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Information Sharing Agreement


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  • 4 weeks later...
Guest Nolanquinn

Employers still must have an information sharing agreement with any vendor that they are directing contributions towards, even if they don't allow transfers. The ISA ensures that vital information such as termination of employment and loan amounts are shared between the vendor and employee and give the IRS a better picture of where the plan dollars are and that the plan is in compliance with the new regulations. After 1/1/09, the ISA language should be "baked in" the written plan document therefore there shouldn't be a need for a seperate ISA.

Darren

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Employers still must have an information sharing agreement with any vendor that they are directing contributions towards, even if they don't allow transfers. The ISA ensures that vital information such as termination of employment and loan amounts are shared between the vendor and employee and give the IRS a better picture of where the plan dollars are and that the plan is in compliance with the new regulations. After 1/1/09, the ISA language should be "baked in" the written plan document therefore there shouldn't be a need for a seperate ISA.

Darren

How is the ISA to be baked into a written document that a vendor will sign since the plan document will detail the specific responsibility of the plan sponsor and plan administrator? Why would a vendor want to assume all of the legal responsbilites/risks of plan sponsors and plan administration instead of simply agreeing to provide information to the plan adminsitrator? Do you think that vendors will want to pay for the cost of fiduciary or E & O insurance relating to plan administration simply because the vendor makes its funds available to a plan?

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Guest Nolanquinn

I think my choice of words was a little vauge and I apologize. When the employer is completing the new written plan document, it should include language for any vendors to be included in the plan they would have to comply with the same language as the individual ISA. The individual ISA is needed now because the employers do not have to have the final plan document finished until 1/1/09, but employees would not be able to transfer any contributions without an ISA in place due to the revocation of the 90-24 rule. In some states this is not a big deal, but in Iowa (and a few others) we have an open architecture law that requires any vendor that offers a 403b product and a willing employee must be allowed in the district. The vendor will only have to follow the "normal" ISA language to provide information and not act as the plan sponsor (that is definitely the employer's responsibility). There are some vendors (such as ING) that are offering to act as a common remitter and a plan administrator, and yes it is to increase the vendor's presence and standing in this marketplace. This is above and beyond the basic product offering, but the vendors are doing it for a nomial fee or free to ensure a payroll slot and, at least in ING's case, as a tool to force employers to go to an electronic submitting format - it is amazing the number of school districts in Iowa that still send out paper checks for all 403b contributions - some of the districts have 100+ active vendors.

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  • 8 months later...
Guest Erisanubee

Darren,

I've seen where exchanges and plan transfers would require an ISA, but I can't seem to find in the regulations where it requires that for any vendors associated with the plan. Can anyone help?

Also, does anyone know what happens to a participant's account when they plan switches approved vendors, but the participant chooses to remain with a vendor that is not approved and does not sign an ISA?

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Erisanubee,

I assume from your question you are dealing with individual 403b contracts, not a group one to which the ER is a party. The ER can (and should), after 2008, refuse to withhold from paychecks/remit to a 403b vendor that does not sign an info sharing agreement. The ER likely does not have the contractual authority to require the vendor and EE to move such a 403b contract to another vendor, one that has signed an info sharing agreement with the ER. Consequently, that 403b contract could remain where it is, but a prudent ER would not allow new money to go into that 403b contract after 2008. The value in the 403b contract would remain with the vendor that issued it, unless the EE wants to move it. If the EE is under age 59 1/2 and yet an active EE of the ER, then the EE may only move it (exchange it) into a 403b contract with a vendor that has in fact signed an info sharing agreement with the ER.

What about the requirement on 403b contracts to be part of a 403b plan of the ER? If the ER has made a reasonable, good faith effort to include the 403b contracts of that vendor that received contributions after 2004 for only the year the contract was issued, by writing to that vendor and asking for information about those 403b contracts and giving the name and contact info of the person at the ER responsible for 403b plan issues, then that is a reasonable, good faith effort. Section 8.01, Rev Proc 2007-71. Thus even if not included in the ER's plan, those 403b contracts are deemed to meet the requirement that they be part of the ER's plan although in reality they are not because, for example, the vendor would not sign an info sharing agreement proposed by the ER that includes a provisions that the 403b contracts would be subject to the ER's plan.

Alternatively, the vendor that has not signed an info sharing agreement and subjected its 403b contracts to be included in the ER's 403b plan may make a reasonable, good faith attempt so that the part-of-a-documented-403b-plan requirement is deemed met by contacting the ER for relevant, verifying info before making a distribution or loan.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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I think that it is the ER who signs the vendor's ISA.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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If an ER signs differing ISA from differing vendors, the ER would then have a mish-mash of info sharing obligations--the vary thing that motivates the vendors to reject an ISA proposed by the ER.

From the ER's perspective, some of info sharing obligations that vary from vendor to vendor might/might not mesh with some of the provisions of the ER's 403b plan.

For some ERs and vendors, it results in a stand-off--but one that if the ER made a "reasonable, good faith" effort to include the 403b contracts of the vendors in essence relieves those 403b contracts from the requirment that they be maintained pursuant to the ER's 403b plan. Then for those contracts, life goes on just as before the new regs except that no new contributions will be made into those 403b contracts.

(Gratuitously, mosh pit and mush to get all the m_sh words into one post.)

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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