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403(b) plans

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Funds, Fees, and Annuities: A Guide to 403(b) Investment Options (PDF)
11 pages. "[W]hile annuity contracts were once the only option -- and still constitute a majority of the total assets nationwide -- there is a strong trend toward offering mutual funds as an alternative to annuities. In 2015 ... while 87.1% of 403(b) plans offered mutual funds as an investment option, only 58.6% offered annuities.... [A]dditional investment options are not likely to be permitted anytime soon." (Greensfelder)
[Guidance Overview] Bipartisan Budget Act of 2018 Brings Changes for Retirement Plans
"The Act ... expands the sources from which employees may take hardship distributions.... [It] is not clear that these ... changes will apply to 403(b) plans without a change to the 403(b) regulations ... since the 403(b) regulations specifically prohibit distributions from earnings.... Plans sponsors who would like to allow the repayment of amounts wrongfully levied upon by the IRS to their plans should consider amending their plan language to expressly permit these contributions." (Ice Miller LLP)
403(b) Vendor Selection Tips
"Higher education and other 403(b) plans were typically established with a different goal than 401(k) plans. Therefore, 403(b) plan sponsors may want to step back and reevaluate why they're offering a retirement plan, what are the goals for the plan, what are the different recordkeeping structures available, and how this all aligns with their institution's goals. A traditional vendor vetting process would then follow with a special emphasis on the features and services that can most make a difference in their specific situation." (Westminster Consulting)
[Guidance Overview] Disability Claims and Appeals: How the New Regs Affect Retirement Plans
"403(b) plans generally ... rely on the determination made by other sources, such as the Social Security administration or the employer's LTD carrier. So, 403(b) plans will be spared from the most significant components of the revised regulations.... 403(b) plans should update internal procedures for handling an appeal from a denial of disability benefits to comply with the new regulations." (PlanPILOT)
403(b) Plan Compliance Calendar, 2018
"The 2018 Retirement Plan Compliance Calendar highlights critical compliance deadlines ... [T]here may be additional deadlines for specific plans that are not covered here. Plans with non-calendar plan years may be subject to different deadlines." (Cammack Retirement Group)
IRS Publication 571: Tax-Sheltered Annuity Plans (403(b) Plans) for Employees of Public Schools and Certain Tax-Exempt Organizations (PDF)
22 pages; rev. Jan. 2018. "What's New for 2018: [1] Retirement savings contributions credit.... [2] Limit on elective deferrals.... [3] Limit on annual additions.... [4] Self certification available for missed rollover deadline." (Internal Revenue Service [IRS])
[Guidance Overview] Text of IRS Publication 4530: Designated Roth Accounts Under 401(k), 403(b) or Governmental 457(b) Plans (PDF)
Rev. Dec. 2017. "An advantage of a designated Roth account is that you pay tax on your contributions now, but later, when you receive a qualified distribution from the account, it is tax-free. Less tax on your plan distributions could mean more money in your pocket during your retirement." (Internal Revenue Service [IRS])
Mitigating Factors in Calculating a 403(b) Plan's Maximum Payment Amount Under CAP
"There are formally 10 different factors under EPCRS which the IRS takes into account when proposing the sanction amount. One of those elements ... is the 'Maximum Payment Amount' (the MPA).... This number in the 401(a) world can be a very large number -- even for a small plan -- especially when taken over a number of years. But it's interesting to see the effect on a 403(b) plan going through this process:" (National Tax-Deferred Savings Association [NTSA])
Fee Structure and Evaluation in 403(b) Plans
13 pages. "One-third of respondents are unsure if their plan uses revenue sharing to pay expenses, including 50 percent of small plans. One-fourth of plans reallocate revenue sharing among all participants while one-fourth of respondents are unsure.... About one-fourth of respondents are not aware of formal fee policy statements. Half of respondents are unfamiliar with fee levelization." (Plan Sponsor Council of America [PSCA])
Your 403(b) Fiduciary Responsibilities and 403(b) Plan Litigation (PDF)
26 presentation slides. Topics: [1] Overview of Relevant ERISA Provisions; [2] Co-Investments with Endowment; [3] Environmental, Social and Governance (ESG) Investing; [4] Monitoring 3rd Parties; and [5] 403(b) Plan Litigation. (McDermott Will & Emery)
403(b) Sponsors Need More Information on Plan Design, Including How Plan Expenses Are Paid
"Nearly one-third (30.9 percent) of 403(b) plan sponsors are unsure as to whether they use revenue sharing to pay plan expenses ... The PSCA annual survey also found low use of a formal fee policy statement to monitor the reasonableness of plan fees and services, with less than one-third (31.9 percent) of respondents indicating their use. One-fifth (21 percent) are not aware of what a fee policy statement is, according to the survey." (Plan Sponsor Council of America [PSCA])
Can 403(b) Plan Compensation Definition Include Housing Allowance?
"The [IRS] has taken the position for a number of years that amounts nontaxable as housing allowance are not compensation for purposes of the 415 definition of compensation. Thus, they cannot be counted as compensation for purposes of the 100% of compensation limit.... However, for purposes of making employer contributions, a different definition of compensation could be used that includes nontaxable housing allowance." (PLANSPONSOR)
[Guidance Overview] Spousal Consent/J&S Issues Under 403(b) Plans May Trigger Document Conflicts
"[T]he only way the spousal rights rules apply to 403(b)plans is through ERISA Section 205. This means that if you have a non-ERISA 403(b) plan, the spousal rights rules DO NOT apply. Be careful to avoid inadvertently applying them in the restatement.... HOWEVER, many non-ERISA 403(b) annuity contracts impose the spousal rights rules as a matter of contract language ... It is typical for a 403(b) plan to provide a set percentage of pay as the employer benefit under the plan, much like a money purchase plan. There is a very real and unresolved issue as whether or not this set formula makes the plan a 'money purchase plan' which is subject to the J&S rules[.]" (Business of Benefits)
Courts Weigh in on Challenges to University Retirement Plans
"These rulings, most of which allowed claims to proceed past the motion to dismiss stage, highlight the variation in standards courts apply when weighing ERISA fiduciary suits. Moreover, they underline the need for plan fiduciaries to review the performance and fees of their plans' service and investment providers on a regular basis to determine whether the providers' fees are reasonable and their continued retention is appropriate." (Steptoe & Johnson LLP, via Lexology)
Tax Reform: Comparison of House and Senate Tax Cuts and Jobs Act Versions (PDF)
7-page chart provides side-by-side comparison summary of current law and the provisions of each bill that pertain to retirement and individual savings arrangements. (Ascensus)
401(k) and 403(b) Education: How to Set Up Employees for Success
"When ... employees [were asked] why they had not joined the retirement plan, only a minority blamed stretched finances for their decision. About 40% said they were 'too busy' and 19% said signing up was 'too much hassle.' That means there's room for better, participant-focused 401(k) education efforts to move the needle." (ForUsAll)
Delinquent 401(k) and 403(b) Deposits: Same Prohibited Transaction, But Only One Is Subject to Penalties
"While late deferrals to an ERISA 403(b) plan do need to be reported on the Form 5500's Schedule H or Schedule I, Form 5330 cannot be filed because Section 4975 does NOT apply to ERISA 403(b) plans, and thus no penalty tax is due." (Belfint Lyons Shuman)
401(k) vs. 403(b) for Nonprofit Organizations
"401(k) plans are permitted to have eligibility rules and 403(b) plans, in general, are not. The 'Universal Availability' laws which permit 403(b) plans to avoid testing deferrals also requires all employees (with limited exceptions) to be eligible to make deferrals in a 403(b) plan. A Nonprofit with 150 employees, 60 of which routinely turn over within the first 12 months of employment, should consider a 401(k) plan." (QBI)
Are Proprietary Funds the New 'Lightning Rod' for 403(b) Plans?
"Recent litigation, as well as a number of articles in the press, have been highly cynical of recordkeepers' proprietary fund offerings ... [U]nlike variable annuities, where the criticism was a slam dunk, the assessment of proprietary funds in 403(b) plans is more like a half-court heave -- once you get past the obvious conflict of interest of a recordkeeper offering funds on the platform it also manages. Here's why." (Cammack Retirement Group)
Tax Reform Legislation's Potential Impact on Public Sector Retirement Plans
"Aggregation of 457(b) elective deferrals with 401(k) and 403(b) deferrals.... Inclusion of 457(b) contributions in defined contribution plan 415(c) limits.... Elimination of special 457(b) catch-up contributions.... Lower age for access to section 457(b) plan in-service distributions.... Hardship distributions: expansion of available assets.... Hardship distributions: elimination of loan requirement.... Hardship distributions: elimination of six-month waiting period to re-start contributions.... Extension of time for terminated employees to repay offset loans." (ICMA-RC)
Tax Reform and Accumulated Leave ('Special Pay') Plans
"The proposed Senate tax reform bill ... eliminates the ability of 403(b) plans to accept contributions for former employees for up to five years following termination of employment.... The result will be greater employment taxation on the employer and former employee, and more immediate income taxation on the employee." (Carlton Fields)
401(k) and 403(b) Contributions Still on the Chopping Block
"Here's what is now under consideration: [1] The maximum catch up contribution would be increased to $9000, but catch up contributions would have to be made on a ROTH basis.... [2] No catch up contributions would be permitted for employees earning more than $500,000. [3] Catch up contributions for pre-retirees and long service employees under 403(b) and 457 plans would be eliminated. [4] Special post-termination employer contributions for 403(b) plan participants would be eliminated. [5] The rules permitting contributions to a 457(b) plan in addition to maximum 401(k) and 403(b) contributions would be eliminated." (Cohen & Buckmann, P.C.)
Prohibition on Loans from 403(b) Plan Participant's Account to Church-Related Employer Applies to Indirect Loans
"[IRS Chief Counsel Advice Memorandum 201742022] presented two situations ... In the first, one of the plan's investment options was an investment in limited liability company (LLC) shares where the LLC's primary function was to offer loans to the employer. The investment return to the participant was the interest on the loan paid by the employer. The LLC was not controlled directly or indirectly by the church. In the second, one of the plan's investment options was an investment in an LLC controlled either directly or indirectly by the employer, but offering loans to the employer was not the LLC's primary function." (Wolters Kluwer Law & Business)
Mitigating Factors in Calculating a 403(b) Plan's Maximum Payment Amount Under EPCRS Closing Agreement
"[For a 403(b) plan]: [1] There is no tax exempt trust ... [2] The employer is a tax-exempt entity.... [3] The individual will suffer taxation, the amount of which should be included in the [minimum payment amount (MPA) calculated by the IRS agent]. But ... [b]ecause most 403(b) annuity contracts will qualify as annuities for 'inside buildup' purposes -- even if they fail 403(b) treatment -- the earnings should be excluded from the MPA.... [and] the MPA should only include the tax on portion of the excess in the account of the affected individual." (Business of Benefits)
[Official Guidance] Text of IRS Announcement 2017-15: Relief for Victims of Hurricane Maria and the California Wildfires (PDF)
"This announcement provides relief to taxpayers who have been adversely affected by Hurricane Maria and recent wildfires in California ('California Wildfires') and who have retirement assets in qualified employer plans that they would like to use to alleviate hardships caused by these disasters. In addition, this announcement provides relief from certain verification procedures that may be required under retirement plans with respect to loans and hardship distributions. The relief provided under this announcement is in addition to the relief already provided by the Service pursuant to News Releases CA-2017-06, VI-2017-02 and PR-2017-02 ... The relief in this announcement is separate and in addition to the relief provided to victims of Hurricane Maria by the Disaster Tax Relief and Airport and Airway Extension Act of 2017 ...

"As described [in this announcement], a qualified employer plan will not be treated as failing to satisfy any requirement under the Code or regulations merely because the plan makes a loan, or a hardship distribution for a need arising from Hurricane Maria or the California Wildfires, to an employee or former employee whose principal residence on September 16, 2017, in the case of the U.S. Virgin Islands; September 17, 2017, in the case of Puerto Rico; or October 8, 2017, in the case of California was located in one of the areas identified for individual assistance by [FEMA] because of the devastation caused by these disasters or whose place of employment was located in one of these areas on that date or whose lineal ascendant or descendant, dependent, or spouse had a principal residence or place of employment in one of these areas on that date....

"[A] profit-sharing or stock bonus plan that currently does not provide for hardship or other in-service distributions may nevertheless make hardship distributions related to these disasters pursuant to this announcement, except from QNEC or QMAC accounts or from earnings on elective contributions (see below for plan amendment requirements)....

"[T]he relief provided by this announcement applies to any hardship of the employee, not just the types enumerated in the regulations, and no post-distribution contribution restrictions are required." (Internal Revenue Service [IRS])

University 403(b) Plan Fees and Investments Under Scrutiny
"Rulings tend to favor plaintiffs on allegations relating to ... [1] Recordkeeping fees ... [2] Offering high-fee actively-managed funds; [3] Maintaining poor performing investments. Rulings tend to favor plans/plan fiduciaries on allegations covering ... [1] Offering a large number of investment options ... [2] Selecting and maintaining investment options with unnecessary/excessive fee layers; [3] Entering into 'lock-in' arrangements; [4] Breach of the duty of loyalty. Rulings are notably split with regard to allegations that plan fiduciaries imprudently offered higher cost retail class mutual fund shares when an allegedly identical and cheaper institutional class mutual fund shares are available." (Hodgson Russ LLP)
Employers Should Reach Out to 403(b) Participants Who Maintain Outside Businesses
"Notifying 403(b) plan participants of annual additions limit rules under Internal Revenue Code Section 415(c) may not be just a best practice -- it may be an affirmative obligation in the employer's 403(b) plan document.... [If] a 403(b) participant also has a controlling interest ... in an outside business, the participant's 403(b) account and the account under that outside business' defined contribution plan ... must individually, and on an aggregated basis, satisfy the 415(c) annual additions limit.... [T]he IRS has noted that 'many of the healthcare doctors and the university professors maintain a practice outside of the entity that is the general 403(b) plan sponsor.' " (National Tax-Deferred Savings Association [NTSA])
[Official Guidance] Text of IRS Chief Counsel Memo 201742022: Application of Rule Prohibiting Loans to the Employer from a Section 403(b)(9) Retirement Income Account (PDF)
"A direct loan from the plan to the employer results in a loan or other extension of credit from assets in a participant's retirement income account to the employer. In the case of an indirect loan, such as is described in Situation 1 and Situation 2, an arrangement has been structured so that the employer receives a substantially similar loan or other extension of credit using the assets of the retirement income account as it would have under a direct loan. Accordingly, for purposes of Section 1.403(b)-9(a)(2)(i)(C), both direct and indirect loans are loans or other extensions of credit from assets in a participant's retirement income account to the employer, which cause assets in the retirement income account to be treated as diverted to the employer, violating the exclusive benefit requirement of Section 1.403(b)-9(a)(2)(i)(C)." (Internal Revenue Service [IRS])
Why Switching from a 403(b) to a 401(k) May Not Be the Best Choice
"This article will discuss a few advantages that an ERISA 403(b) plan has compared to a 401(k) plan; including fewer nondiscrimination testing requirements under the Internal Revenue Code and an opportunity for additional catch-up contributions." (National Tax-Deferred Savings Association [NTSA])
Who Are the Top 403(b) Providers?
"Small nonprofits ... may struggle to find time to even look for a provider, much less handle tasks associated with a retirement plan. Nonprofits unsure of just how to go about a search may simply contact one of the larger 403(b) providers. The biggest 403(b) players are presented [in this article]." (ForUsAll)
Which 403(b) Plans Are Good Fee Levelization Candidates?
"More than a quarter (26.2%) of 403(b) organizations are currently re-evaluating how plan expenses are allocated. Beyond fee allocation, some 403(b) organizations plan to tailor their investments with a tighter list of investment options -- dropping to 26, down from 28 last year. By narrowing the options, organizations can help make investment decisions less daunting for plan participants." (The Principal Blog)
MIT Must Defend Lawsuit Over Excessive Fees in Retirement Plan
"Judge Nathaniel M. Gorton ... partially adopted the magistrate judge's 59-page report and recommendation not to dismiss most of the participants' claims under [ERISA]. Gorton refused to dismiss claims that MIT acted imprudently by charging excessive record-keeping fees and failing to choose the least expensive share classes for some of the plan's investment options. However, Gorton departed from the magistrate judge's recommendation to allow the participants' claims of prohibited transactions based on an alleged kickback scheme between Fidelity and the plan." [Tracey v. Mass. Inst. of Tech., No. 16-11620 (D. Mass. Oct. 4, 2017)] (Bloomberg BNA)
[Guidance Overview] 403(b) Document Delays, The 'Once in Always In' Rule, and The 'Effective Date Addendum'
"The IRS requires that the 'once in, always in' term be included in the pre-approved [403(b) plan] document.... [M]any employers may not have not applied this rule, over time, consistent with the required plan document term. With the pre-approved document covering practices back to January 1, 2010, plans which adopted this the pre-approved plan with this term automatically included term might immediately have a 'form and operation' problem which would force them into EPCRS.... [T]here can be any number of practices required by the pre-approved document which the employers have not 'practiced' since January 1, 2010." (Business of Benefits)
Cornell, MIT Lose Rounds in Retirement Plan Litigation
"A federal judge Sept. 29 refused to dismiss key portions of the lawsuit against Cornell, including claims that the school was wrong to use multiple record keepers and to offer high-fee actively managed funds and certain underperforming investment options. However, the judge dismissed charges that Cornell shouldn't have offered so many investment options and shouldn't have agreed to a 'lock-in' relationship with one of its record keepers, TIAA. On the same day, a different federal judge kept a similar lawsuit against MIT alive, refusing to dismiss claims that MIT acted imprudently by charging excessive record-keeping fees and failing to choose the least expensive share classes for some of the plan's investment options." (Bloomberg BNA)
Johns Hopkins Employees Advance Retirement Plan Fee Suit
"A federal judge Sept. 28 refused to dismiss key portions of the lawsuit, including claims that the school violated [ERISA] by offering actively managed funds in its retirement plan and using multiple record-keepers. However, the judge dismissed claims that Johns Hopkins imprudently offered higher-cost share classes when cheaper classes of the same funds were available. The judge also dismissed the novel claim that the school violated ERISA by offering too many investment options in its retirement plan." [Kelly v. The Johns Hopkins Univ., No. 16-2835 (D. Md. Sept. 28, 2017] (Bloomberg BNA)
Dismissal of Case Against Univ. of Pennsylvania Is Good News for 403(b) Plan Sponsors
"Participants in the plan asserted breaches of fiduciary duties arising out of a variety of decisions made by plan fiduciaries at UPenn: locking in the plan to certain TIAA-CREF accounts; allowing TIAA-CREF and Vanguard to serve as their own recordkeepers and use asset-based recordkeeping fees instead of flat, per-person fees; offering some retail class shares, rather than all lower-fee institutional class shares; and permitting some underperforming funds to remain in the plan. The judge dismissed all claims in their entirety." [Sweda v. The Univ. of Penn., No. 16-4329 (E.D. Pa. Sept. 21, 2017] (Verrill Dana LLP)
Average 403(b) Fees: How Do Your Plan Expenses Measure Up?
"Smaller plans tended to incur higher costs to run their 403(b) plans. Plans with $1-$10 million in assets experienced total plan costs of 0.91% of assets, almost double the 0.46% costs incurred by non-profits with more than $1 billion assets in their 403(b). Even plans with $100-$250 million in assets, at 0.54%, experienced far lower costs than the smallest plans." (ForUsAll)
Comparison of Retirement Programs Available to Public School Corporations (PDF)
"This chart outlines the rules for qualified retirement plans only.... [D]ifferent rules often apply to non-governmental tax-exempt employers and for-profit companies.... [A] public school corporation may maintain a grandfathered 401(k) plan that was adopted before May 6, 1986. Since there are very few grandfathered 401(k) plans, this chart does not outline the applicable rules for those plans." (Ice Miller LLP)
Not-For-Profit Plan Sponsors and Participants Could Use More Lifetime Income Education
"More than half (59%) of plan sponsors in the not-for-profit sector are concerned that employees will run out of money in retirement... [T]he top concern among sponsors is that workers would delay retirement due to inadequate savings (64%).... [L]ifetime income options across the board can be very complicated for several participants to comprehend.... [P]lan sponsors can benefit from a targeted, holistic approach to educating employees around key aspects of their retirement plans, including annuities as investment options." (PLANSPONSOR)
[Guidance Overview] Comparison of Retirement Programs Available to Church and Church-Related Employers (PDF)
13 pages. "This chart compares retirement programs that are 'tax-qualified' under the Internal Revenue Code. In addition to these options, a non-qualified church controlled employer (non-QCCO) can establish a Code Section 457(f) ineligible deferred compensation plan. A church or qualified church controlled organization (QCCO) cannot establish a 457(f) plan, but can establish a non-qualified deferred compensation plan under Code Sections 451 and 83. This chart covers the general rules that apply to each of these types of retirement programs to provide context. However, the rules that apply only to church and church-related employers are bolded in red." (Ice Miller LLP)
University of Pennsylvania Prevails in 403(b) Fee Suit
"The suit, brought by participants in the $3.8 billion University of Pennsylvania Matching Plan against the University of Pennsylvania and its Vice President of Human Resources ... alleges ... that: [1] the defendants breached their fiduciary duty by 'locking in' plan investment options into two investment companies; [2] the administrative services and fees were unreasonably high due to the defendants' failure to seek competitive bids to decrease administrative costs; and [3] the fiduciaries charged unnecessary fees while the portfolio underperformed." [Sweda v. Univ. of Penn., No. 16-4329 (E.D. Pa. Sept. 21, 2017] (National Tax-Deferred Savings Association [NTSA])
SEC: Advisers Must Offer Investors the Lowest-Fee Share Class Available
"[The SEC] issued a cease-and-desist order to Envoy Advisory, Inc., a registered investment adviser that allegedly sold Class A mutual fund shares to advisory clients without disclosing that lower-fee institutional shares were available.... Envoy's clients are primarily organizations that sponsor [ERISA] Section 403(b) retirement plans for their employees, and individuals who hold individual retirement accounts with Envoy." (Thompson Hine)
The Perils of a Multi-Vendor 403(b) Plan (PDF)
"The primary issues prevalent in multi-vendor 403(b) environment include: a lack of oversight from a vendor due diligence perspective, use of proprietary investment products, and pricing inefficiencies. This white paper intends to provide a brief history of 403(b) plans, highlight each of the aforementioned issues and equip plan sponsors with examples of actions committees can take moving forward." (Arthur J. Gallagher & Co.)
IRS Clarifies Use of Effective Date Addendums to Pre-Approved 403(b) Plan Documents
"Adoption of the pre-approved document itself may not take into account plan provisions that were in effect at varying times during this period.... The IRS has taken the position that such plans may continue to rely on their pre-approved opinion or advisory letter if they create an 'effective date addendum' to the plan document." (Ascensus)
[Guidance Overview] When Must Discretionary Amendments to a 403(b) Plan be Adopted?
"The Remedial Amendment Period (RAP) for 403(b) plans ends on March 30, 2020 for plan sponsors using IRS pre-approved 403(b) plan documents.... [W]hat happens if a plan sponsor changed the operation of the plan but did not adopt an amendment reflecting that change? ... The answer 'appears' to be that the plan can be retroactively amended when it is restated.... [T]his is one area where the rules for qualified plans differ from the rules for 403(b) plans." (FIS Relius)
[Guidance Overview] Understanding Pre-Approval of 403(b) Plans
"In March 2017, the [IRS] began issuing advisory and opinion letters to the first preapproved retirement programs described in Internal Revenue Code Section 403(b) ... [This] article discusses preapproved 403(b) plans, including their advantages, legal pitfalls, and other issues that an eligible employer may consider when determining whether to convert its existing 403(b) plan into a preapproved plan." (Venable LLP)
Are 403(b) Plans Evolving Fast Enough?
"403(b) plans are showing improvements in automated plan features ... More than 1 in 5 (21 percent) now offer auto-enrollment, up from just 19 per cent last year. Default deferral percentages at 4, 5 and 6 percent are all higher than last year. And default percentages at 1, 2 or 3 percent all declined. The number of plans offering automatic enrollment at 6 percent more than doubled to now more than 1 in 10 (11.7 percent)." (The Principal Blog)
Attack on University Section 403(b) Retirement Plans: Litigation Update
"To date, only three district courts -- the Middle District of North Carolina, the Northern District of Georgia and, most recently, the Southern District of New York -- have ruled on the motions and dismissed some of the class claims against the universities. However, the bulk of the claims alleging that the fiduciaries breached their duties of prudence in monitoring or investigating investment options, administrative fees and costs have survived." (Michael Best & Friedrich LLP)
[Guidance Overview] How to Do a 403(b) Collective Trust: 'Reverse-Engineering' the University of California 403(b) CIT
"The University of California made news when it announced that it has found a way to apply the collective trust rules in such a way to make just such an offering to its 403(b) plan.... [This] really does speak to the sophistication of their counsel AND the hoops through which one must jump in order to make it happen. The downside to this is that it still does not 'crack the nut' to make CIT's available on a bulk basis as 81-100 trusts for unrelated employers. But it still is pretty cool." (Business of Benefits)
[Guidance Overview] 403(b) Plans Must Be Universally Available: Is Yours?
"A frequent error occurs when plan sponsors automatically exclude employees working less than full-time from making elective deferral contributions under a 403(b) plan. A 403(b) plan that wants to apply the statutory exclusion for part-time employment must determine the employee's eligibility for the 403(b) elective deferral contributions based on whether the employee is reasonably expected to normally work less than 20 hours per week and has actually never worked more than 1,000 hours in the applicable 12-month period." (EisnerAmper)
Texas Teacher Retirement System Adjusts Proposed 403(b) Rule Amendments
"TRS is sticking with its current rule allowing a 10-year surrender period (12 years with disclosure) at 10%, instead of its proposal to halve the penalty to five years and 5%. Additionally, TRS is opting to raise the caps it previously proposed on asset-based fees and split those caps into two categories, one for variable annuity (VA) products and one for non-annuity products[.]" (National Tax-Deferred Savings Association [NTSA])
401(k)/403(b) Loan Borrowers: Check Your Paystubs!
"[T]he employer deducted none of the loan repayments from Ms. Frias' paychecks while she was on leave. Ms. Frias did not know of this failure until she returned to work ... She immediately made a $1,000 payment ... and authorized an increase in her repayments ... [T]he plan's record keeper accepted all loan repayments and in July 2014 wrote Mrs. Frias that her loan had been repaid in full. But in 2012 Mutual of America issued a Form 1099-R, reporting a deemed distribution because of the late ... loan repayment.... The tax court disagreed with Ms. Frias that a deemed distribution should not have been reported because she was on an unpaid leave of absence." [Louelia Salomon Frias v. Comm'r, TC Memo 2017-139 (July 11, 2017)] (Foley & Lardner LLP)
Impact of Proposed Rule Amendments on the Teacher Retirement System of Texas (PDF)
50 presentation slides. "While TRS does not recommend 403(b) providers or investments, the certification and registration process gives the appearance of TRS endorsement.... [Proposed amendments include:] Require certification application disclosures. Adjust allowable maximum fees, costs, and penalties. Increase company certification and product registration fee from $3,000 to $5,000 and from $3,000 to $10,000 respectively ... Formalize the closed and restricted product list." (Teacher Retirement System of Texas [TRS], via National Tax-Deferred Savings Association [NTSA])
Lawsuits Reveal Risks for 403(b) and 401(k) Plan Fiduciaries
"An examination of the class action lawsuits ... reveals a repeated allegation that the faculty and staff who participate in the [institution's] 403(b) plans pay excessive fees for investment and administrative services. The underlying theme of that allegation charges executives and managers who hire the plans' service providers with insufficient oversight and breaches of their ERISA fiduciary duty. Hidden beneath the excessive fee complaint, however, are several risk issues that are consistently found to exist in [the authors'] audits of fiduciary management systems." (Roland|Criss)
Most Claims Dismissed in NYU 403(b) Plans Suit
"[A] federal judge has found that while plaintiffs have adequately pleaded certain claims, a number of the bases upon which they rely as support for other claims could not -- even if proven -- result in a favorable judgment." [Sacerdote v. NYU, No. 16-6284 (S.D.N.Y. Aug. 25, 2017)] (planadviser)
Text of IRS Publication 4483: 403(b) Tax-Sheltered Annuities for Sponsors (PDF)
Revised Aug. 2017. "As a 403(b) plan sponsor, it's important to know the tax rules that apply to your 403(b) plan and to pay attention to the operation of your plan so you can: [1] maximize your employees' retirement benefits, [2] comply with the law, and [3] avoid additional taxes and penalties." (Internal Revenue Service [IRS])
403(b) Plans Improving Plan Design
"Twenty-one percent of 403(b) plans now automatically enroll their participants, up from 19% in 2016 and 16.2% in 2014. Among the 21% of plans that automatically enroll participants, 52% pair that with automatic escalation, up from 43% in 2015." (PLANSPONSOR)
Text of IRS Publication 4482: 403(b) Tax-Sheltered Annuities for Participants (PDF)
Revised Aug. 2017. "As a participant in a 403(b) plan, you need to be familiar with the tax rules governing your 403(b) annuity so you can: [1] maximize your retirement benefits, [2] comply with the law, and [3] avoid additional taxes and penalties." (Internal Revenue Service [IRS])
More 403(b) Plans Offering Target Date Funds as QDIAs
"Target-date funds were offered by 76.9% of [403(b)] plans last year vs. 70.3% in 2015 ... The funds were most popular among the largest plans tracked by the survey -- those with 1,000 or more participants -- with 85.8% offering this option in 2016.... Last year, target retirement/life-cycle funds accounted for 85% of [qualified default investment alternatives (QDIAs)] in plans offering auto enrollment. Balanced funds placed a distant second with 8% of plans." (Pensions & Investments)
Nonprofit Retirement Plans: An Overview of 403(b) Options
"Unlike 401(k) plans, not every 403(b) plan must comply with ERISA regulations. In fact, non-ERISA plan assets accounted for 57% of all 403(b) assets in 2013 ... 79.1% of employees participated in their employer's 403(b) plan, a figure comparable to the participation rate in 401(k) plans. Similarly, 403(b) participants deferred 6.2% of their salary toward retirement in 2015. This figure is not far off the 6.8% employee deferral rate for 401(k) plans." (ForUsAll)

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