COLLECTED WISDOM™ on 403b Plans

A 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.

Broader Investment Options on the Horizon for Section 403b Retirement Plans

The House Financial Services Committee has approved legislation (H.R. 1013, the Retirement Fairness for Charities and Educational Institutions Act of 2025) that aims to expand investment options for participants in retirement plans maintained by universities and hospitals. Currently, 403b plan participants have fewer investment choices compared to those in Section 401k plans. The proposed act would allow certain 403b plans to include collective investment trusts as an investment option, helping to address this disparity and improve the investment opportunities for 403b participants.

Source: Mayerbrown.com, July 2025

2025 PLANSPONSOR 403b Market Survey

The traditional multi-vendor model for 403b plans, which manages over $1.5 trillion across nearly 160,000 plans and 20 million participants, presents unique information-sharing requirements. As highlighted in the 2025 PLANSPONSOR 403b Market Survey, vendors face challenges related to the SECURE 2.0 Act of 2022, particularly regarding implementation and retroactive amendments, according to Justin Londergan from Ardea Fiduciary Advisors. Unlike 401k plans, many 403b plans are sponsored by K-12 school systems and are predominantly non-ERISA plans, with ERISA 403b plans holding a larger share of assets.

Source: Plansponsor.com, June 2025

VFCP and Late Deposit of Contributions

The DOL's Voluntary Fiduciary Correction Program helps employers and plan officials rectify certain breaches of fiduciary duties under ERISA, enabling them to avoid civil enforcement actions and penalties. A key update effective March 17, 2025, allows for the self-correction of delinquent contributions and loan payments within 180 days of withholding or receipt, as long as lost earnings do not exceed $1,000. This change simplifies the process for plan sponsors to address common operational issues without a formal VFCP application.

Source: Consultrms.com, June 2025

Fee Savings From CITs in 403b Plans Could Equate to Six Months of Expenses

A Vanguard report highlights that allowing 403b plans to invest in collective investment trusts could save workers an average of 0.08% in fees annually compared to mutual funds. For a median worker earning $74,000, this cost difference could lead to a loss of $23,000 to $28,000 in retirement savings by age 65, potentially covering six months of expenses. Unlike 401k plans used in the private sector, 403b plans for nonprofit employees generally lack access to these lower-cost CITs.

Source: Napa-net.org, June 2025

DOL Rolls Out Updates to Opinion Letter Program

The DOL's Employee Benefits Security Administration has modernized its opinion letter program to improve compliance support. Announced on June 2, these changes aim to enhance the assistance provided to the public in understanding their rights and responsibilities under the law. Opinion letters offer official interpretations from the DOL on how laws apply to specific situations, providing clarity on regulations. Deputy Secretary of Labor Keith Sonderling emphasized the importance of these letters in offering clear and practical guidance for both workers and businesses.

Source: Napa-net.org, June 2025

House Panel Advances Bill to Permit CITs in 403b Plans

The U.S. House Financial Services Committee has passed H.R. 1013, the Retirement Fairness for Charities and Educational Institutions Act of 2025, with a vote of 43 to 8. This bipartisan bill seeks to permit 403b retirement plans, typically utilized by nonprofit employees, to invest in collective investment trusts, thus bringing their investment choices in line with those offered by 401k plans.

Source: Bpas.com, May 2025

New Voluntary Fiduciary Correction Program

The new Voluntary Fiduciary Correction Program introduces a Self-Correction Component that allows practitioners to use the DOL Calculator for self-correction of errors. In return for the self-correction, plan sponsors will receive an email acknowledgment of receipt rather than a "no-action" letter. The key difference between self-correction submissions and traditional VFCP filings is that self-correction only requires the retention of supporting documents, while filings necessitate the submission of those documents. Despite the difference, self-correctors must still prepare and keep all documentation as if filing a regular VFCP application.

Source: Belfint.com, May 2025

Multiple Retirement Bills -- Including CITs in 403bs -- Being Marked Up in House This Week

The House Financial Services Committee is holding a two-day session to mark up four bipartisan bills aimed at modernizing retirement plans, improving retail investor access to private markets, lessening regulatory burdens, and protecting seniors from financial fraud. Key bills include the Retirement Fairness for Charities and Educational Institutions Act (HR 1013) and the Improving Disclosure for Investors Act (HR 2441), both prioritized by the Insured Retirement Institute and the Investment Company Institute. Additionally, IRI supports the Senior Security Act (HR 1469), and ICI advocates for the Increasing Investor Opportunities Act among the many bills being considered.

Source: 401kspecialistmag.com, May 2025

Mandatory Automatic Enrollment for New 401k/403b Plans Gets Much Needed Guidance

SECURE 2.0 mandated, for the very first time, a special automatic enrollment arrangement be added to all new 401k and 403b plans. In this comprehensive article, Groom principals Elizabeth Thomas Dold and David Levine explore essential facets of the IRS proposed regulations covering this new mandate. They discuss which plans fall under the regulations, the functioning of automatic enrollment features, and any applicable exceptions. Additionally, the article details the necessary compliance steps and highlights specific considerations regarding mergers, acquisitions, and multiple employer plans.

Source: Groom.com, May 2025

It's Time to Restate Your 403b Plan: Deadline Looms

Organizations sponsoring 403b retirement plans must heed the IRS deadline for plan restatements. Ignoring this deadline could lead to compliance risks and penalties. Non-profits, public school districts, and government entities utilizing pre-approved plan documents should ensure timely restatement of their plans to avoid potential issues.

Source: Brickergraydon.com, May 2025

Supreme Court Lowers Bar to Pleading Prohibited Transactions, Despite "Serious Concerns" of Meritless Litigation

In a unanimous decision reversing the dismissal of claims related to fees paid to defined contribution plan recordkeepers, the Supreme Court ruled that ERISA's prohibited transaction exemptions are affirmative defenses. Therefore, plaintiffs are not required to include these exemptions in their initial pleadings to state a valid claim. Although the Court recognized that this ruling might enable some plaintiffs to overcome dismissal with minimal allegations, it determined that concerns about a potential rise in meritless lawsuits do not outweigh the clear language and framework of the statute.

Source: Seyfarth.com, April 2025

Supremes Back Plaintiffs in Cornell ERISA Burden of Proof Standard

The U.S. Supreme Court ruled unanimously in favor of retirement plan participants who sued Cornell University over excessive fees in its 403b plan. The decision clarified that under ERISA, plan fiduciaries must both plead and prove exemptions to prohibited transactions. Additionally, plaintiffs challenging such transactions do not need to specify whether statutory exemptions apply in their complaints, marking a significant win for employees.

Source: Napa-net.org, April 2025

2026 401k Contribution Limit on Track for $1,000 Increase: Milliman

The maximum 401k contribution limit, currently $23,500 for 2025, is projected to increase by $1,000 to $24,500 in 2026, according to Milliman's latest IRS limits forecast. This forecast, based on Consumer Price Index data, predicts the annual adjustment that the IRS typically announces in late fall.

Source: 401kspecialistmag.com, April 2025

The DOL's Lost and Found Database Is Live

The DOL has developed a database as part of SECURE 2.0 to assist in locating missing retirement plan participants and beneficiaries. This initiative aims to address the ongoing issue of missing participants, which is a key focus for both the DOL and the IRS. While participation in the database is voluntary for plan sponsors, it can serve as additional evidence that they are fulfilling their fiduciary duty to locate eligible participants for benefits.

Source: Brickergraydon.com, April 2025

403b Plans Have Special Considerations When Complying With SECURE 2.0

During the PLANSPONSOR Roadmap Livestream session titled "Special Considerations for 403b Plans," speakers addressed new rules affecting long-term, part-time employees and the potential for creating multiple and pooled employer plans. They also highlighted the possible future option for 403b plan sponsors to utilize collective investment trusts. As provisions from SECURE 2.0 are implemented, 403b plan sponsors are encountering new challenges related to plan design and administration.

Source: Planadviser.com, March 2025

Teachers and Nurses Deserve Access to the Same Investment Options as 401k Savers

Public education and nonprofit workers, such as teachers and nurses, are facing limitations in retirement investment options compared to the private sector, potentially leading to higher fees and reduced retirement savings. Currently, 403b plans, designed for tax-exempt organizations, are not allowed to hold collective investment trusts, which can offer cost savings and efficiency. In contrast, CITs are commonly available in 401k plans and the Thrift Savings Plan for federal employees. There is bipartisan support in Congress to eliminate this disparity for 403b plans.

Source: Ici.org, March 2025

IRS Issues Proposed Regulations Regarding Mandatory Auto-Enrollment Under SECURE 2.0

The IRS has issued proposed regulations regarding the mandatory automatic enrollment requirements under the SECURE 2.0 Act of 2022, which builds on previous interim guidance from IRS Notice 2024-02. Starting with plan years after December 31, 2024, new 401k and 403b plans established after December 29, 2022, must include an eligible automatic enrollment arrangement. The recently proposed regulations clarify that a plan is considered established on the adoption date, irrespective of its effective date, and also provide guidance on how these automatic enrollment requirements will affect plan mergers and spin-offs.

Source: Ktslaw.com, March 2025

Mandatory Automatic Enrollment Is Here

Employers have long had the option to automatically enroll employees in their 401k or 403b plans to boost participation and encourage retirement savings. Due to the success of these automatic enrollment strategies, Congress has decided to make them mandatory. Starting in 2025, many plans that allow participants to make deferral elections will be required to automatically enroll their participants. This article reviews the key points regarding the new requirements.

Source: Ferenczylaw.com, March 2025

What to Know About Part-Time Employee Eligibility for Retirement Plans

The SECURE 2.0 Act of 2022 introduces significant changes to the eligibility criteria for long-term, part-time employees in employer-sponsored 401k and 403b retirement plans. Laurie Lombardo from Voya Financial explains that employees aged 21 and older can now participate if they have either one year of service with at least 1,000 hours or two consecutive years with at least 500 hours. Employers must evaluate their part-time workforce to determine eligibility, and they face new administrative requirements. While some may choose the minimum compliance route, others might make part-time employees immediately eligible, potentially reducing administrative burdens.

Source: Planadviser.com, February 2025

The DOL Adopts Self-Correction for Common Retirement Plan Fiduciary Breaches

For the first time since its inception in 2002, the DOL has updated its Voluntary Fiduciary Correction Program to include a Self-Correction Component. This new feature allows retirement plan sponsors to efficiently self-correct common compliance issues, such as late contributions and loan repayments. Additionally, an amendment to an existing prohibited transaction exemption has been finalized, offering excise tax relief for transactions that have been self-corrected. Both the SCC and excise tax relief will take effect on March 17, 2025.

Source: Pensionsandbenefits.blog, February 2025

SECURE Act 2.0 Mandatory Automatic Enrollment Requirements for New Retirement Plans Guidance Released

The SECURE 2.0 Act of 2022 aims to boost participation in retirement plans, and on January 10, 2025, the IRS proposed regulations mandating automatic enrollment for new 401k and 403b plans. This follows the addition of Code Section 414A, which states that plans must meet specific automatic enrollment criteria to be considered qualified. The proposed regulations will take effect six months after the final regulations are issued. However, with potential changes in presidential administration and agency policies, there is uncertainty about whether these regulations will be finalized or altered. Plan sponsors are advised to continue complying with the proposed rules in good faith until they are finalized.

Source: Pensionsandbenefits.blog, February 2025

House and Senate Reintroduce CITs in 403b Plans Legislation

Legislators have reintroduced two bills aimed at allowing the use of collective investment trusts in 403b plans. Named the Retirement Fairness for Charities and Education Institutions Act of 2025, the bills were presented in the House as H.R. 1013 and in the Senate as S. 424.

Source: 401kspecialistmag.com, February 2025

IRS Issues Guidance on Mandatory Automatic Enrollment

On January 10, 2025, the IRS released Proposed Regulations concerning the automatic enrollment requirement for newly established 401k and 403b plans under SECURE 2.0. These regulations build on previous interim guidance from late 2023 and include clarifications on participant notice requirements. While the regulations will take effect six months after finalization, the automatic enrollment mandate itself is applicable for plan years starting January 1, 2025. For plans before the final rules are effective, compliance will be assessed based on a good faith interpretation of the law.

Source: Groom.com, January 2025

IRS Issue Proposed Regulations on New Automatic Enrollment Requirement for 401k and 403b Plans

The IRS has released proposed regulations related to the SECURE 2.0 Act, which includes a mandate for newly established 401k and 403b plans to automatically enroll eligible employees starting in the 2025 plan year. The proposed regulations offer guidance for plan administrators on implementation and will apply to plan years starting more than six months after the final regulations are released. In the interim, administrators must follow a reasonable, good faith interpretation of the statute.

Source: Irs.gov, January 2025

Defined Contribution Plan Profile: A Close Look at ERISA 403b Plans, 2021

The BrightScope/ICI Defined Contribution Plan Profile is a research initiative by BrightScope and the Investment Company Institute that analyzes audited Form 5500 data from private-sector DC plans. It provides insights into DC plan design, including investment options, employer contributions, automatic enrollment features, and recordkeeping practices. The research draws from the BrightScope Defined Contribution Plan Database and includes analysis of employer contribution structures and associated fees, enhancing understanding of retirement savings. The current report focuses on ERISA 403b plans in 2021, examining data from the Department of Labor's 2021 Form 5500 Research File and nearly 6,300 audited plans in the BrightScope database.

Source: Ici.org, January 2025

New Year Brings New Automatic Enrollment and Escalation Requirements for Some Recently Adopted 401k and 403b Plans

The SECURE 2.0 Act of 2022 mandates that starting January 1, 2025, newly adopted 401k and 403b plans must implement automatic enrollment and escalation features. Participants will be automatically enrolled to make pre-tax contributions between 3% and 10% of their eligible pay, with an annual increase of one percentage point until contributions reach at least 10%, but no more than 15%. Employers should also consider IRS guidance issued in December 2023 regarding how these requirements apply to plan mergers. The guidance indicates that depending on the circumstances, a merger could result in the newly merged plan being subject to or exempt from the automatic enrollment requirements.

Source: Benefitsnotes.com, January 2025

Required Minimum Distributions for 401k and 403b Plans

The first Required Minimum Distribution must be taken by April 1 of the year following the latter of when a participant turns 73 or retires (if allowed by the plan). For 5%-or-more owners, RMDs must begin by April 1 following their 73rd birthday, regardless of employment status. The minimum distribution rules must be explicitly included in the plan to maintain its tax-qualified status. Recordkeepers typically notify participants about RMDs and assist with calculations, but failure to comply with RMD rules can result in qualification errors for the plan, with excise taxes imposed on individuals. This scenario creates confusion over accountability, as plan sponsors, recordkeepers, and participants often blame each other for RMD violations, leaving everyone with a problem.

Source: Belfint.com, January 2025

IRS Adds New Category to the 2024 Required Amendments List

The IRS has expanded its "Required Amendments" List by adding a new Part C that focuses on "optional amendments" that may have been influenced by recent law changes or IRS guidance. An example provided is section 604 of the SECURE 2.0 Act, which allows plans to offer Roth treatment for employer or nonelective contributions starting in 2023. The IRS issued guidance on this in Notice 2024-2, and plans may need to be amended to comply with this guidance by December 31, 2026.

Source: Groom.com, January 2025

Higher Education and 403b Plan Litigation

Since 2015, universities have faced over 20 lawsuits related to DC plan fees, a shift from prior litigation focusing on for-profit 401k plans. The lawsuits typically accuse universities of offering excessive investment options, failing to replace costly underperforming investments, and imposing above-market fees for investment and recordkeeping services. Some claims also focus on issues like duplicative fees from multiple recordkeepers and misuse of forfeiture assets, as well as concerns regarding target-date fund selections. This article identifies four common claims in university lawsuits that higher education plan sponsors should pay close attention to. It then suggests actions that go beyond the basic fiduciary and governance best practices.

Source: Wtwco.com, December 2024

IRS Provides Guidance on Application of SECURE 2.0 Act's Coverage of Long-Term, Part-Time Employees

The IRS issued Notice 2024-73, guiding the application of non-discrimination rules for long-term, part-time employees in 403b plans under the Internal Revenue Code. This follows modifications made by the SECURE Act and SECURE 2.0 Act, which changed eligibility criteria for these employees, now allowing them to make elective deferrals once they meet specific service requirements. Specifically, ERISA LTPT employees aged 21 or older can begin deferring contributions either after completing a year of service with at least 1,000 hours or after 24 months with at least 500 hours each year, with this counting only for periods starting from January 1, 2023.

Source: Jdsupra.com, December 2024

The Rise of Target-Date Funds: Closer Look at 403b Plan Investments

The Investment Company Institute and ISS Market Intelligence released a report titled "The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at ERISA 403b Plans, 2021." The report emphasizes the increasing adoption of target-date funds in large ERISA 403b plans. Since 2009, the percentage of these plans offering target-date funds has risen from approximately 50% to around 90% by 2021. Sarah Holden, ICI Senior Director of Retirement and Investor Research, noted that target-date funds provide a diversified investment solution that shifts from growth to income-focused strategies as the target-date approaches, making them a valuable option for retirement plan participants.

Source: Ici.org, December 2024

IRS Issues 2024 Required Amendments List for Qualified Plans and 403b Plans

The IRS issued Notice 2024-82, which outlines the 2024 Required Amendments List for qualified plans under IRC sections 401(a) and 403(b). This RA List indicates the deadline for plan amendments necessary to comply with recent legislative and regulatory changes that affect these plans, applicable to both individually designed and pre-approved plans. Each year's RA List includes changes for which the IRS has provided guidance or determined that no guidance is needed. The 2024 RA List includes amendments related to the SECURE Act, the Bipartisan American Miners Act, the CARES Act, the Relief Act, and the SECURE 2.0 Act.

Source: Milliman.com, December 2024

DOL Supports Participants Against Cornell in Supreme Court Case Over DC Plan Management

The DOL has requested the Supreme Court's support for former participants in two Cornell University 403b plans who claim the plans charged excessive fees and that their contracts with recordkeepers violated federal law. Oral arguments for the case, Cunningham et al. vs. Cornell University et al., are scheduled for January 22. This case, which has been ongoing for eight years, is seen as an opportunity for the Supreme Court to clarify differing interpretations of ERISA's prohibited transactions rules by various appeals courts. The DOL, represented by Solicitor General Elizabeth Prelogar, submitted an amicus brief on December 2, highlighting the central issue of whether plaintiffs need to prove defendants engaged in prohibited transactions, or if fiduciaries must demonstrate they fall under ERISA exemptions.

Source: Pionline.com, December 2024

IRS Issues Guidance on Long-Term, Part-Time Employees in 403b Plans

On October 3, 2024, the IRS issued guidance in Notice 2024-73 regarding the application of Long-Term, Part-Time Employee rules to 403b plans, effective in 2025, as part of the SECURE 2.0 legislation. Previously, these rules applied to 401k plans under the SECURE Act. LTPTs in 403b plans will be eligible to make elective deferrals but do not need to qualify for matching or nonelective contributions, nor need to be included in discrimination testing for matching contributions. Although plan amendments for LTPT rules are not required until the end of the 2026 plan year, 403b plan operations must be compliant by January 1, 2025.

Source: Thebenefitofbenefits.com, November 2024

Key SECURE 2.0 Act Updates for Defined Contribution Retirement Plans

Beginning in 2025, new regulations will impact 401k and 403b retirement plans concerning long-term part-time employees, automatic enrollment, catch-up contributions, and Roth treatment for high earners. These updates reflect a significant shift in the retirement planning landscape aimed at enhancing access and contribution flexibility for employees while ensuring compliance with new regulations.

Source: Quarles.com, November 2024

Long-Term, Part-Time (LTPT) Guidance for 403b Plans

On October 2, 2024, the IRS issued Notice 2024-73, providing important guidance on the relationship between permitted exclusions from participation in 403b plans and the LTPT rules set to take effect on January 1, 2025, for ERISA-covered 403b plans. This guidance supports earlier predictions outlined in a previous blog about the LTPT rules and clarifies which exclusions remain allowable despite the upcoming LTPT regulations.

Source: Belfint.com, November 2024

IRS to Issue Opinion Letters for Certain 403b Pre-Approved Plans

The IRS plans to issue opinion letters on November 29, 2024, or shortly after, for certain 403b pre-approved plans. This was announced in IRS Announcement 2024-38. The opinion letters will pertain to plans updated to comply with changes regarding Internal Revenue Code Section 403(b) and were filed during the second remedial amendment cycle for these plans.

Source: Asppa-net.org, November 2024

DOL Initiates Data Collection to Reunite Workers With Lost Retirement Savings

The DOL has begun efforts to create the Retirement Savings Lost and Found database, an online tool to help workers locate lost retirement benefits. Starting Monday, plan administrators, recordkeepers, and service providers are invited to voluntarily submit data to help populate the database, which is expected to launch by December 29. The EBSA has issued a request outlining the necessary data elements and submission methods, highlighting the importance of collaboration between the government and the retirement plan community for the tool's success.

Source: Planadviser.com, November 2024

IRS Regulations Clarify 403b Plans' Obligations to Part-Time Employees

On October 3, 2024, the IRS issued guidance regarding the obligations of 403b plan sponsors to part-time employees, in light of new legislation effective January 1, 2025. This legislation mandates that long-term, part-time employees -- defined as those who work 500 or more hours in two consecutive years -- must be allowed to participate in 403b plans, regardless of previous exclusions. The IRS guidance, titled Notice 2024-73, clarifies which employees are eligible for participation, the extent of their required participation, and addresses several key questions about the rights of LTPT employees under 403b plans.

Source: Bsk.com, November 2024

Fred Reish on Things I Worry About: Automatic Enrollment - Part 2

The SECURE Act 2.0, enacted on December 29, 2022, mandates that new 401k and private sector 403b plans automatically enroll eligible employees starting in the plan year after December 31, 2024. This article focuses on the effective date as pertaining to the 2025 calendar year, which is approaching. It highlights two specific issues related to automatic enrollment: the determination of "which" eligible employees will be automatically enrolled and the inclusion of long-term, part-time employees in this requirement.

Source: Fredreish.com, November 2024

IRS Guidance: How Reliable Is It?

Federal agencies translate legislation affecting defined contribution plans into guidance, with the IRS focusing on tax laws and the DOL on labor laws. The IRS provides crucial guidance that helps plan sponsors, fiduciaries, and participants to effectively implement tax-preferred savings options. This framework is essential, as it reduces uncertainty surrounding new laws such as the SECURE Act of 2019, the CARES Act of 2020, and SECURE 2.0 from 2022, ensuring these legislative changes are practical and beneficial.

Source: Callan.com, November 2024

New Permissible Minimum Service Requirements for 401k and 403b Plans

The SECURE Act, signed into law on December 20, 2019, followed by SECURE Act 2.0 on December 23, 2022, introduced several changes to 401k and 403b plan requirements. One significant change pertains to minimum service requirements for participation in 401k plans, allowing sponsors to set criteria that help streamline administration by excluding part-time employees with minimal participation history. This is aimed at reducing the administrative burden associated with managing small accounts. Meanwhile, 403b plans must provide universal eligibility but can exclude employees working less than 20 hours per week for similar administrative efficiency reasons.

Source: Berrydunn.com, November 2024

IRS Announces 2025 Retirement Plan Limits

On November 1, 2024, the IRS announced that the contribution limit for 401k plans will increase to $23,500 for 2025, up from $23,000 in 2024. Additionally, the IRS provided technical guidance on cost-of-living adjustments impacting pension plans and other retirement-related items for tax year 2025 in Notice 2024-80.

Source: 401khelpcenter.com, November 2024

403b Specific Financial Statement Audit Considerations

This article outlines the unique aspects of auditing 403b retirement plans compared to 401k plans. It emphasizes that each Independent Qualified Public Accountant (IQPA) audit is tailored due to the diversity in service providers, plan structures, payroll systems, and internal controls. The discussion includes specific audit considerations pertinent to 403b plans, focusing on the types of employers eligible to offer these plans and other relevant factors for IQPAs during the audit process.

Source: Belfint.com, October 2024

Back-to-School Special: IRS Offers Insight on Implementing Qualified Student Loan Payments

On August 19, 2024, the IRS released Notice 2024-63, offering guidance on implementing Section 110 of the SECURE 2.0 Act of 2022. This section allows employers with 401k or 403b plans to make matching contributions based on employees' student loan payments. The Notice addresses key topics such as eligibility rules, employee certification, nondiscrimination testing, and other administrative procedures through a series of questions and answers. This article is an in-depth look.

Source: Mwe.com, October 2024

How to Compute the 15-Year Special Catch-Up for 403b Plans

Plan sponsors need historical data to accurately calculate the maximum 403b catch-up contributions for employees. If this data is unavailable, especially due to excluded contracts, sponsors should reconsider offering such a provision, as it may lead to inaccurate administration. Templates provided here can help document calculations for the 15-year catch-up eligibility, which is a unique feature of 403b plans. Without complete information, it may be wiser to forgo the provision altogether.

Source: Belfint.com, October 2024

IRS Provides Helpful Answers Regarding Long-Term Part-Time Employees in 403b Plans

In November 2023, the IRS proposed regulations regarding long-term part-time employee eligibility for 401k plans, noting that additional guidance was needed for 403b plans. The recent IRS Notice 2024-73 provides important clarifications for 403b plan sponsors, particularly benefiting colleges, universities, and teaching hospitals. This notice addresses various issues related to 403b plans, focusing specifically on the treatment of part-time and student employees.

Source: Verrill-law.com, October 2024

IRS Issues Guidance Regarding Long-Term Part-Time Employees and 403b Plans Subject to ERISA

On October 3, 2024, the IRS released Notice 2024-73, which offers guidance on Long-Term Part-Time Employees in ERISA 403b plans. The notice clarifies that part-time employees who typically work less than 20 hours per week must be permitted to participate in the plan for elective deferral if they meet certain criteria. The notice also addresses how these rules interact with nondiscrimination standards.

Source: Voya.com, October 2024

IRS Issues 403b Plan LTPT Guidance

On October 2, 2024, the IRS issued Notice 2024-73, which offers guidance on the long-term, part-time employee (LTPT) rules for ERISA-covered 403b plans. Non-ERISA 403b plans are not affected by these rules and can disregard them.

Source: Ferenczylaw.com, October 2024

The Trouble With True-ups: Make Sure You Budget for the Maximum Match

Employers that give substantial bonuses tend to allow their employees to contribute the maximum 401k or 403b deferral amount out of their bonus pay. To ensure that employees who take advantage of this flexibility get the maximum match, the employers have to make sure that their plan document has a true-up match provision. There's also a lesson to be learned by employers who don't like surprises.

Source: Belfint.com, October 2024

IRS Addresses Long-Term, Part-Time Employees in 403b Plans in New

In guidance issued on October 3, the IRS addresses long-term, part-time employees in 403b plans under SECURE 2.0 for plans beginning in 2025. The guidance comes in Notice 2024-73. The guidance includes a question-and-answer section about applying the nondiscrimination rules for 403b plans regarding LTPTEs, including rules to exclude part-time employee and student employee participation.

Source: Asppa-net.org, October 2024

Required Minimum Distributions

As we approach the end of the calendar year, it is important to be reminded about one frequently overlooked retirement plan requirement. Upon attainment of age 73, certain participants of a tax-qualified retirement plan may be required by federal tax law to withdraw a minimum amount from such plan each year. These mandatory distributions are known as "required minimum distributions."

Source: Legacyrsllc.com, October 2024

The Plan Sponsor's Guide to PEPs

The Plan Sponsor's Guide to PEPs is a resource for employers interested in providing 401k or 403b benefits using a pooled employer plan. Each section of the guide takes 401k and 403b plan sponsors through the steps of how PEPs work and whether they are an appropriate approach for an employer; how to evaluate pooled plan providers; best practices for implementation and monitoring; and reviewing plan design and investment menus that can help meet the retirement needs of their participants.

Source: Pionline.com, September 2024

Bid for Jury Trial Bounced in 403b Excessive Fee Suit

A long-running excessive fee suit involving a university 403b plan -- and is incredibly, still running -- won't have a jury trial, according to a new federal court ruling. The suit was brought by participants in plans of New York University. This case reminds us that litigation frequently involves a series of motions and countermotions, often small procedural victories that contribute little to the merits, but can influence the eventual outcome of the case.

Source: Ntsa-net.org, September 2024

Bill That Would Allow CITs in 403bs Before Senate

Legislation that would allow 403b plans to invest in collective investment trusts has been introduced by several Senate Banking Committee members, including the ranking Republican, an indication of growing acceptance of the idea. The legislation originates in part from feedback Sen. Scott received concerning the capital formations framework he released almost a year ago, a roundtable he convened concerning ways to boost minority community access to capital.

Source: Asppa-net.org, September 2024

IRS Addresses Matches for Qualified Student Loan Payments

The SECURE 2.0 Act gave plan sponsors of certain DC plans the ability to make matching contributions when workers make qualified student loan payments on qualified educational loans. The IRS has issued interim guidance that applies to 401k, 403b, and governmental 457b plans as well as SIMPLE IRAs. The interim guidance is effective for plan years beginning after December 31, 2024.

Source: Segalco.com, September 2024

Extended 403b Plan Amendment Deadlines Still Obligatory

Amendment deadlines may have been extended for a variety of retirement plans -- including 403bs -- but they are no less obligatory than they were before. The IRS in a Sept. 12 edition of Employee Plans News focuses on plan amendment deadlines that were extended by the "Grab Bag" guidance the IRS issued in Notice 2024-02 on Dec. 20, 2023, and Revenue Procedure 2022-40 on Nov. 21, 2022.

Source: Ntsa-net.org, September 2024

Multi-Billion-Dollar 403b Plan Settles Excessive Fee Suit

"After years of hard-fought litigation," a multi-billion-dollar 403b plan has struck a deal in an excessive fee suit. This suit involves plans of the MITRE Corporation Tax Sheltered Annuity Plan and the Qualified Retirement Plan with more than 23,000 participants and more than $8 billion in assets between them.

Source: Ntsa-net.org, September 2024

District Court Permits 403b Plan Fiduciary Breach Claims to Proceed

A federal district court in Massachusetts recently denied a motion to dismiss a complaint filed by plan participants in the Cape Cod Healthcare, Inc. 403b plan, which alleged that the plan's fiduciaries breached their ERISA duty of prudence by permitting the plan to pay excessive recordkeeping fees and remain invested in overpriced, underperforming investment options. Plaintiffs, both former employees of Cape Cod Healthcare, alleged that Cape Cod Healthcare (plan sponsor and named fiduciary) and individual fiduciary defendants breached their fiduciary duty in two ways.

Source: Erisapracticecenter.com, September 2024

2025 401k Contribution Limits: Milliman Halves Its Increase Prediction

It's looking like retirement savers will only see a $500 increase in the amount they can contribute to their 401k, 403b, or 457 plans in 2025, according to the newly updated final forecast for the 2025 IRS contribution limits from Milliman. For 2024, the elective deferral limit was also increased by $500 compared to 2023.

Source: 401kspecialistmag.com, September 2024

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