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403(b) investment vendors


Guest PMiller

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Guest PMiller

In an article I read recently, the author recommended that 403(b) sponsors select a single investment vendor rather than offering a choice of several. The context of the discussion was the new regs and changes to plan operation. In your opinion, is the main reason for this recommendation better control, reliability and availability of investment information, is it to simplify communication & education, or is it for other reasons? Please comment. Thanks.

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In an article I read recently, the author recommended that 403(b) sponsors select a single investment vendor rather than offering a choice of several. The context of the discussion was the new regs and changes to plan operation. In your opinion, is the main reason for this recommendation better control, reliability and availability of investment information, is it to simplify communication & education, or is it for other reasons? Please comment. Thanks.

Would you be able to post the article or identify it in some other way. I would like to read it prior to commenting.

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  • 2 weeks later...

I have been preaching a version of that gospel for some time. The basic problem comes not from the proposed regulations but from 403(b)(5), which says that two or more contracts are treated as one contract under 403(b) and which has been ignored in the past. In a multi-vendor environment, the contracts may individually meet the requirements of 403(b), but in the aggregate they are going to have limitations that exceed 403(b). Also, on the distribution side, they are going to permit excessive loans, etc.

One vendor is one solution, but not the only one, and not one that is available at all if the employer (e.g., a school district) has to allow multiple vendors. Another, which we do here, is to create a wraparound plan (or non-plan) document, under which the various vendors have something like the status of a trustee under a qualified plan, and to route loans and distributions through an administrator that ensures compliance with dollar limits and prevents multiple hardship distributions.

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

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Guest PMiller

In an article I read recently, the author recommended that 403(b) sponsors select a single investment vendor rather than offering a choice of several. The context of the discussion was the new regs and changes to plan operation. In your opinion, is the main reason for this recommendation better control, reliability and availability of investment information, is it to simplify communication & education, or is it for other reasons? Please comment. Thanks.

Would you be able to post the article or identify it in some other way. I would like to read it prior to commenting.

The article appeared in the Winter 06 issue of PlanAdviser magazine and is entitled The Evolution of 403(b) Plans.

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