Anything preventing an Employer from offerring two 403(b) plans?

[mariemonroe]

We have an employer who would like to offer two 403(b) plans. One would be through TIAA-CREF and the other would be administered by a local company. The employer wants to do this because half of its employees prefer TIAA-CREF while the other half is more comfortable with the local company. Is there any reason (besides the obvious administrative hassle) that would prevent them from being able to do this?

[mbozek]

How yould you defien the eligible group for each plan, e.g theose ee who contribute to T/C and those who contribute to other co? What happens if ee wnat to change from one co to another. Why not have one plan and let ee select investment options?

[mariemonroe]

I don't think it's the investment options that the employees are concerned with. I think it is their comfort level with the company in charge of administering the plan.

i don't know how to define the groups. I suspect there would be a coverage issue that would require constant monitoring. any thoughts?

[mbozek]

I dont know what you mean by comfort level? Why are two plan admin necessry for 1 403(b) plan? It seems that you are creating unnecessary work by running two plans side by side for the same group of employees. Structurally the employer could maintain two separate plans for its employees -one for t/c investments and the other with the other co's investments but for IRS compliance purposes, e.g., 410(b), 401(a)(4), 415 the two plans would be aggregated and someone would have to test for compliance.

[GBurns]

I think that she might not be understanding what "administering the plan" means.

Are there any employer contributions?

If no, then the employees should be allowed as many or any investment opitions/providers as they see fit and that the payroll system etc can handle. The "administration" of the plan selected by the employee would not matter to the employer and really is not their concern.

If yes there are employer contributions, Why not do as mbozek advises, and have each provider as an option?

I suspect that she thinks that each provider is a separate plan, and I wonder what is meant by "a coverage issue that would require constant monitoring".

In general there seems to be misunderstanding of what a 403(b) plan is and how it operates.

[joel]

Marie---you might want to get a headsup on the Proposed 403(b) regs.