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COLLECTED WISDOM™ on 403b PlansA 403b tax-sheltered annuity (TSA) plan is a retirement plan, similar to a 401k plan, offered by public schools and certain 501(c)(3) tax-exempt organizations. The following are some resources to help manage and administer your 403b. This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic. If you find a broken link or an items that you feel is outdate, irrelevant or no longer appropriate, please let us know.
Guidance and Relief for 403b Plan Sponsors Who Exclude Part-Time EmployeesAbstract: In the spirit of the holidays, the Internal Revenue Service gave a gift to sponsors of 403b tax-deferred annuity plans on December 4, 2018, by issuing IRS Notice 2018-95. For plan sponsors that exclude part-time employees from their 403b plans, this gift provides a 10-year nod on their historical plan administration, despite noncompliance with the once-in-always-in part-time exclusion condition. Source: Benefitslawadvisor.com, December 2018
403b Plan Snapshot SurveyAbstract: Plan sponsors are changing key governance practices to improve 403b plan performance and outcomes for employees, according to new findings from the latest Plan Sponsor Council of America survey report. The 13-page report highlights that changes are largely in response to litigation surrounding plans, the need to mitigate risk, recommendations from their advisor, and the normal course of plan governance. Source: Psca.org, December 2018
IRS Provides Relief Regarding Part-Time Employee Exception to Universal Availability Requirement for 403b PlansAbstract: The IRS issued Notice 2018-95 (Dec. 4, 2018), which provides relief regarding the part-time employee exception to the universal availability requirement for 403b plans. Specifically, the Notice addresses the "once-in-always-in" condition for excluding part-time employees from making elective deferrals under a 403b plan. Source: Westlaw.com, December 2018
Ten Litigation Lessons for 401k and 403b FiduciariesAbstract: 401k and 403b plan litigation is not going away. If you are a plan fiduciary looking to avoid (or win) future lawsuits over fees and investments, there are lessons to be learned from recent decisions and settlements about the best ways to protect yourself in 2019. Here are some important takeaways from recent litigation activity. Source: Cohenbuckmann.com, December 2018
403b Plans Offer Diverse Range of Investment OptionsAbstract: The average large 403b plan subject to ERISA offered 27 "core" investment options in 2015, a joint research study released by BrightScope and the Investment Company Institute has found. This report suggests that nonprofit employers sponsoring 403b plans recognize the importance of plan design and include features that will help attract and retain qualified workers. Source: Ici.org, December 2018
A Close Look at ERISA 403b PlansAbstract: This 68-page report analyzes 403b plans in the Department of Labor 2015 Form 5500 Research File. The focus then shifts to nearly 4,000 audited 403b plans in the BrightScope Defined Contribution Plan Database, which have at least $1 million in plan assets and typically 100 participants or more. Source: Ici.org, December 2018
2018 Plan Year: Year-End Compliance RemindersAbstract: Every year, plan sponsors must make sure their plans meet certain compliance requirements. This 5-page publication identifies the materials you need to review and will help you prepare for year-end. This information applies to qualified defined contribution plans and 403b plans that are subject to Title I of ERISA. Source: Prudential.com, November 2018
New Regulations on Hardship Distributions: What Plan Sponsors and Administrators May Do Now and Must Do LaterAbstract: Many plan administrators of 401k and 403b plans permitting hardship distributions will want to implement some of the changes soon to take advantage of the liberalized hardship distribution standards, and virtually all sponsors of such plans will be required to amend their plans in the not-so-distant future as a result of these changes. Source: Bradley.com, November 2018
Improving Retirement Savings for America's Public EducatorsAbstract: The research finds that public employees who have access to retirement education resources at the workplace and the assistance of financial professionals are saving earlier and contributing more to their 403b plans and have greater confidence in being able to achieve their retirement goals. The report is being made available to school districts nationally to assist them in understanding how to improve 403b participation and savings rates to help employees achieve a comfortable and timely retirement. Source: Ntsa-net.org, November 2018
Less Choice Leads to Lower 403b Participation, StudyAbstract: New research published by the National Tax-Deferred Savings Association confirms that a decrease in investment choice and reduced access to advisors leads to lower retirement plan participation by employees in public education 403b plans. The research is based on data from nearly 4,500 school districts across the United States. Source: 401khelpcenter.com, November 2018
Making Sure 401k and 403b Fees are "Necessary and Reasonable" - Part OneAbstract: As a plan sponsor, you are required to understand all of the fees that are associated your organization's retirement plan benefit program. This is a challenge because plan fee structures are often opaque, complicated, and downright misleading. The most effective way to meet your fiduciary requirement is a Request for Proposals process, typically run every three-to-five years. Why? The 401k and 403b markets are extremely competitive. They are constantly evolving and changing. Source: Fiduciaryplangovernance.com, November 2018
ERISA: Thou Shall Not Pay Excessive FeesAbstract: With increased government scrutiny, ERISA lawsuits at an all-time high, and the plaintiff's bar not only increasing in number but in sophistication, 403b plan fiduciaries will continue to face high exposure if they fail to prudently select and then continue to monitor the investments options of their plans and plan fees. Litigation is not limited to large plans, as plaintiffs and the DOL have found that smaller plans are “low hanging fruit” in terms of finding ERISA violations. Source: Ckrlaw.com, November 2018
IRS to Focus on 403b Plan Rules in 2019Abstract: A Program Letter from the Tax Exempt & Government Entities (TE/GE) Business Operating Division of the IRS offers a heads up to what retirement plan sponsors can expect from the IRS in 2019. Included is an examination of 403b plans for universal availability, excessive contributions, and proper use of catch-up contributions under IRC Section 414(v). Source: Planadviser.com, October 2018
Another 403b Plan Sponsor Beats Back Fee LawsuitAbstract: Washington University in St. Louis has won the dismissal of a lawsuit alleging it caused employees participating in the school's 403b plan to pay excessive fees for recordkeeping and investment management. Judge Ronnie L. White dismissed the lawsuit with prejudice, meaning it can't be brought back at the district-court level. Source: Investmentnews.com (registration may be required), October 2018
Why Teachers' Retirement Plans Aren't Making the GradeAbstract: While total costs for 401k plans hit an average of 0.88 percent, annuity-based 403b plans that are not subject to federal protections can have annual fees of around 2.5 percent. That's because while there's been a trend of falling fees and plaintiffs' lawsuits against too-costly 401k plans, public school teachers are dealing with a different saving regime. Here's what you need to know about 403b plans for public school workers. Source: Cnbc.com, October 2018
Annual 403b Retirement Plan Survey: Organizations Adopting Best Practice Plan DesignsAbstract: Organizations that sponsor 403b plans are accelerating adoption of plan automatic features to improve plan design and participant outcomes, according to the 2018 403b Plan Survey from the Plan Sponsor Council of America. The report also confirms more organizations are working with advisors. This year marks the 10th year of the survey and significant trends have emerged over that period. Source: Psca.org, September 2018
NYU v. Sacerdote -- Thoughts for Plan FiduciariesAbstract: Since 2016, participants have filed 19 lawsuits against universities over the fees charged to the universities' 403b plans. In the first of these cases to reach trial, New York University secured a complete victory when the court found that NYU did not breach its ERISA fiduciary duty of prudence. The court's decision provides some important takeaways for plan sponsors and the retirement committees that act as plan fiduciaries. Source: Drinkerbiddle.com, September 2018
Fiduciary Best Practices Helped NYU Win ERISA Class ActionAbstract: District Judge Katherine B. Forrest's opinion in Sacerdote highlights the various fiduciary governance practices the NYU fiduciaries followed in making the decisions at issue in the case. This article summarizes the fiduciary practices and explains how they helped the NYU fiduciaries prevail at the trial level. Source: Barclaydamon.com, September 2018
403b Sponsors Finding Success Beating Back LawsuitsAbstract: Beginning in August 2016, law firms took aim at the ERISA 403b market. Many observers expected an even less favorable outcome for 403b sponsors, particularly given their seemingly ad hoc or patchwork plan design and largely unexamined practices of both sponsors and service providers. The early results, however, have been markedly less successful for the 403b plaintiffs. Source: Investmentnews.com (registration may be required), September 2018
Why Is Recordkeeping Pricing Different for 403bs?Abstract: The price of recordkeeping services is not uniform; it can vary depending on type of retirement plan. This article discusses why pricing for 403bs is different than that for 401ks including four factors that impact 403b pricing. Source: Ntsa-net.org, August 2018
Best Practices for 403b Plan FiduciariesAbstract: Plan fiduciaries of 403b plans face some unique challenges and making mistakes can expose these fiduciaries to liability. Following 403b fiduciary best practices can help reduce the risk of lawsuits and avoid ERISA compliance violations. Source: Bsllp.com, August 2018
403b Loose Ends for 2019 HardshipsAbstract: While the Bipartisan Budget Act of 2018 modified the safe harbor rules for hardship withdrawals starting in the 2019 plan year, the extent to which these modifications will impact 403b plans is still subject to open to interpretation. Source: Ntsa-net.org, August 2018
The Recent NYU ERISA Decision and Best Practices for ERISA FiduciariesAbstract: The decision in favor of NYU, and the recent dismissal of two other similar lawsuits against Northwestern University and the University of Pennsylvania, should give some comfort to fiduciaries of ERISA retirement plans, especially those sponsored by higher education institutions. The NYU decision suggests that 403b plans do not necessarily violate ERISA simply because they have a very large number of investment funds, including actively managed funds, or because they do not promptly remove underperforming funds from the plan. Source: Bsk.com, August 2018
ERISA Fiduciaries Can Learn Lessons From NYU's Victory in 403b Fees CaseAbstract: The NYU's victory was the first to come after a trial, and the court's finding of facts and conclusions of law provide lessons for ERISA fiduciaries and not just those embroiled in their own fee cases. Source: Greensfelder.com, August 2018
Court Finds in Favor of NYU in 403b Plans LawsuitAbstract: A federal district court judge found that "while there were deficiencies in the Committee's processes -- including that several members displayed a concerning lack of knowledge relevant to the Committee's mandate -- ;plaintiffs have not proven that the Committee acted imprudently or that the Plans suffered losses as a result." Source: Planadviser.com, August 2018
Matrix Trust Company Accused of Making Unauthorized Transfers of 403b Plan AssetsAbstract: Plan participants have filed a lawsuit against Matrix Trust Company for making several transfers to an unauthorized account held by recordkeeper Vantage Benefits Administrators. Source: Planadviser.com, July 2018
GWU Tells Court 403bs Cannot Be Compared to 401ksAbstract: In a brief supporting a motion to dismiss a case against George Washington University related to the management of its 403b plan, the defendants note that 403bs have always looked differently and were set up for a different purpose than 401k plans. Source: Plansponsor.com, June 2018
The Differences Between 403b and 401k PricingAbstract: 403b plans are fundamentally different than 401k plans. Many of these differences result in a greater amount of work required to administer 403b plans and more work equals more money. This article looks at a few of the major 403b plan price drivers that do not exist in 401k plans. Source: Cammackretirement.com, June 2018
403b Plans and Puerto RicoAbstract: Suppose your pre-approved 403b plan does not exclude residents of Puerto Rico, but your PPA defined contribution plan does. What do you do? Susan Diehl discusses what can be done in such a situation. Source: Ntsa-net.org, June 2018
Top 10 Issues Found in 403b PlansAbstract: Compiled from lists published by the IRS, DOL and auditors, here are 10 items to check and review to make sure your 403b plan is operating in line with IRS and DOL expectations. Source: Qbillc.com, June 2018
Northwestern University Defeats 403b LawsuitAbstract: A federal judge in the Northern District of Illinois recently dismissed a lawsuit against Northwestern University alleging that the University and its fiduciaries mismanaged its retirement and voluntary savings plans. This is the latest decision in a series of class action lawsuits against prominent universities in which plaintiffs allege fiduciary violations of ERISA. Source: Employeebenefitsblog.com, June 2018
Deadline Looming in the Distance for 403b PlansAbstract: Last year when the IRS announced that the initial remedial amendment period for 403b plans will end March 31, 2020, the natural reaction to this very important (but rather remote) deadline was to immediately put it on the to-do list, somewhere near the bottom, where it has been languishing ever since. If this describes your reaction, it's time to move it to the front burner and take some action. Source: Benefitsbryancave.com, June 2018
Northwestern University Beats Jerry Schlichter 403b lawsuitAbstract: Northwestern University has become the second college to beat back allegations of retirement-plan mismanagement, prevailing in a lawsuit brought by prominent plaintiffs' attorney Jerry Schlichter. Source: Investmentnews.com (registration may be required), May 2018
Northwestern University 403b Lawsuit Tossed By District CourtAbstract: Defendants strongly prevailed with their motion to dismiss, and the Illinois District Court barred further motions as moot: The complaint was far too general in its scope and allegations to move ahead. Source: Planadviser.com, May 2018
Paying "Reasonable" 403b Plan ExpensesAbstract: One of the perennial issues facing the sponsors, participants and fiduciaries of 403b plans, as well as the consultants servicing or advising such individuals or plans, is plan expenses. Section 403b plans, particularly those that are covered ERISA, must carefully watch what they spend with their limited resources. Source: Ntsa-net.org, May 2018
University of Chicago Settles 403b Lawsuit for $6.5 MillionAbstract: The University of Chicago has agreed to settle a retirement-plan lawsuit for $6.5 million, becoming the first of about 20 prominent universities facing allegations over 403b-plan mismanagement to take such a step. Observers say it's difficult to determine if this is a harbinger of the outcome in the roughly 20 outstanding lawsuits. Source: Investmentnews.com (registration may be required), May 2018
The IRS Has a 403b MEP ProblemAbstract: There has been increasing interest in the market to put together Multiple Employer Plans for 403b plans, and with good reasons. Tax exempt entities are well suited to the sorts of economies of scale that a MEP can bring, and they often organize well around common associations. But a 403b MEP is really complicated when you get down to it because -- like anything 403b, it seems -- the devil exists in the details. Source: Ntsa-net.org, May 2018
Third Parties Weigh in on 403b LitigationAbstract: Three briefs were filed with the US Court of Appeals for the Third Circuit in support of the University of Pennsylvania and its Investment Committee. The briefs support the assumption that 403b plans have traditionally been managed differently than 401k plans, and as a result, they cannot be viewed in the same light with respect to litigation. Source: Sentinelgroup.com, May 2018
The New 403b Plan Documents: Protecting Your ClientsAbstract: Less than two years remain until the date by which 403b plan sponsors which seek to self-correct plan provisions that violate the Internal Revenue Code can do so. An April 18 NTSA webinar discussed what some employers are doing to correct errors and make restatements by that date certain. Source: Ntsa-net.org, April 2018
Brief in University of Pennsylvania 403b Lawsuit Points Out Differences From 401ksAbstract: An amici curiae brief filed by the American Council on Education and other higher education associations details the history of higher education 403b plans. The Council points out that the retirement system for higher education has always looked different than the system for industrial, corporate America. Source: Plansponsor.com, April 2018
Ignore Those Form 5500 Instructions: 403b Plans Do Not Use Form 5330 for Late DepositsAbstract: One of the continuing confusions in how 401a rules apply to 403b plan involves the reporting rules related to the correction and reporting on the 5500 of one of the most common errors in any elective deferral plan: the late deposit of those deferrals into the plan. Neither non-ERISA or ERISA 403b plans will ever file a Form 5330. Ever. Even when the VFCP program is being used to correct the late deposit. Source: Businessofbenefits.com, April 2018
The IRS's Gradual Shift on Applying 415 Limits to 403b PlansAbstract: There is a little noticed change in the IRS's recent update of Publication 571 (which is the IRS's 403b technical guide). In a highlighted box on page four is a statement on how the limits on "annual additions" -- otherwise known as the 415 limits -- apply. This innocuous statement is pretty outstanding, finalizing a quiet morphing over a generation of the way the IRS applies a regulation in a way we rarely see. Source: Businessofbenefits.com, March 2018
The IRS Has a 403b MEP ProblemAbstract: There has been increasing interest in the market to put together Multiple Employer Plans for 403b plans, and with good reasons. But a 403b MEP is really complicated when you get down to it because -- like anything 403b it seems -- the devil that exists in the details. Source: Businessofbenefits.com, March 2018
Litigation Against 403b Plan FiduciariesAbstract: The purpose of this article is to provide a brief overview of 403b plans, discuss when such plans are subject to ERISA, review the key allegations raised in ERISA breach of fiduciary duty lawsuits, and discuss the status of these cases. Source: Groom.com, March 2018
Audit Guidelines on Missing Participants and RMDsAbstract: This memorandum directs EP examiners not to challenge a 403b plan as failing to satisfy the required minimum distribution (RMD) standards under Internal Revenue Code Section 403(b)(10) in the circumstances set forth. Source: Benefitsforward.com, March 2018
IRS Extends RMD Audit Guidelines for Missing Participants to 403b ProgramsAbstract: The IRS has extended to section 403b programs the audit guidelines for required minimum distribution failures due to missing participants and beneficiaries that were accorded in an October 2017 memorandum to "qualified plans." Source: Us.eversheds-sutherland.com, March 2018
Basic Due Diligence for ERISA 403b PlansAbstract: It is important for 403b plans to review, with their legal counsel, any fiduciary responsibilities they may have under state law. There can be benefit from having knowledge regarding ERISA and utilizing some of the provisions that would be beneficial to their plan. This article examines some basic areas for review. Source: Ntsa-net.org, March 2018
Compliance Checklist 2018 for Plans That Are Subject to ERISAAbstract: This 43-page Compliance Checklist incorporates defined benefit, defined contribution, and ERISA 403b requirements and provides information on the materials that will need to be file, filing due dates, and agencies to which the filings should be made. Source: Prudential.com, February 2018
Georgetown University Hit With 403b Excessive Fee SuitAbstract: The suit alleges that rather than "...leveraging the Plans' substantial bargaining power to benefit participants and beneficiaries, Defendants failed adequately to evaluate and monitor the Plans' expenses and caused the Plans to pay unreasonable and excessive fees for investment and administrative services." Source: Ntsa-net.org, February 2018
Bipartisan Budget Act of 2018 Brings Changes for Retirement PlansAbstract: The Bipartisan Budget Act of 2018 was passed into law on Feb. 9, 2018 and introduces some unexpected changes for retirement plans. The most significant of the Act's changes for retirement plans reduces the existing restrictions on hardship distributions from 401k and 403b plans. Source: Icemiller.com, February 2018
Funds, Fees, and Annuities, a Guide to 403b Investment OptionsAbstract: Unlike qualified plans under Section 401, 403b plans are restricted to only three investment options. This article discusses the differences between these three options (annuities, custodial accounts, and retirement income accounts) including their legal definitions, permitted investments, asset commingling, contract exchanges and transfers, distributions, excise taxes, and fees. Source: Greensfelder.com, February 2018
Which Employees Are Eligible for a 403b Plan?Abstract: This is a quick review of which employees are eligible for a 403b plan. Source: Qbillc.com, February 2018
A (403b) Plan to Resolve ConflictsAbstract: An employer with a 403b plan must have a written plan that identifies the plan's investment arrangements in order to satisfy the IRS regulatory requirements. But what happens if the terms of the 403b plan document conflict with the provisions of an investment arrangement identified in the 403b plan? Source: Ntsa-net.org, February 2018
2018 403b Compliance CalendarAbstract: This 403b Retirement Plan Compliance Calendar highlights critical compliance deadlines for defined contribution retirement plans. While we have covered all of the major dates, some may only apply to particular plan types (and are noted accordingly) and there may be additional deadlines for specific plans that are not covered here. Source: Cammackretirement.com, January 2018
Transfers from a Non-ERISA 403b to an ERISA PlanAbstract: Can a non-QCCO (qualified church-controlled organization) transfer assets to an ERISA 403b plan from a non-ERISA 403b that is part of a multiple employer plan and is not the lead employer in the MEP but a participating one? Source: Ntsa-net.org, January 2018
Vanderbilt Can't Shake Suit Over Retirement Plan FeesAbstract: Vanderbilt University is the latest school to lose an early round in litigation challenging the fees and investment options in its retirement plan. A federal judge on Jan. 5 largely refused to dismiss a proposed class action accusing the school of running a retirement plan with excessive administrative fees, too many service providers, and high-fee investment options. Source: Bna.com (registration may be required), January 2018
Fee Structure and Evaluation in 403b PlansAbstract: This 13-page PSCA 403b Snapshot Survey reflects responses from 250 not-for-profit organizations that currently sponsor a 403b plan. The survey was conducted online in October/November 2017 and asks sponsors questions regarding how plans fees are structured, administered, and evaluated. Source: Psca.org, December 2017
Survey: 403b Sponsors Need More Information on Their Plan DesignAbstract: PSCA's annual survey shows that 403b plans have made significant improvements in plan administration. This snapshot survey highlights how additional focus evaluating fees and expenses as well as implementing a prudent, documented process might help to mitigate the risks plan fiduciaries face. Source: Principal.com, December 2017
403b Loans: Maximums and Cure PeriodsAbstract: In 2017, the IRS issued two memoranda regarding 403b plan loans and how those loans should be administered. First, in April, the IRS presented two different options to calculate loan maximums under Internal Revenue Code Section 72(p). The second IRS memorandum focused on cure periods. This article reviews the details. Source: Ntsa-net.org, December 2017
2017 Plan Year-End Compliance RemindersAbstract: Every year, plan sponsors must make sure their plans meet certain compliance requirements. This publication identifies the materials you need to review and will help you prepare for year-end. It only applies to qualified defined contribution plans and 403b plans that are subject to ERISA. Source: Prudential.com, December 2017
Delinquent 401k and 403b Deposits: Same Prohibited Transaction, But Only One is Subject to PenaltiesAbstract: The IRS Code Section that assesses a penalty on delinquent deferrals, Code Section 4975, does not apply to 403b plans. Unlike parents, who must be fair to all their children and treat them the same, the government doesn't have to penalize all types of plans equally when they commit the same exact prohibited transaction. Source: Belfint.com, December 2017
Proprietary Funds: The New Lightning Rod for 403b Plans?Abstract: In the large 403b plan space, the criticism of variable annuities has all but evaporated, since, with some low-cost exceptions, variable annuities no longer exist. But recent litigation has been highly cynical of recordkeepers' proprietary fund offerings and the plan sponsors who select such offerings. Source: Cammackretirement.com, December 2017
Colleges and Universities Seek Expert DC Advisers for Plan RefinementsAbstract: Transamerica has published an updated annual survey of higher education plan sponsors, finding many are beginning to adopt the retirement plan features shown to be popular in the corporate sector. Survey finds higher education institutions "made a marked increase in the adoption of automatic enrollment (67%) and automatic deferral rate increases (36%) for participants." Source: Planadviser.com, November 2017 401khelpcenter.com, LLC is not the author of the material referenced in this digest unless specifically noted. The material referenced was created, published, maintained, or otherwise posted by institutions or organizations independent of 401khelpcenter.com, LLC. 401khelpcenter.com, LLC does not endorse, approve, certify, or control this material and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, or timeliness of the material. Use of any information obtained from this material is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by 401khelpcenter.com, LLC. | |||||||
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