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All News > 403(b) Plans and Annuities

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Yale University Challenges Participants' Appeal in 403(b) Excessive Fee Suit
American Retirement Association [ARA] Link to more items from this source
Mar. 15, 2024

"[An] issue raised in the appeal was the arguably contradictory jury results that a breach had occurred, but no damages resulted. Also questioned was the jury's assessment that a prudent fiduciary COULD have made the same decisions, whereas the plaintiffs argued that the correct standard was that a prudent fiduciary WOULD have made those decisions." [Vellali v. Yale Univ., No. 16-1345 (D. Conn. Jun. 28, 2023; on appeal to 2d Cir. No. 23-1082, response brief filed Mar. 8, 2024)]

Tags: 403(b) Plans and Annuities  •  Fiduciary Duties  •  Retirement Plan Investment Costs

Give Yourself a 403(b) Plan Checkup
403bwise Link to more items from this source
Mar. 12, 2024

"This post describes ten 403(b) plan checkup and five additional financial planning checkup activities. It also summarizes research about the frequency of performance of financial management practices as well as three 'need to know' facts and six take-away action steps."

Tags: 403(b) Plans and Annuities  •  Retirement Plan Information for Employees

House Advances Measure That Would Permit CITs in 403(b) Plans
Multnomah Group Link to more items from this source
Mar. 11, 2024

"[The] Retirement Fairness for Charities and Educational Institutions Act ... would allow 403(b) plans subject to [ERISA] and governmental plans to invest in CITs. SECURE 2.0 opened the door for 403(b) plans to use CITs through changes in tax-related provisions, but it was not implemented as the provisions did not include the necessary changes to the securities provisions."

Tags: 403(b) Plans and Annuities  •  Retirement Plan Investments

House Approves Amendment to Allow CITs in 403(b) Plans
American Retirement Association [ARA] Link to more items from this source
Mar. 8, 2024

"On March 7, the House of Representatives voted on an amendment to a larger bill that would allow collective investment trusts (CIT) to be included as menu options in 403(b)s.... If passed, [The Retirement Fairness for Charities and Educational Institutions Act] would ensure that 403(b) plan participants have the same opportunities to invest as other retirement plan participants."

Tags: 403(b) Plans and Annuities  •  Retirement Plan Investments

SECURE 2.0 Defined Contribution Retirement Plan Provisions Snapshot (PDF)
Multnomah Group Link to more items from this source
[Guidance Overview]
Mar. 6, 2024

8-page chart lists and describes SECURE 2.0 provisions and effective dates.

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  Retirement Plan Administration  •  Retirement Plan Design  •  SECURE 2.0

Plan Sponsor Considerations for Roth Employer Contributions
Watkins Ross Link to more items from this source
Mar. 1, 2024

"Even if you currently allow Roth deferrals, you are not required to offer Roth Employer contributions. You can offer this option even if your plan does not offer Employee Roth deferrals. An employee must irrevocably elect Roth treatment for matching and nonelective contributions before they are allocated to their plan account."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  457 Plans  •  Retirement Plan Design  •  SECURE 2.0

403bwise Remarks to Illinois Legislators on Proposed Single Vendor Legislation
403bwise Link to more items from this source
[Opinion]
Feb. 26, 2024

"Illinois legislator Karina Villa ... is determined to fix a problem unique to K-12 employees: unvetted, exorbitantly priced multi-vendor 403(b) products sold by an army of sales agents with zero fiduciary duty. She has introduced legislation (co-sponsored by Robert F. Martwick) to require K-12 403(b) plan in the state be put out to bid. The bill would forbid the sale of products with loads and surrender charges.... [403bwise spoke] to Illinois legislators last week about the merits of this bill."

Tags: 403(b) Plans and Annuities  •  Local Regulation  •  Retirement Plan Policy

Editor's Pick Proposed Regs Address Long-Term Part-Time Employee Participation in 401(k) Plans
Boutwell Fay LLP Link to more items from this source
[Guidance Overview]
Feb. 14, 2024

"Because the 12-month periods may overlap, some employees may become eligible as LTPT employees even before they have worked 'long term.' ... Upon rehire, it is important to differentiate between employees who were previously eligible for a plan due to being LTPT employees and employees who were eligible for any other reason.... If a plan sponsor mistakenly did not provide LTPT employees eligible as of Jan. 1, 2024, the opportunity to defer on that date, the plan sponsor may need to take corrective action under [EPCRS] ... Even if LTPT employees are excluded from testing, plan sponsors can still make employer contributions on their behalf."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  Retirement Plan Administration  •  SECURE 2.0

Eighth and Ninth Inning 403(b) Strategies
403bwise Link to more items from this source
Feb. 13, 2024

"This post starts by discussing the process of 'ripping off the band-aid' of a high-cost vendor and getting out of a bad 403(b). It then describes the importance of continued saving through retirement age, finding money to save, dollar-cost averaging savings deposits, tax incentives to make up for lost time, and creating a retirement catch-up action plan ... It also summarizes research about 'the arithmetic of investment expenses' as well as three 'need to know' facts and six take-away action steps."

Tags: 403(b) Plans and Annuities  •  Retirement Plan Information for Employees

IRS Proposes Long-Term, Part-Time Worker 401(k) Eligibility Rules (PDF)
Mercer Link to more items from this source
[Guidance Overview]
Feb. 7, 2024

"The regulation would apply to plan years starting on or after Jan. 1, 2024 ... The proposal doesn't address Section 403(b) plans that are covered by ERISA, which must comply with SECURE 2.0's LTPT eligibility requirements starting in the 2025 plan year.... [T]his updated article includes a discussion of certain plans that could see employees satisfy the LTPT eligibility rules prior to 2024, as well as recent informal IRS guidance recommending action steps for employers."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  Retirement Plan Administration  •  SECURE 2.0

Long-Term Part-Time Employee Eligibility Rules Now in Effect
Troutman Pepper Link to more items from this source
[Guidance Overview]
Feb. 2, 2024

"While safe harbor 401(k) plans are explicitly called out as requiring amendments to reflect the exclusion of LTPEs from eligibility for those contributions, as well as their exclusion from testing, non-safe harbor plans also appear to be subject to this requirement. The preamble to the proposed regulations requires a plan to contain 'enabling' language to permit the exclusion.... [A] non-safe harbor plan, out of an abundance of caution, should be amended in the same manner as a safe harbor plan regarding LTPE eligibility for employer contributions and exclusion from testing."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  Retirement Plan Administration  •  Retirement Plan Design  •  SECURE 2.0  •  SECURE Act

The Maximum Contribution May Be Lower Than You Thought: ADP and ACP Test Basics for 401(k) and 403(b) Plans
Belfint Lyons Shuman Link to more items from this source
[Guidance Overview]
Feb. 2, 2024

"It is a common misconception that employees who are not contributing should not be included in the census data provided to the third-party administrator performing the testing. Unfortunately, not including the zeroes renders the results of the test incorrect."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  Retirement Plan Administration

Meta Effect of Being Non-ERISA
403bwise Link to more items from this source
[Opinion]
Jan. 30, 2024

"The 401(k) is subject to protections under [ERISA]. The K-12 403(b), known as a governmental 403(b), is not.... Meta, better known as Facebook, is headquartered in Menlo Park. If they offered the same vendor list as the school district they would be sued. Why? Because of the dozens of red-rated vendors in the plan."

Tags: 403(b) Plans and Annuities  •  Fiduciary Duties  •  Retirement Plan Investments

Defined Contribution Pre-Approved Plans Listing of Required Modifications and Information Package (LRM) (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Jan. 17, 2024

150 pages; January 2024. "This Information Package contains samples of plan provisions that have been found to satisfy certain specific requirements of the Internal Revenue Code, taking into account changes in the plan qualification requirements, regulations, revenue rulings, and other guidance ... including changes enacted by the [CARES Act] ... the [SECURE] Act of 2019 ... and ... the SECURE 2.0 Act of 2022 ... Such language may or may not be acceptable in different plans depending on the context in which used." [Also available: Redlined version]

Tags: 403(b) Plans and Annuities  •  Retirement Plan Amendments

Cash or Deferred Arrangement (CODA) Listing of Required Modifications and Information Package (LRM) (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Jan. 17, 2024

60 pages; January 2024. "This Information Package contains samples of plan provisions that have been found to satisfy certain specific requirements of the Internal Revenue Code, as amended through the SECURE 2.0 Act of 2022 ... These CODA LRMs are not revised to reflect certain changes to catch-up contribution limits and requirements enacted by SECURE 2.0, to the extent these changes are not included on the Cumulative List. This CODA LRM also does not include plan language for implementing pension-linked emergency savings accounts (PLESAs) ... added by Section 127 of SECURE 2.0." [Also available: Redlined version]

Tags: 403(b) Plans and Annuities  •  Retirement Plan Amendments

Employee Stock Ownership Plan Pre-Approved Plans Listing of Required Modifications and Information Package (LRM) (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Jan. 17, 2024

45 pages; January 2024. "[Rev. Proc. 2015-36] expanded the pre-approved program to cover employee stock ownership plans (ESOPs) and set forth certain requirements to be a pre-approved ESOP.... This information package contains samples of plan provisions that satisfy certain requirements of the Code applicable to ESOPs. Such language may or may not be acceptable in specific plans depending on the context in which used. To expedite the review process, plan sponsors are encouraged to use the language in this package."

Tags: 403(b) Plans and Annuities  •  Retirement Plan Amendments

403(b) Plans: Not Your Average Salary Deferral Plan
Bricker Graydon Link to more items from this source
Jan. 12, 2024

"Congress continues to pass laws that move 403(b) plans ever closer to 401(k) plans, but 403(b) plans remain distinct.... Special aspects of 403(b) plans include ... [1] Types of plan sponsors ... [2] ERISA coverage ... [3] Universal availability ... [4] Special 15-year catch-up contributions ... [5] Contributions on behalf of former employees ... [6] Investment choices."

Tags: 403(b) Plans and Annuities  •  Retirement Plan Design

IRS Issues Miscellaneous Implementation Guidance for SECURE 2.0 Changes
Ice Miller LLP Link to more items from this source
[Guidance Overview]
Jan. 9, 2024

"The Question & Answer format addresses a limited number of provisions under SECURE 2.0, and the IRS noted that the Notice is intended to assist plan sponsors in commencing implementation of these provisions rather than provide comprehensive guidance.... Comments for Notice 2024-2 are requested by February 20, 2024, in particular with respect to the de minimis financial incentives."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  Retirement Plan Administration  •  Retirement Plan Design  •  SECURE 2.0

Preapproved 403(b) Plans
Venable LLP, via LexisNexis Practical Guidance Link to more items from this source
[Guidance Overview]
Dec. 28, 2023

"This practice note discusses pre-approved Internal Revenue Code Section 403(b) plans, including their advantages, legal pitfalls, and other issues that an eligible employer may consider when determining whether to use a pre-approved plan for a new 403(b) plan or convert its existing 403(b) plan into a pre-approved plan."

Tags: 403(b) Plans and Annuities  •  Retirement Plan Administration  •  Retirement Plan Design

403(b) Plan Design and Compliance
Venable LLP, via LexisNexis Practical Guidance Link to more items from this source
[Guidance Overview]
Dec. 28, 2023

25 pages. "This practice note discusses the rules that apply when eligible tax-exempt organizations (or their employees) establish tax-sheltered annuities, custodial accounts, or retirement income accounts, as described in Section 403(b) of the Internal Revenue Code.... This practice note has been updated to address significant changes affecting 403(b) plans pursuant to the Secure 2.0 Act[.]"

Tags: 403(b) Plans and Annuities  •  Retirement Plan Design

DOL Says Yale Plaintiffs 'Should' Get Another Shot in 403(b) Suit
American Retirement Association [ARA] Link to more items from this source
Dec. 19, 2023

"The [DOL amicus brief] argues that the [jury] instruction should have been that the defendants could escape liability for their fiduciary breach associated with the Plan's recordkeeping expenses if they proved that a fiduciary following a prudent process 'could have' made the same decisions, rather than requiring Defendants to establish that a prudent fiduciary 'would have' done so." [Vellali v. Yale Univ., No. 16-1345 (D. Conn. Jun. 28, 2023; on appeal to 2d Cir. No. 23-1082)]

Tags: 403(b) Plans and Annuities  •  Fiduciary Duties

Withholding Rules for Small Rollover Balances
PLANSPONSOR; free registration may be required Link to more items from this source
[Guidance Overview]
Dec. 19, 2023

"[If] total distributions to a participant in a tax year are less than $200, such distributions are not subject to the 20% mandatory withholding. Also, the plan is not required to allow participants to make a direct rollover of such amounts (though the participant may complete an indirect rollover), and no withholding notice and election is required either."

Tags: 403(b) Plans and Annuities  •  Misc. Distribution Issues  •  Rollovers

PEPs Demonstrate Benefits for University Plan Sponsors
RPAG Link to more items from this source
Dec. 12, 2023

"Asked why they had chosen to join a pooled solution, the majority of institutions who reported having done so identified lower costs and less administrative responsibility. Proponents of pooled plans argue they can offer lower 401(k) fees for workers, reduce liability and allow employers to outsource plan operation. They can also offer some features a company might not offer through a SEP, such as insured or non-insured retirement income options."

Tags: 403(b) Plans and Annuities  •  MEP/PEP  •  Retirement Plan Design

Text of Draft IRS Publication 571: Tax-Sheltered Annuity Plans (403(b) Plans) for Employees of Public Schools and Certain Tax-Exempt Organizations (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Nov. 30, 2023

33 pages; Nov. 29, 2023. "What's New for 2023: Retirement savings contributions credit ... Limit on elective deferrals.... Limit on annual additions.... Designated Roth nonelective contributions.... What's New for 2024: Retirement savings contributions credit.... Limit on elective deferrals.... Limit on annual additions.... Distributions for emergency personal expenses ... Distributions to a domestic abuse victim."

Tags: 403(b) Plans and Annuities  •  Retirement Plan Administration  •  Retirement Plan Design

2024 Changes Affecting 403(b) Participants
403bwise Link to more items from this source
[Guidance Overview]
Nov. 7, 2023

"This post describes 2024 changes affecting 403(b) plan participants including contribution limits (for 403(b)s, IRAs, and HSAs), catch-up provisions, the Saver's Credit, Social Security rules, and SECURE 2.0 provisions. It also summarizes two research studies about the impact of higher catch-up contribution limits as well as three 'need to know' facts and six take-away action steps."

Tags: 403(b) Plans and Annuities  •  Retirement Plan Administration  •  Retirement Plan Design

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