non-erisa 403b plan

[Santo Gold]

Hoping someone can confirm: Is a non-profit 403b plan, that allows only for employee contributions and the ER has minimal involvement, considered a non-ERISA plan? If so, then a 5500 has not been required, is continues to not be required under the new 403b regs. Is that correct?

Thanks

[movedon]

Assuming the "minimal involvement" determination is correct, yes.

[rcline46]

And, according to the DOL, at least 2 investment platforms are offered.

[QDROphile]

No implied agreement or disagreement with the bigger issue, but where do we get the idea that two providers is enough?

[Santo Gold]

And, according to the DOL, at least 2 investment platforms are offered.

If 2 platforms are offered, but only 1 used (small plan, only 5 people, and everyone went with "Platform A"), do you think that would satisfy this requirement?

[rcline46]

Read the news from Benefits Link from when Bob Architect was at sessions discussing the 403(b) regulations, and the DOL sessions on the new 403(b) regs. Obviously the need for 2 or 3 or how many is only word of mouth and there is nothing in the regs. It was also discussed at SPARK this spring.

[jpod]

If employer agrees to forward employee contributions to only to funds in the Fidelity menu, or only to funds in the Vanguard menu (just to use 2 examples), does anyone really think there is a risk of non-compliance with the DOL's regulatory safe harbor just because there is only one investment "platform" or "provider"?

[rcline46]

I do. The rules pre-date the ability to use custodial platforms but the DOL does not care. DIscussions of 'how will they ever find it' are not for this board.

[jpod]

rcline: First, I was not offering a "how will they find out" analysis. Second, I beg to differ on the substantive issue. Consider the following sentence from the DOL's 2007 Field Bulletin, which basically recites the rule in the 1979 regulatory safe harbor:

The employer may also limit funding media or products available to employees, or annuity contractors who may approach the employees, to a number and selection designed to afford employees a reasonable choice in light of all relevant circumstances.

Why would a menu of all Vanguard funds, or all Fidelity funds, or a limited but diversified menu of, let's say, 12 of those funds, never be a reasonable choice in light of all relevant circumstances?

I know that load fund brokers and insurance people say that you must always let in multiple vendors, but I don't believe that's correct.

[rcline46]

You must speak with the DOL on how to interpret their words. I can only report on what was said at various meetins and the fact the interpretation was by the speakers (with the usual caveats).

[Guest Joseph Zavoda]

Under the new IRS regulations, it may be difficult for a tax exempt employer to have limited employer involvement, especially if it has multiple investment providers. For example, many annuity contracts provide for hardships or loans. Many of the new forms used by the investment providers require the employer/plan sponsor to sign off as the plan administrator to approve the hardship distribution or loan and certify that the loan or distribution meets the applicable requirements taking into account hardship distributions and loans made through other investment providers used by the plan. Absent additional guidance from the Department of Labor, employers who certify and approve loans or hardship distributions risk having their plans becomming subject to ERISA and given the significant penalties for Form 5500 nonfilers, this risk is significant.

Joseph Zavoda

President

403b Plan Services LLC

293 SR-18, Suite C #318

East Brunswick, NJ 08816

(732) 353-6841

403bplanservices.com

[QDROphile]

We all suffer from the duplicity of the Department of Labor.