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Do 403b plans have trustees?


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We have several 403b plans and none have a named trustee.  The document software that we use does not even permit a trustee designation.  Yet, we are being asked for a trustee by a new recordkeeper that the plan is transitioning to.  Any thoughts?

Thank you

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Nothing in Internal Revenue Code of 1986 § 403(b) requires a trustee.

Many § 403(b) plans have no role labeled trustee.

Many § 403(b) plans have annuity insurers and § 403(b)(7) custodians.

ERISA § 403(b) [29 U.S.C. § 1103(b)] excuses from § 403(a)’s general command to hold an employee-benefit plan’s assets in trust the annuity contracts and custodial accounts recognized in Internal Revenue Code § 403(b).

ERISA § 403(b)(1)(2)-(5) http://uscode.house.gov/view.xhtml?req=(title:29%20section:1103%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1103)&f=treesort&edition=prelim&num=0&jumpTo=true

To the extent a § 403(b) annuity contract or custodial account requires or permits an instruction from a plan’s fiduciary (rather than a participant, beneficiary, or alternate payee), a typical contract refers to the plan’s administrator. Some refer to the employer.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Recordkeepers have their own view of the world.  The way we handle it is that we ask an official of the organization if they are willing to serve as the "trustee".  Then we fill-in the box on the Recordkeeper's system with that person''s name.  Then the problem goes away.  In the 50 years we have been doing this, no problems were ever created by telling the recordkeeper this info.  I'm sure all the lawyers will say that it's a bad idea, but sometimes expedience trumps legal preferences.

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Don’t assume all lawyers would advise against the kind of practical description you mention.

However, if I were helping a client placate a recordkeeper’s system, I’d suggest filling-in such a trustee box with the name of the plan’s administrator, as named in the plan’s governing document.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Peter Gulia is correct and that is good advice.  

In response to the other comments:  403(b) plans are very useful and appropriate in many situations.  Many "modern" 403(b)'s are invested in mutual funds not insurance contracts.   Non-Profits would not benefit from the imposition of deferral testing mandated for 401(k) plans.  Most 401(k) plans sponsored by Churches lack pre-approved plan documents  and some are subject to current litigation. 

If one is knowledgeable about 401(k), best to stick to what you know.

Patricia Neal Jensen

Vice President and Nonprofit Practice Leader

| QBI, an Ascensus company

21031 Ventura Blvd., 12th Floor

Woodland Hills, CA 91364

E patricia.jensen@QBILLC.com

P 818-449-6096

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