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<< Older News  |  September 25, 2020

News

All News > 403(b) Plans and Annuities

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Cornell Crafts Cash Settlement with Schlichter
National Tax-Deferred Savings Association [NTSA] Link to more items from this source
Sept. 24, 2020

"The suit -- one of the first of the genre filed four years ago -- was filed on behalf of some 28,000 current and former plan participants in Cornell's 403(b) plan, a plan that, as of December 2014 had $1.9 billion in assets. The one remaining claim -- and the one item that was addressed in the settlement -- was the issue of the plan's utilization of retail class mutual funds when less expensive, institutional class shares were available." (Cunningham v. Cornell Univ., No. 16-6525 [S.D.N.Y. motion for settlement approval filed Sep. 21, 2020)

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

SEC Cracks Down on 403(b) and 457(b) Advisers' Undisclosed Compensation and Conflicts
Proskauer Link to more items from this source
Aug. 13, 2020

"As part of the negotiated settlement, VFA agreed to an undertaking capping its management fees at 45 basis points for all Florida K-12 teachers who currently participate (and, in some cases, those who prospectively participate) in its advisory product in Florida's 403(b) and 457(b) retirement programs. The cap will remain in effect for the duration of the clients' enrollment in the programs.... As it has in recent enforcement initiatives, the SEC put market participants on notice that it would be looking closely at the administration of 403(b) and 457(b) plans whose beneficiaries are 'main street investors,' despite that they are administered, in many cases, by large government agencies."

Tags: 403(b) Plans and Annuities  •  457 Plans  •  Retirement Plan Investments

Steady Contributions Combined with Market Performance Lead to Double-Digit Rebound Across Retirement Account Balances
Fidelity Link to more items from this source
Aug. 11, 2020

"[In Q2, the] average IRA balance was $111,500, a 13% increase from last quarter and slightly higher than the average balance of $110,400 a year ago. The average 401(k) balance increased to $104,400 in Q2, a 14% increase from Q1 but down 2% from a year ago. The average 403(b) account balance increased to $91,100, an increase of 17% from last quarter and up 3% from a year ago.... More than three quarters (76%) of workers received an employer contribution in Q2, with the average employer contribution reaching $1,080."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  IRAs

Back-to-School Retirement Savings Checklist for Teachers
403bwise Link to more items from this source
Aug. 7, 2020

"[1] Do you have a pension? If yes, learn the basics of how it works.... [2] Do you have a 403(b) available at work? If yes, do you understand how it works? ... [3] Do you have quality 403(b) vendor(s) available? ... [4] Do you have a 457(b) available at work? Do you understand how it works? ... [5] Do you have quality 457(b) vendor(s) available? ... [6] Do you contribute to Social Security?"

Tags: 403(b) Plans and Annuities  •  457 Plans  •  Health Plan Design

What Are the Partial Termination Rules for 403(b) Plans?
Business of Benefits Link to more items from this source
[Guidance Overview]
Aug. 4, 2020

"Technically, neither the Tax Code or the 403(b) tax regulations require that non-vested employer contributions be vested on plan termination. ERISA's vesting rules ... do not require any plan, whether it be 403(b) or 401(k), to vest non-vested employer contributions on plan termination.... [I]f you have mistakenly applied that 'partial termination' vesting rule to a 403(b) plan you may have an operational error. Check your plan document, it may have a partial termination rule."

Tags: 403(b) Plans and Annuities  •  Coronavirus (COVID-19)

AIG Settlement Shows K-12 403(b) Not A-OK
403bwise Link to more items from this source
[Opinion]
Aug. 4, 2020

"On July 28, 2020 the SEC announced that AIG/Valic Financial Advisors (VFA) had agreed to a multi-million dollar settlement over the firm's practices in the Florida K-12 403(b) market.... It is estimated the firm reaped upwards of $30 million through the practices in question.... Unfortunately, this latest revelation is but a few grains of sand on a very dirty beach. The K-12 403(b) is still not A-okay."

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

Congress Should Give Americans Flexibility to Keep Retirement Savings on Track
Investment Company Institute [ICI] Link to more items from this source
[Opinion]
Aug. 3, 2020

"Congress can help American families get their retirement savings goals back on track by including the 'Temporary Coronavirus-Related Catch-Up Contribution' proposal in the next COVID-19 relief package. The proposal would allow workers who were adversely affected by COVID-19 to make additional contributions of up to $6,000 annually -- for three years beginning in 2021 -- to their retirement accounts ... The proposal would be available to qualified workers regardless of age, and would permit employers to match their employees' catch-up contributions."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  457 Plans  •  Coronavirus (COVID-19)  •  IRAs  •  Retirement Plan Design

Princeton 403(b) Excessive Fee Settlement Features $5.8 Million Price Tag
planadviser Link to more items from this source
July 31, 2020

"In addition to the payment into a settlement fund, Princeton ... will not increase the plans' recordkeeping fees for three years and will use commercially reasonable best efforts to continue to attempt to reduce recordkeeping fees. Princeton has also agreed to conduct [an RFP] process for recordkeeping-administrative services and outside independent investment consulting services within three years after the settlement approval." [Nicolas v. The Trustees of Princeton Univ., No. 17-3695 (D.N.J. proposed settlement filed Jul. 28, 2020)]

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

SEC Chairman Jay Clayton Describes SEC's Ongoing Efforts to Protect Teachers' Retirement Savings
U.S. Securities and Exchange Commission [SEC] Link to more items from this source
[Official Guidance]
July 28, 2020

"[The] Teachers Initiative ... is an important aspect of [the SEC's] efforts to focus enforcement and investor education resources where they are needed and will have the greatest impact -- we have at least 800,000 teachers who participate in defined contribution plans with a total of over $1 trillion in assets ... That is a pool of assets that should be managed with due care and candor.... [T]he amounts at stake are high and our teachers deserve our attention. It is clear that we and our fellow authorities -- federal, state and local -- should be watching this space."

Tags: 403(b) Plans and Annuities  •  457 Plans

SEC Charges VALIC Financial Advisors with Failing to Disclose Payments to Promote Services to Florida Educators
U.S. Securities and Exchange Commission [SEC] Link to more items from this source
[Official Guidance]
July 28, 2020

"The [SEC] today charged Houston-based VALIC Financial Advisors Inc. (VFA) in a pair of actions for failing to disclose to teachers and other investors practices that generated millions of dollars in fees and other financial benefits for VFA. In the first action, the SEC found that VFA failed to disclose that its parent company paid a for-profit entity owned by Florida K-12 teachers' unions to promote VFA and its parent company services to teachers. In the second action, the SEC found that VFA failed to disclose conflicts of interest regarding its receipt of millions of dollars of financial benefits that directly resulted from advisory client mutual fund investments that were generally more expensive for clients than other mutual fund investment options available to clients. VFA agreed to pay approximately $40 million to settle the charges in these two actions."

Tags: 403(b) Plans and Annuities  •  457 Plans  •  Retirement Plan Investment Costs

Updated Operational Compliance List from IRS, for Plan Qualification Requirements Effective in 2020
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
July 9, 2020

"The Operational Compliance List is provided per Rev. Proc. 2016-37 ... to help plan sponsors and practitioners achieve operational compliance by identifying changes in qualification requirements effective during a calendar year.

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

Text of IRS Notice 2020-52: COVID-19 Relief and Other Guidance on Mid-Year Reductions or Suspensions of Contributions to Safe Harbor Section 401(k) and Section 401(m) Plans (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
June 29, 2020

"If a plan amendment that reduces or suspends safe harbor matching contributions or safe harbor nonelective contributions during a plan year is adopted between March 13, 2020, and August 31, 2020, then the plan will not be treated as failing to satisfy the requirement ... that the employer either [1] is operating at an economic loss ... for the plan year, or [2] has included in the plan's safe harbor notice ... for the plan year a statement that (a) the plan may be amended during the plan year to reduce or suspend the safe harbor contributions and (b) the reduction or suspension will not apply until at least 30 days after all eligible employees are provided notice of the reduction or suspension....

"If a plan amendment that reduces or suspends safe harbor nonelective contributions during a plan year is adopted between March 13, 2020, and August 31, 2020, then the plan will not be treated as failing to satisfy the requirements of Section 1.401(k)-3(g)(1)(ii) or Section 1.401(m)-3(h)(1)(ii) merely because a supplemental notice is not provided to eligible employees at least 30 days before the reduction or suspension of safe harbor nonelective contributions is effective, provided that [1] the supplemental notice is provided to eligible employees no later than August 31, 2020, and [2] the plan amendment that reduces or suspends safe harbor nonelective contributions is adopted no later than the effective date of the reduction or suspension of safe harbor nonelective contributions....

"Sections III and IV of this notice apply on similar terms to Section 403(b) plans that apply the Section 401(m) safe harbor rules pursuant to Section 403(b)(12)."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  Coronavirus (COVID-19)  •  Retirement Plan Administration

Editor's Pick The 403(b)ill of Rights
403bwise Link to more items from this source
[Opinion]
June 29, 2020

"[1] School districts must offer access to at least one quality, low-cost vendor.... [2] Anyone selling K-12 403(b) product must sign a Fiduciary Pledge ... [3] Unions must cease accepting 'donations' or any other financial support from financial institutions that sell 403(b) products to their members.... [4] Vendors must supply a clear breakdown of all fees.... [5] Employers must provide objective plan information and 403(b) education to employees, especially new hires.... [6] Plans should contain a manageable number of quality vendors.... [7] Benefits administrators must possess 403(b) training and knowledge.... [8] Sales agents must be banned from K-12 campuses.... [9] The 403(b) plan should be known as just that: the 403(b) plan.... [10] Every school employee should have access to a quality, low-cost 457(b) plan."

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

CITs in the 403(b)?
403bwise Link to more items from this source
June 23, 2020

"Bipartisan legislation was recently introduced to make this investment vehicle available in 403(b) plans. What are [collective investment trusts] and why might they make a good fit for the 403(b)?"

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

CARES Act: Special Distributions to Qualified Individuals
Faegre Drinker Link to more items from this source
[Guidance Overview]
June 18, 2020

"The CARES Act includes a provision that can help participants who are affected by the coronavirus by permitting them to take a special coronavirus-related distribution (CRD) this year.... [A] chart compares the CRD to other 'distributable events.' "

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  CARES Act  •  Coronavirus (COVID-19)  •  Misc. Distribution Issues

403(b) Plan Sponsors: Are Your Part Time Employees 'In OR Out' -- or 'In AND Out?'
Belfint Lyons Shuman Link to more items from this source
June 18, 2020

"Part-time workers and transient workers have always posed a challenge for plan sponsors trying to determine retirement plan eligibility. For 403(b) plans, universal availability rules and the related ability to exclude employees that work less than 20 hours a week added a layer of complications, especially when employees teetered over and under the threshold from one year to the next."

Tags: 403(b) Plans and Annuities

Retirement Benefits for Adjunct Faculty
TIAA Institute Link to more items from this source
June 18, 2020

"The vast majority of U.S. colleges and universities let all or some adjunct faculty defer salary into a sponsored retirement savings plan. Adjunct eligibility for plan participation is usually not contingent upon a minimum teaching load or a previous service requirement. Plan-eligible adjuncts are generally not auto-enrolled in the plan. Contributions by plan-eligible adjuncts -- typically at a threshold employment level -- are matched by 37% of institutions and 60% of systems."

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

How to Improve Retirement Plans for Teachers and Other Public Servants
Morningstar Link to more items from this source
[Opinion]
June 18, 2020

"The Public Service Retirement Fairness Act [HR 6257]... would allow 403(b) plans to invest in collective investment trusts.... Introducing CITs into these plans will not fix everything in the 403(b) market.... CITs can offer a significant benefit to workers saving for retirement through reduced expenses.... The bill could be enhanced by adding additional participant safeguards."

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

IRS Announces Opening of Cycle 3 Pre-Approved Defined Contribution Plan Restatement Period (PDF)
ASC Link to more items from this source
[Guidance Overview]
June 11, 2020

"[T]he IRS indicated it expects to issue opinion letters for pre-approved defined contribution plans on June 30, 2020 or soon thereafter.... The IRS further established in the Announcement that pre-approved defined contribution plans must restate and adopt Cycle 3 plan documents by July 31, 2022."

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

Replacing Mandatory Employee Contributions with Automatic Enrollment
Cammack Retirement Group Link to more items from this source
June 11, 2020

"[E]employee mandatory contributions (other than in 414(h) pickups) are rarely seen outside of one particular sector: college and university 403(b) plans.... Now that a number of universities are reducing or suspending their employer contributions, due to the COVID-19 pandemic, they are beginning to question the logic of requiring employee contributions.... [T]hese employers should consider replacing their employee mandatory contribution with automatic enrollment."

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

Text of IRS Notice 2020-35: Relief with Respect to Deadlines Applicable to Employment Taxes, Employee Benefits, and Exempt Organizations Affected by the Ongoing Coronavirus Disease 2019 Pandemic (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
May 29, 2020

"[T]he revised deadline for an Affected Taxpayer to perform a Time-Sensitive Action ... is July 15, 2020, unless a different revised deadline is specified ...

"The Time-Sensitive Actions [include] ...

  • Application for a funding waiver under section 412(c) for a defined benefit pension plan that is not a multiemployer plan....
  • With respect to a multiemployer defined benefit pension plan, actions due to be performed on or before the dates described in: 
    • Section 432(b)(3) for the certification of funded status and the notice to interested parties of that certification.
    • Sections 432(c)(1) and 432(e)(1) for the adoption of, and the notification to the bargaining parties of the schedules under, a funding improvement plan or rehabilitation plan.
    • Sections 432(c)(6) and 432(e)(3) for the annual update of a funding improvement plan and its contribution schedules, or rehabilitation plan and its contribution schedules, and the filing of those updates with the Form 5500 annual return....
  •     Filing of Form 5330 and payment of the associated excise taxes....
  • With respect to the remedial amendment period and plan amendment rules for section 403(b) plans described in Rev. Proc. 2017-18 and Rev. Proc. 2019-39, actions that are otherwise required to be performed on or before March 31, 2020, with respect to form defects or plan amendments. The deadline for those actions is postponed to June 30, 2020 ...
  • With respect to pre-approved defined benefit plans, the deadline for the following actions is postponed until July 31, 2020:
    • Adoption of a pre-approved defined benefit plan that was approved based on the 2012 Cumulative List; 
    • Submission of a determination letter application under the second six-year remedial amendment cycle; and
    • Actions that are otherwise required to be performed with respect to disqualifying provisions during the remedial amendment period that would otherwise end on April 30, 2020....
  • With respect to a compliance statement issued under VCP, implementation of all corrective actions, including adoption of corrective amendments, required by the compliance statement....
  • Request for approval of a substitute mortality table in accordance with section 430(h)(3)(C)....
  • With respect to the Form 5498, IRA Contribution Information, Form 5498-ESA, Coverdell ESA Contribution Information, and the Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, the due date for filing and furnishing the forms is postponed to August 31, 2020."

Tags: 403(b) Plans and Annuities  •  Coronavirus (COVID-19)  •  HSAs  •  Health Plan Administration  •  IRAs  •  Medical Savings Accounts (MSAs)  •  Reporting to Government Agencies  •  Retirement Plan Administration  •  Retirement Plan Amendments

When Bad 403(b) Vendors Offer Good Investing Choices
403bwise Link to more items from this source
[Opinion]
May 26, 2020

"[S]everal of the vendors known for high-cost agent-sold products actually offer a few pretty decent options. Call this sheep in wolf's clothing. For teachers stuck without better options, this can be a lifeline to better 403(b) investing."

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

COVID-19 Pandemic Sheds Light on Questionable Retirement Plan Features
Cammack Retirement Group Link to more items from this source
May 21, 2020

"[T]he QJSA is not a requirement for many plan types, and retaining it makes little sense if it can be avoided ... Despite [the CARES Act] changes, providing participants with flexibility for loan repayment at employment termination is far preferable.... Even in a non-pandemic environment, it seems prudent for a retirement plan to be written, if possible, so that the plan sponsor has the flexibility to modify/suspend contributions at its discretion."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  Coronavirus (COVID-19)  •  Retirement Plan Design

IRS May Be Increasing Focus on Catch-Up Contributions in 403(b) and 457(b) Plans
Groom Law Group Link to more items from this source
May 21, 2020

"Recent announcements from the IRS indicate the potential for increased audits of section 403(b) and 457(b) plans, specifically relating to catch-up contributions under such plans. The IRS recently published an issue snapshot discussing the rules for catch-up contributions under 403(b) plans and released Publication 5313, containing the Fiscal Year 2020 Program Letter for the Tax Exempt & Government Entities division, which provides for a focus on such contributions."

Tags: 403(b) Plans and Annuities  •  457 Plans

IRS Issue Snapshot: 403(b) Plans -- Catch-Up Contributions
Internal Revenue Service [IRS] Link to more items from this source
[Guidance Overview]
May 7, 2020

"Audit Tips: [1] Review the Forms W-2 to determine if any employee has exceeded the basic IRC Section 402(g) limit. This indicates that the employee made catch-up contributions. [2] Determine if the plan document permits the age 50 catch-up or the special 403(b) catch-up contributions. For plans that permit both types, make sure the contributions are applied to the limits in the proper order. [3] Verify that the qualified organization keeps the records necessary to calculate the special 403(b) catch-up and that the calculations are accurate."

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


<< Older News  |  September 25, 2020

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