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Hello!  Long-time reader, first-time poster.... :)

I have a prospective client that I won through an RFP, therefore, I didn't know a ton about the plan until we "won" the business.  I don't work with any 403b plans, but I wanted to share the scenario with you for any insights:

This is a 403B plan for a college.  The college states that they are ERISA exempt and the plan document reflects that as well, however, they are allowing an employer match and their plan document also designates the employer to have responsibilities that should be prohibited in a non-ERISA plan (QDRO processing, etc). They have NEVER performed testing, had a plan audit (150 pcps), or filed a 5500.

1. There isn't some legitimate reason how they could possibly be operating the plan this way, is there???  I'm not finding anything.

2. To correct this, would they have to retroactively test and file 5500's dating back to 2009?

Obviously my suggestion would be for them to hire an ERISA attorney, but I wanted to kick the tires with the experts here first in case I was missing something glaringly obvious.

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The plan you describe is ERISA unless it is a church or a QCCO (Qualified Church Controlled Organization).  The employer match (are they actually making a match or have made a match?) is the "nail in the coffin," again, unless this is somehow a church organization.  It is not a good idea to have the other activities in the document because, as you correctly suggest, such activities by the employer would arguably make this plan ERISA, but if this was the only thing and it was just written in the document and never acted on, you might argue that this was a drafting error (although not the DOL's favorite excuse any more). 

I would agree that an ERISA attorney should advise on the procedure from this point.  This is a significant, expensive problem. (See the new SECURE Act fees for failing to file a 5500.) Wonder why they thought they were "ERISA Exempt?"   The document and other aspects of this problem should have been disclosed during the "bidding" process. 

This plan is required to be restated onto a pre-approved document  by the end of March (whether or not it is ERISA)  so that requires action right away.  The attorney may have an idea he or she would like put into action on this point, but if this was my client and they had made employer matching contributions, etc., I would get them on a pre-approved ERISA 403(b) document immediately.  (If you are unfamiliar with this, send me a note and I will send you a piece I wrote for our clients and advisors on this topic.  patricia.jensen@ascensus.com)

If this was presented to me and we did not do any ERISA work, I would consider declining the business.   It will be a challenge to charge enough to recover your billable costs in this situation.

Good luck!


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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  • 3 weeks later...

jesse12, if this is a public college, e.g. a state U or a community college, it is likely governmental, and therefore exempt from ERISA and 5500's, no matter what its document says.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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