AMDG

What about the 403(b) written plan document? There seems to have been a period of time in which a 403(b) written plan document did not exist... It can be fixed under EPCRS.

I think it would be a multi-step correction process, including consideration of whether the 401(a) plan assets were appropriately held in trust at all times. I recently came across a retirement plan written by a medium size law firm that included 403(b) accounts to hold the salary deferral contributions of HCEs, whereas the rest of the plan is supposed to be a 401(k) plan. Your client is not alone in being poorly advised.

I have seen plan sponsors take this approach, but the danger is that there safe harbor protections of the Code and ERISA that support default IRA rollovers will not be available. So, even though the plan sponsor wants to do the right thing for its participants, if the market goes down, it practically guaranteed that some participants will sue the plan sponsor. Is that an acceptable risk?

Does anyone know when, and if, Treasury and/or the IRS are going to issue regulations and/or guidance for new Code Section 414(z), which permits plan-to-plan transfers between church 403(b) and 401(a) plans? In the meantime, can we move ahead based on a reasonable interpretation of the statutory language only? Thanks very much for your help.

I thought so, too (that you don't need to file) , but others disagreed with my conclusion. Call your local irs district office. Maybe they can help.

Fidelity is a directed trustee and recordkeeper, not the plan administrator. As a general matter, the plan administrator (that is, the employer) is in a better position to research data discrepancies and direct Fidelity accordingly if an automated alert is generated. Here is an example of common plan language: Whereabouts of Participants and Beneficiaries. The Administrator shall at all times be responsible for determining the whereabouts of each Participant or Beneficiary who may be entitled to benefits under the Plan and shall at all times be responsible for instructing the Trustee in writing as to the current address of each such Participant or Beneficiary. The Trustee shall be entitled to rely on the latest written statement received from the Administrator as to such addresses. The Trustee shall be under no duty to make any distributions under the Plan unless and until it has received written instructions from the Administrator satisfactory to the Trustee containing the name and address of the distributee, the time when the distribution is to occur, and the form which the distribution shall take. Complaints about regulatory requirements should be directed to the applicable regulatory agency.

It is my understanding that TIAA-CREF does indeed issue "fully paid-up annuity contracts" to individuals. As a practical matter, it is also my understanding that some recipients do not understand the situation and continue to contact the employer's HR office regarding their 403(b) accounts after the fully paid-up annuity contracts are distributed to them.

The DOL has never explicitly said whether a single-vendor plan could be a valid non-ERISA 403(b) plan. Regarding access to investment options, please note that it is possible to set up a 403(b)(7) plan with one custodian that offers access to practically every mutual fund available through a self-directed brokerage-type account.

Depending upon the size of the accounts of the terminated participants, the plan document may permit the administrator to request the individuals to take a distribution or IRA rollover, and in the absence of an election, force out the amounts. The plan administrator (or employer's HR office) could also be proactive, reach out to the terminated employees, and inform them of their options with respect to their account balances, including taking cash distributions or rollovers to the current plan or an IRA.

Here is the IRS-published list of Prototype (P) and Volume Submitter (VS) Plans, through Sept. 9, 2015: https://www.irs.gov/pub/irs-tege/preapproved_403b_plans_list.pdf

In addition, unvested amounts in a participant's account should be treated under the Plan as a separate contract to which section 403© (or another applicable provision of the Internal Revenue Code) applies. For most 403(b) recordkeepers, this is form over substance -- participants do not have two distinct accounts between which amounts are transferred once vested.