Jump to content

plan document.....still


Guest Moira
 Share

Recommended Posts

Guest Moira

a local church is being told by an auditor that they are required to have a plan document. The church is not a client of mine but is merely asking for some information so I'm working off of some assumptions. We believe the plan is a 403(b)(7) with mutual funds not a 403(b)(9), however there is an employer contribution. Now, does that mean the 403(b) is required to have a written plan document (prototype-ish for example) or even with the employer contribution, will agreements with the provider suffice for a 403(b)(7) "written plan document"? Thanks in advance.

Link to comment
Share on other sites

a local church is being told by an auditor that they are required to have a plan document. The church is not a client of mine but is merely asking for some information so I'm working off of some assumptions. We believe the plan is a 403(b)(7) with mutual funds not a 403(b)(9), however there is an employer contribution. Now, does that mean the 403(b) is required to have a written plan document (prototype-ish for example) or even with the employer contribution, will agreements with the provider suffice for a 403(b)(7) "written plan document"? Thanks in advance.

It's highly unlikely that vendor documents will comply. Two examples. First, the custodial accounts will limit contributions to each account, but probably will not take into account contributions to other permitted investments. Second example, they almost certainly will not coordinate as to loan limitations or on hardship amounts.

I prefer to think of the 403(b) document as a wraparound plan document. This structure addresses plan-level issues in the plan document and then simultaneously incorporates and subordinates the vendor contracts.

You should seriously consider a retirement income account. The underlying assets are still held in custody somewhere, but in an ordinary brokerage account. The investments are not limited to annuities and mutual funds. Last, the additional custodial account limitations on distributions do not apply.

Tom Geer

Thomas L. Geer, J.D., LL.M.

Benefit Plan Solutions

Blog: http://401k-403b-457-plansblog.blogspot.com/

Email: geertom@gmail.com

Phone & Fax: (888) 315-6720

Link to comment
Share on other sites

Guest Moira
a local church is being told by an auditor that they are required to have a plan document. The church is not a client of mine but is merely asking for some information so I'm working off of some assumptions. We believe the plan is a 403(b)(7) with mutual funds not a 403(b)(9), however there is an employer contribution. Now, does that mean the 403(b) is required to have a written plan document (prototype-ish for example) or even with the employer contribution, will agreements with the provider suffice for a 403(b)(7) "written plan document"? Thanks in advance.

It's highly unlikely that vendor documents will comply. Two examples. First, the custodial accounts will limit contributions to each account, but probably will not take into account contributions to other permitted investments. Second example, they almost certainly will not coordinate as to loan limitations or on hardship amounts.

I prefer to think of the 403(b) document as a wraparound plan document. This structure addresses plan-level issues in the plan document and then simultaneously incorporates and subordinates the vendor contracts.

You should seriously consider a retirement income account. The underlying assets are still held in custody somewhere, but in an ordinary brokerage account. The investments are not limited to annuities and mutual funds. Last, the additional custodial account limitations on distributions do not apply.

Tom Geer

Thanks for your comments. Given that this plan actually is not my client and I'm just trying to work within the framework of what I know, I am really not in a position to recommend they use a retirement income account. I do, however, need to be sure I am correct in my response to their question. Would I be correct in saying that technically they are not required to have a "wraparound" plan document as you call it (I like that description by the way) but perhaps they would be advised to do so? Or would it be the case that, because of the employer contributions, are they automatically required to have such a wraparound-type document? I have not been as successful as I had hoped in getting the specific answer out of any of the legalese I have tried to read in the regulations themselves.

Thank you!

Link to comment
Share on other sites

First, I need to apologize. I reacted and responded as of this were a more common situation presenting this issue. Given the existence of employer contributions, they need a 403(b) document, to wrap around the funding vehicles and to define the employer contribution rules and limit their amounts within 403(b). This is not a matter of options, it's required.

Thomas L. Geer, J.D., LL.M.

Benefit Plan Solutions

Blog: http://401k-403b-457-plansblog.blogspot.com/

Email: geertom@gmail.com

Phone & Fax: (888) 315-6720

Link to comment
Share on other sites

Guest Moira
First, I need to apologize. I reacted and responded as of this were a more common situation presenting this issue. Given the existence of employer contributions, they need a 403(b) document, to wrap around the funding vehicles and to define the employer contribution rules and limit their amounts within 403(b). This is not a matter of options, it's required.

No problem at all, I appreciate your help. This seems logical to me but in my years around the employee benefit world the one thing I have learned with certainty is that I do not think like regulators do. What seems logical to me is not normally what is the rule! Thanks again.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...