynical guess is that the vendor list was chosen because of relationships with union shop stewards and that you will have a hard time adding to the list and a close to impossible time getting a vendor dropped.

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Gee, Peter, looks like I forgot to play my "consult your state law" broken record this time--thanks for the catch! smile.gif Seriously, you're right that while ERISA would not preclude employer involvement in a governmental plan, state law should be consulted to see whether it either requires or forbids a particular kind of employer involvement.

--------------------------------------

Employee benefits legal resource site

Employee benefits legal resource site

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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