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.

403b Plan Participants: Getting "Noticed"

A reminder for public schools and 501(c)(3) organizations with 403b plans as year-end approaches, employers have an annual notice obligation to employees to meet IRS requirements. This article reviews the IRS employers' annual notice obligation to employees.

Source: Voya.com, October 2021

Despite Pandemic, Nonprofit Workers Boost Participation in 403bs

Despite COVID-19 hitting nonprofit organizations particularly hard last year, nonprofit workers participated in 403b retirement plans at the highest level since tracking began in 2008, according to an annual 403b Plan Survey from the Plan Sponsor Council of America. Overall retirement plan participation continued to climb, rising to 77.2% in 2020, up from 76.6% in 2019 and 72% in 2018.

Source: Psca.org, October 2021

415 Limit Applies in Aggregate When 403b Participant Sponsors Another Plan

In an updated Issue Snapshot, the IRS reminds plan sponsors about rules for the Internal Revenue Code Section 415 annual additions limitation when a 403b plan participant also sponsors a qualified plan to which he contributes.

Source: Planadviser.com, October 2021

IRS Issues Important Reminder on Application of IRC Section 415(c) Limit to 403b Plans

The IRS issued an important reminder of the unique application of the limit under Internal Revenue Code Section 415(c) to 403b plans on August 20, 2021. The IRS's "Issue Snapshot" highlighted a rule that has applied for decades, but with which 403b plan sponsors and administrators are often not familiar.

Source: Morganlewis.com, September 2021

Insurance Agents Charged With Duping California Educators in 403b Plans

The owner of a 403b plan administration firm and another insurance agent allegedly convinced educators to roll retirement plan money into an IRA to invest in the owner's companies, which were in poor financial shape.

Source: Plansponsor.com, September 2021

How Important Are Beneficiary Forms?

When hiring a new employee, one of the initial tasks given to that employee is completing various beneficiary forms for the company's benefit plans. Most people will fill it out and not think about that initial election ever again. Some employees may not fill one out at all. So why is it a big deal?

Source: Asppa.org, September 2021

Second Circuit Revives Share-Class Claim in NYU Retirement Plan Class Action

The Second Circuit recently vacated the district court's dismissal of Plaintiffs' share-class claim. Sacerdote v. New York Univ. To begin, the Court observed that the notion that "prudent fiduciaries may very well choose to offer retail class shares over institutional class shares' because retail shares offer greater liquidity provides no basis to dismiss pleadings that otherwise generate plausible inferences of the claimed misconduct."

Source: Erisalitigationadvisor.com, September 2021

IRS Announces Opening of the Second 403b Pre-Approved Plan Cycle

Like the pre-approved plan document program for 401k plans, the 403b pre-approved plan document program is intended to be on a regular 6-year cycle. Many 403b plan providers and eligible employers, particularly QCCOs and Non-QCCOs, have been wondering when the second cycle would begin and what changes it might include. The IRS has now issued guidance on Cycle 2.

Source: Groom.com, September 2021

IRS Snapshots Show Continued Focus on 403b Plan Compliance

Expanding access to retirement savings options would give low- and moderate-income workers the opportunity to generate meaningful savings by the end of their careers. By beginning to save and starting sooner, private-sector workers can take advantage of compounding interest investment returns. That, especially if supplemented by other incentives such as a refundable Saver's Tax Credit, would result in significantly improved retirement income outcomes compared to workers who begin saving later in their careers.

Source: Mercer.com, August 2021

The 403b Qualified Plan Distribution Annuity Contract Under SECURE Section 109

You may have noticed that the SECURE Act introduced yet another new twist to the 403b world: the Qualified Plan Distribution Annuity Contract. It's not that Congress was singling out 403b plans, as 401(a) and 457(b) plans can now distribute the QPDAC. But, as in all other things 403bs, there are several unique twists to the rules which exist solely in the 403b world.

Source: Businessofbenefits.com, August 2021

2021 PLANSPONSOR 403b Market Survey

403b plans are in many ways the same as traditional corporate 401k plans, but they also have many unique challenges. The PLANSPONSOR 403b Market Survey covers the providers who serve this market, what they focus on in terms of market segment, and the services they provide to 403b plan sponsors.

Source: Ntsa-net.org, August 2021

Are You Ready to Comply With the New Lifetime Income Disclosure Requirement for Benefit Statements?

The Setting Every Community Up for Retirement Enhancement Act of 2019, enacted December 20, 2019, added a new annual disclosure requirement for benefit statements to participants and beneficiaries. The new disclosure requirement applies to all ERISA-covered defined contribution plans (e.g., 401k and 403b plans), regardless of whether annuities are offered under the plan. With the effective date fast approaching, there has been some confusion as to when the lifetime income disclosure must first appear on benefit statements.

Source: Verrill-law.com, August 2021

Baptist Health South Florida Faces ERISA Excessive Fee Suit

The claims are typical of excessive fee suits, but the plaintiffs also cite language from the 403b plan's investment policy statement and say plan fiduciaries didn't follow it.

Source: Planadviser.com, August 2021

IRS Updates Universal Availability Requirement Information for 403b Plans

The IRS has updated the information it provides concerning the universal availability requirement for 403b plans. The information is contained on the IRS website, with hyperlinks to additional resources.

Source: Ntsa-net.org, August 2021

ERISA 403b vs. ERISA 401k

Which is better? It depends! That's the verdict from an industry insider who compared and contrasted the two in a June 29 session of the 2021 NTSA Summit. "A vexing issue," said Mark Heisler, CEO of ADMIN Partners, LLC, of the question. Not only that, he said, it is "probably the number one question he gets." And the answer, he said, "very much depends" on the particular client involved.

Source: Asppa.org, August 2021

Master Custodial Accounts and the 403b Self Directed Brokerage Account

Today's 403b plans investment structures can actually be a bit misleading. We have designed these arrangements to "look and act" like investment structures for 401k plans. In fact, the 403b arrangements are actually substantially different than their 401k counterparts. There is a bit of history which helps explain these unique arrangements.

Source: Businessofbenefits.com, June 2021

Wake Forest University Baptist Medical Center Sued Over 403b Plan Fees

Wake Forest University Baptist Medical Center, its board of directors, and its retirement benefits committee have been sued for allegedly failing to ensure the plan and its participants paid reasonable fees for investments and administration. The complaint alleges that many of the mutual funds in the Wake Forest Baptist Medical Center 403b Retirement Savings Plan were more expensive than comparable funds found in similarly sized plans, those with more than $1 billion in assets.

Source: Planadviser.com, June 2021

Columbia University Settlement: A Reminder of ERISA Litigation Risk

On May 21, 2021, the terms of the proposed class action settlement in Cates v. The Trustees of Columbia University in the City of New York were announced. The case, which was filed in 2016, involved allegations that plan fiduciaries breached their ERISA duties by causing the plan and participants to pay excessive fees to service providers and by selecting and retaining expensive and poor-performing investment options. In addition to a monetary payment of $13 million, the settlement agreement includes several non-monetary terms.

Source: Faegredrinker.com, May 2021

Terms of Another University 403b Excessive Fee Suit Unveiled

The law firm of Schlichter Bogard & Denton has announced the terms of another settlement of a 403b excessive fee case. According to a press release by the St, Louis-based law firm, it has filed a preliminary settlement approval motion on behalf of Columbia University employees and retirees in their suit against the university involving their 403b retirement plan.

Source: Napa-net.org, May 2021

Bronson Healthcare Group Sued Over 403b Plan Fees

Bronson Healthcare Group and its board of directors are facing an ERISA lawsuit alleging they allowed participants of the organization's 403b Tax Sheltered Matching Plan to be subjected to excessive administrative and investment fees, resulting in lower account balances.

Source: Planadviser.com, May 2021

University Pushes Back on Excessive Fee Class Claims

The fiduciary defendants in a 403b university excessive fee suit say the plaintiffs have not only failed to make their case but that they've taken actions in their account(s) that undermine their arguments. The suit was originally filed in June 2017 by Latasha Davis and Jennifer Elliott on behalf of the plan's more than 24,000 participants and beneficiaries.

Source: Napa-net.org, May 2021

Lawsuit Says Changes to University of Tampa 403b Plan Made Too Late

A participant in the University of Tampa's 403b plan has filed a lawsuit claiming that over the past six years, plan participants have paid at least $3 million in administrative fees, which it says is more than 10 times what they should be. The complaint says the plan's recordkeeper, TIAA, has been able to extract "such grossly excessive fees" because the fees are based not on services it provides to the plan but on a percentage of assets in the plan.

Source: Planadviser.com, May 2021

Higher Education Plan Sponsors Seeing More Demand for Participant Investment Help

A study on higher education retirement plans from Voya found 43% of plan sponsors say motivating employees to save adequately and invest wisely are top challenges to helping their employees prepare for retirement. Interestingly, a separate study from Transamerica found more than half (59%) of higher education institutions view motivating faculty and staff to save adequately for retirement as their greatest challenge in managing their retirement plan. Forty-seven percent said it was helping participants invest wisely.

Source: Plansponsor.com, April 2021

403b Terminations: Important Considerations

There are a variety of important considerations concerning terminations and freezes of a plan and that includes 403b plans. In an ASPPA webcast, Kelsey Mayo, American Retirement Association's Director of Regulatory Policy and a partner with the Poyner Spruill LLP law firm, addressed priorities related to terminations of 403b plans.

Source: Napa-net.org, April 2021

QBAD Distribution Limits When One Spouse Doesn't Participate in a Retirement Plan

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations, in this case, on QBAD Distribution Limits.

Source: Planadviser.com, April 2021

The Relentless Rules of Humble Arithmetic: 401k/403b Fiduciary Litigation at the Crossroads

SCOTUS is currently deciding whether to hear the Hughes v. Northwestern University 403b case. The key issue in the case is an allegation of fiduciary breach by the plan concerning the level of the plan's fees. A number of large financial services firms have recently sold their 401k/403b divisions. Could a possible explanation be concern over a possible review and adverse decision by SCOTUS? Could the humble arithmetic and simplicity of the Active Management Value Ratio metric be a contributing factor in these decisions to leave the 401k/403b arena?

Source: Iainsight.wordpress.com, April 2021

A Technical Analysis of How "Small Amount" Cash-Outs Under 403b Plans Work

The minute differences between 403b plans and 401k plans are often inconvenient, at best, and sometimes they produce serious conundrums in plan administration which can be difficult to resolve. Prominent among these is the issue of "small amount" cash-outs from 403b plans.

Source: Businessofbenefits.com, March 2021

COVID-19 Creating Huge Challenges for Higher-Ed Retirement Plans

As a result of the pandemic, 41% of higher education institutions have already reduced or stopped their employer matching contribution, and 87% of them believe COVID-19 will have a significant impact on their employees' retirement readiness. Those are among the key findings of an inaugural survey of retirement plans in public and private higher education conducted by Greenwald Research on behalf of Voya Financial.

Source: 401kspecialistmag.com, March 2021

Collective Investment Funds and 403b Plans

Collective investment funds are regulated by the Office of the Comptroller of the Currency. Are they eligible investment vehicles for 403b plans?

Source: Ntsa-net.org, March 2021

Favorable Features of 403b

403b plans have been known to receive a bad rap related, in part, to the difficulties surrounding the public K-12 marketplace with which they are associated, and also due to the perception that they are a step behind 401k plans concerning marketplace innovations. Despite these challenges, there are several distinctive features of 403b plans that may give them a leg-up on other types of plans.

Source: Cammackretirement.com, March 2021

403b Plans and Modeling Tools

Many 403b plan providers offer participant tools to help assess risk tolerance and investment preferences, based on their 401k plan service models. Some tools go as far as to suggest specific investment allocations or model portfolios, and offer options to elect periodic rebalancing to keep allocations in line with original targets. Is this a problem?

Source: Ntsa-net.org, March 2021

403b Plans: The Trendsetters for ESG Investing

403b plans are rarely ahead of the curve on major retirement plan innovations. These plans were certainly not the early adopters of trends like per-head flat dollar pricing or zero revenue share funds. However, there is one area in which they are leading the charge: the adoption of Environmental, Social, and Governance investments.

Source: Cammackretirement.com, February 2021

Participants in Terminated 403b Plan File ERISA Lawsuit

A group of 403b plan participants is suing their employer for allegedly keeping imprudent investments as choices in the plan and for causing them to pay excessive fees for plan investments, among other things. According to the ERISA lawsuit, "for the period beginning January 1, 2015, through the date the plan was terminated, May 31, 2019, plan participants lost approximately $4.6 million due to excessive fees and costs as a result of Columbus Regional's breaches of fiduciary duty."

Source: Plansponsor.com, February 2021

2021 403b Retirement Plan Compliance Calendar

This plan compliance calendar for 2021 highlights critical compliance deadlines for 403b retirement plans. While all major dates are covered, 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. Plans with non-calendar plan years may be subject to different deadlines.

Source: Cammackretirement.com, January 2021

403b Plan Investment Lineups Have Changed

Annuities were the only investment type 403b plans were allowed to use before the passage of ERISA. ERISA added custodial accounts, i.e., mutual funds, as permissible investments. Since regulations were passed in 2007, mutual funds have been embraced more by 403b plan sponsors and participants, and mutual fund fees have decreased.

Source: Plansponsor.com, January 2021

Four-Fifths of Large ERISA 403b Plans Had Employer Contributions

Four-fifths of large 403b plans subject to ERISA had employer contributions and nearly three-quarters of large ERISA 403b plan participants were in plans that offered employer contributions in 2017, according to a joint research study released today by BrightScope and the Investment Company Institute. The study examines 403b retirement plan design and investment lineups.

Source: Ici.org, January 2021

Court Filing Details $13M UPenn 403b Lawsuit Settlement

A new court filing in the U.S. District Court for the Eastern District of Pennsylvania describes the terms of a settlement reached between the University of Pennsylvania and plaintiffs in a long-running and complex ERISA fiduciary breach lawsuit.

Source: Planadviser.com, January 2021

Amending Your 403b Plan for Updated Hardship Withdrawal Regs

A guide to what 403b plan sponsors need to know about upcoming plan amendments for IRS final hardship withdrawal regulations, CARES Act, and SECURE Act. Five key takeaways for 403b plan sponsors.

Source: Voya.com, January 2021

Bill to Expand MEPs to 403bs Introduced in Senate

A bipartisan trio of U.S. Senators has introduced legislation that would expand Multiple Employer Plan access to 403b plans, along with other MEP enhancements.

Source: Asppa.org, December 2020

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