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TIAA-CREF Restatements with Ascensus


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Please comment if you have experienced the following scenario:

Nonprofit client has TIAA-CREF 403(b) arrangement. Client has two TIAA-CREF contract numbers, one for the "RA" plan which receives salary deferrals and matching contributions, and one for a GSRA or group supplemental retirement annuity, which receives no match but which is intended to receive salary deferrals above and beyond the maximum amount or percentage that the employer matches. Both arrangements permit loans and have other features requiring employer administrative efforts such that even the GSRA is an ERISA arrangement despite receiving no employer match. Client traditionally filed a single Form 5500 return using plan number 001 for the RA arrangement.

Ascensus sends out plan checklists for each contract number.

Employer completes checklists separately and receives two adoption agreements and two SPD, one for each contract number. The SPDs say nothing about the "other" plan and each cite the full salary deferral and catch-up limitations.

One is identified as plan 001, the other as plan 002.

Does the client now have to file two Form 5500s, one for the RA and one for the GSRA?

If so, must the employer "merge" the two arrangements onto a single Ascensus checklist (which is permissible) in order to eliminate plan 002 and the attached reporting obligations?

Comments and input much appreciated.

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We saw something like this last year, but they did not sign the two plans and had us take a look because they were confused by the documents and because TIAA was really impressing upon them to have a independent consultant review it for them. It was rather puzzling reviewing the contracts/plan documents - the language really did not spell it out as you described, but that is what the employer was thinking it said, but we gave deference to that interpretation, but after reviewing everything they could provide on it, they really only had one 403(b) plan overall.

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I've seen it, too - the exact scenario you describe. I've taken over the document services for a couple clients set up like this at TIAA CREF. I viewed the arrangement as two separate 403(b) plans and then merged them into one - on my document, not on anything provided by TIAA CREF or BISYS. I was on the fence about whether the previous deferral-only plan had ever been an ERISA plan and ever needed a 5500 of it's own, but since one had been filed previously, I advised the client to file a final one for that "plan" reflecting the merger. When it was all over, there was one plan, one document, one 5500 - as, in my opinion, there should have been all along.

Good luck getting TIAA CREF to set this up any way other than the way they normally do it - on the plan documents they provide or on their administrative systems. The clients whose documents I've "fixed" that were in this situation still have to translate everything into "RA" and "SRA" when communicating anything to TIAA CREF. Silliness.

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I've seen it, too - the exact scenario you describe. I've taken over the document services for a couple clients set up like this at TIAA CREF. I viewed the arrangement as two separate 403(b) plans and then merged them into one - on my document, not on anything provided by TIAA CREF or BISYS. I was on the fence about whether the previous deferral-only plan had ever been an ERISA plan and ever needed a 5500 of it's own, but since one had been filed previously, I advised the client to file a final one for that "plan" reflecting the merger. When it was all over, there was one plan, one document, one 5500 - as, in my opinion, there should have been all along.

Good luck getting TIAA CREF to set this up any way other than the way they normally do it - on the plan documents they provide or on their administrative systems. The clients whose documents I've "fixed" that were in this situation still have to translate everything into "RA" and "SRA" when communicating anything to TIAA CREF. Silliness.

Its only silliness if you dont understand the difference between RA contracts which have limited cashout options, e.g. no automatic lump sum option, and SRA contracts which can be cashed out in a single sum if a distribution event occurs. These differences must be communicated to employees. The two contracts can be treated as separate plans if the employer wants to provide more flexibility in the non ERISA plan- no spousal consent is required for lump sum distribution or loans. It up to the employer to decide whether to have two plans or one plan, not T/C.

mjb

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Well mjb, I've read enough of your posts around here over the years to know you probably know what you're talking about, but you kind of lost me with that post. I get that any non-profit employer with an ERISA 403(b) plan could allow the employee deferrals to go to a separate non-ERISA 403(b) plan, but I'm struggling to see why that would benefit anyone much. From the employer's perspective, they still have one ERISA 403(b) plan and all the ramifications of that - good and bad. From the employees's perspective, they now have two plans instead of one, but most of their rights are the same in any event. They give up the protections of ERISA in the non-ERISA plan, perhaps in exchange for a little bit of flexibility with regard to certain ERISA requirements like spousal consent.

But what do these plan design issues have to do with the RA/SRA contract design? An employer can choose to have one or two plans, can avoid ERISA as to a deferral-only plan, can have different distribution options for different contribution sources... all regardless of TIAA CREFs product design. What value does the RA/SRA "silliness" add versus a single contract?

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Guest Catherine M. Peery

We have a client coming to us with a similar situation but one plan allows employee deferral only and the other allows a match on a disretionary basis. In every other way they are exactly the same. We also want to merge the two plans, but will have to do DFVC projects for both, and the 2009 full 5500 for both. Then hopefully soon we can get these two plans on one document. The client has been told that unless they terminate their relationship with TIAA-CREF no payouts or transfers between plans will be possible. Typical TIAA-CREF. We will be doing letters to encourage about 20 people who are over age 59 1/2 or terminated from the org to rollover their accounts.

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Guest TPANY

We too have a client with a similar situation. Back in March, I questioned this on behalf of the client and this was the response:

"Unless they are deemed as an aggregated plan under the recordkeeping agreement, then they would need to be reported separately. We would recommend your reaching out to your Plan's Liaison or contacting our Administrator Telephone Service for additional information."

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We have a client coming to us with a similar situation but one plan allows employee deferral only and the other allows a match on a disretionary basis. In every other way they are exactly the same. We also want to merge the two plans, but will have to do DFVC projects for both, and the 2009 full 5500 for both. Then hopefully soon we can get these two plans on one document. The client has been told that unless they terminate their relationship with TIAA-CREF no payouts or transfers between plans will be possible. Typical TIAA-CREF. We will be doing letters to encourage about 20 people who are over age 59 1/2 or terminated from the org to rollover their accounts.

May I ask how far back you are going to submit returns, in DFVC? The thing I find interesting is that the supplemental plan may always have been subject to ERISA as a result of employer involvement in approval of harship withdrawals, loans, etc., but the employer had no concept of the supplemental arrangement as a "plan" with reporting duties until the documentation requirement cropped up (or more specifically when the TIAA-CREF/Ascensus process resulted in it being labled "Plan No. 002.") Also I am finding that the employers often did not get information on supplemental "plan" assets, so as to be able to re-create past returns.

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Guest TPANY

Prior to the 2009 plan year there was no real need for employers to have access to their 403(b) plan assets as there was no requirement to attach any schedules to their annual 5500 filings.

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Well mjb, I've read enough of your posts around here over the years to know you probably know what you're talking about, but you kind of lost me with that post. I get that any non-profit employer with an ERISA 403(b) plan could allow the employee deferrals to go to a separate non-ERISA 403(b) plan, but I'm struggling to see why that would benefit anyone much. From the employer's perspective, they still have one ERISA 403(b) plan and all the ramifications of that - good and bad. From the employees's perspective, they now have two plans instead of one, but most of their rights are the same in any event. They give up the protections of ERISA in the non-ERISA plan, perhaps in exchange for a little bit of flexibility with regard to certain ERISA requirements like spousal consent.

But what do these plan design issues have to do with the RA/SRA contract design? An employer can choose to have one or two plans, can avoid ERISA as to a deferral-only plan, can have different distribution options for different contribution sources... all regardless of TIAA CREFs product design. What value does the RA/SRA "silliness" add versus a single contract?

While I am confused by what you were trying to say in your rambling post I will respond to one question.

The RA/SRA distinction exists in some TIAA/CREF 403b plans subject to ERISA because employer contributions can only be contributed to a RA which does not allow for a lump sum distribution. SRAs are limited to voluntary employee salary reduction contributions. Where an employer maintains a retirement plan with mandatory employee contributions the RA contract is used (Today most 403b plans use GRA contracts). The non erisa plan for salary reductions is funded with SRAs which allows a lump sum distribution and do not require spousal consent for lump sum distributions or plan loans. There are other structural differences between RAs and SRAs, for example, the fixed rate of return on a TIAA SRA is about .50% less than an RA because it provides for a lump sump distribution.

Because of regulatory issues many employers are choosing to eliminate the non ERISA 403b plan and have employees make voluntary contributions to the ERISA plan which is usually funded by a GRA.

mjb

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  • 7 years later...

I am writing in 2018 so I suspect TIAA has improved, but I am having no difficulty with TIAA entertaining:  1.  keeping a Non-ERISA plan separate from the ERISA plan (the ones I am working on have followed a very clean protocol concerning no employer decision making or involvement in the Non-ERISA plans.... my only concern has been investment diversity (another topic for another day) or 2. freezing the Non-ERISA plan so that all contributions go into the ERISA plan (usually called "DC" plan), or 3. merging the two plans, or 4. Using our plan document in the restatement for whatever the client and I want to do.

 TIAA constantly confuses the terms "plan" with "contract."    There is nothing wrong with having two contracts (or more) funding one plan.  The 6 digit numbers TIAA uses are contract numbers.  TIAA will set up both contracts to fund the DC plan  (merger) so I think this moots the whole asset distribution issue, and this set up will retain all  or most of the features of the SRA Contracts.  Lippy's "silliness" remark indicates to me a lack of knowledge about or disdain for annuity contracts.

Finally, my experience with the good TIAA conversion consultants is the they, too, believe the safest course of action today is to use one of the above techniques to "get rid of" the Non-ERISA plans.  It is just too difficult to be sure the client has consistently avoided all the ways a Non-ERISA plan can inadvertently become ERISA (see the Wisconsin late deposit = ERISA case). I still have a few clients who want to maintain the Non-ERISA plans and TIAA and I do our best to set them on the right track and warn them of the potential dangers.

 

Patricia Neal Jensen, JD

Vice President and Nonprofit Practice Leader

|Future Plan, an Ascensus Company

21031 Ventura Blvd., 12th Floor

Woodland Hills, CA 91364

E patricia.jensen@futureplan.com

P 949-325-6727

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