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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.

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Relief for Distributing Summary Plan Descriptions

2020 is the year that ERISA 403b plan must issue summary plan descriptions to plan participants. Experts from Groom Law Group and Cammack Retirement Group answer questions concerning SPD distribution due to the COVID-19 pandemic.

Source: Planadviser.com, September 2020

IRS Revenue Procedure 2020-40 Provides Extensions of Retirement Plan Amendment Deadlines

Revenue Procedure 2020-40 (Rev. Proc. 2020-40) expands the situations in which the plan amendment deadline may be extended for discretionary amendments made to pre-approved qualified retirement plans and pre-approved Internal Revenue Code Section 403b plans.

Source: Westlaw.com, September 2020

Retirement Plan Update: New DOL Disclosures and Updated IRS Notices

The DOL recently issued interim final regulations requiring new information to be included on ERISA-covered defined contribution plan participant account statements under the SECURE Act. The guidance only applies to defined contribution plans, such as 401k and 403b plans. The IRS also recently updated safe-harbor explanations that can be used to satisfy the tax notice requirements in Code Section 402(f). These requirements generally require plan administrators to provide a written explanation of tax consequences when making eligible rollover distributions from a qualified retirement plan.

Source: Shermanhoward.com, September 2020

New SECURE Act Guidance: Lifetime Income Disclosures for 401k and 403b Plans

The DOL announced new guidance on lifetime income disclosures that must be included in pension benefit statements furnished to participants in defined contribution plans, such as 401k and 403b plans. This guidance, issued in the form of an interim final rule, sets forth the rules that plan administrators must follow in implementing the lifetime income disclosure requirement that was added to ERISA by Section 203 of the 2019 SECURE Act.

Source: Insidecompensation.com, September 2020

Checklist for Amending a 403b Plan

This is a checklist for amending a 403b plan for a public educational institution. The general steps to amend a 403b plan are reviewed.

Source: Ntsa-net.org, August 2020

Mercy Health Corp. Faces 403b Plan Excessive Fee Lawsuit

An ERISA lawsuit has been filed against fiduciaries of Mercy Health Corp.'s 403b plan. Among other things, the lawsuit alleges the health care system unreasonably maintained investment advisers and consultants despite the known availability of others with lower costs and/or better performance histories.

Source: Plansponsor.com, August 2020

Not "Wired at Work"? New DOL E-Disclosure Rule is Here to Help

The DOL announced final regulations that describe new "safe harbor" procedures for electronic delivery of required ERISA retirement plan disclosures such as Summary Plan Descriptions, quarterly or annual account statements, and other items. The new safe harbor procedures are an addition to the DOL e-disclosure rules that date back to 2002 and represent an improvement on the 2002 rules for employees who are not "wired at work," as defined in those regulations. The safe harbor procedures took effect on July 27, 2020. A plan administrator that relied on the safe harbor before that date wouldn't be subject to enforcement action, the DOL vowed.

Source: Eforerisa.wordpress.com, August 2020

IRS Updates Operational Compliance List for Retirement Plans

IRS recently updated its Operational Compliance List for qualified retirement and 403b plans to identify changes in law and guidance affecting plan operations. The Operational Compliance List reminds sponsors about revised operational requirements taking effect during a calendar year, even though conforming amendments might not be due until a later date.

Source: Mercer.com, July 2020

CARES Act Special Considerations for 403b Plans

Participants in 403b plans may not be able to take as much in distributions and loans as provided for in the CARES Act. Also, they may not enjoy the savings provided by the elimination of tax penalties for early distributions in the same way other plan participants will. Participants invested in annuity contracts may face charges for distributions and limits on amounts they can take as a distribution or loan that they may not be aware of.

Source: Plansponsor.com, July 2020

Sutter Health 403b Plan the Target of Excessive Fee Suit

A lawsuit has been filed against fiduciaries of the Sutter Health 403b Savings Plan for breaches of their fiduciary duties under ERISA. Defendants are accused of failing to leverage the size of the plan to negotiate for lower investment and recordkeeping fees, among other things.

Source: Planadviser.com, July 2020

Required Distributions for 2020 Suspended for Many Plan Participants

The CARES Act creates a moratorium on required minimum distributions for 2020. The one-year required minimum distribution moratorium under the CARES Act applies to IRAs and defined contribution retirement plans, such as 401ks, money purchase pension plans, 403b plans and some government plans. Plans may need to be amended to accommodate the moratorium.

Source: Mcdonaldhopkins.com, July 2020

Return of 2020 RMDs Allowed by New IRS Announcement

On June 23, the IRS issued a notice that told taxpayers they could unwind any required minimum distributions from their retirement accounts that they had taken in 2020. This provides a significant opportunity for IRA beneficiaries who didn't need this money for expenses. They can put these distributions back into their IRAs to grow there tax-deferred, lowering their total tax bill.

Source: Wealthspire.com, July 2020

CARES Act Expansion of In-Service Withdrawals Highlights 403b Plan Surrender Charge Disparity

The CARES Act includes provisions that allow retirement plan sponsors to provide plan participants the opportunity to withdraw funds from a defined contribution retirement plan if they are facing adverse financial consequences due to the COVID-19 pandemic. Unlike other DC plans, 403b plans are administered by insurance companies. These plans typically feature annuities that require the payment of a surrender charge of up to 12% on asset withdrawals or transfers. Plan participants in a 403b will need to check with their plan administrator to determine if any surrender charges apply before making a withdrawal.

Source: Hallbenefitslaw.com, July 2020

IRS Issues New Guidance for Mid-Year Changes to Safe Harbor 401k and 403b Plans

The IRS issued Notice 2020-52 addressing mid-year reductions and suspensions of contributions to Safe Harbor 401k and 403b plans. In response to the COVID-19 pandemic, the Notice provides some temporary relief for plan sponsors that wish to reduce or eliminate safe harbor contributions mid-year.

Source: Spotlightonbenefits.com, July 2020

403b Plan's Use of Actively Managed TDFs Challenged in Lawsuit

A former participant of the MedStar Health Retirement Savings Plan has filed a proposed class-action lawsuit against MedStar, its 403b retirement plan committee, and individual committee members for breaching their fiduciary duties under ERISA. The lawsuit says the defendants not only selected and retained high-cost and poorly performing investments but also failed to fully disclose the expenses and risk of the plan's investment options to participants.

Source: Planadviser.com, July 2020

The IRS Provides Relief for Mid-Year Reductions in Employer Contributions to Safe Harbor Plans

The Internal Revenue Service issued Notice 2020-52, which provides guidance and temporary relief for employers who may choose to reduce contributions during 2020 to their safe harbor 401k or 403b plan.

Source: Groom.com, July 2020

The Push to Allow CITs in 403bs

Fees in 401k plans have been falling for years, in part as a result of lower investment costs in mutual fund alternatives such as collective investment trusts, an option that is legally prohibited for most 403b plans. Some members of Congress are trying to change that, and the initiative could get more attention soon.

Source: Investmentnews.com (registration may be required), June 2020

Replacing Mandatory Employee Contributions With Automatic Enrollment

403b plan sponsors should do their homework to review participant data to ascertain how many individuals are indeed "maxing out" over and above their mandatory contribution. If there are a lot of employees who fit this description, perhaps automatic enrollment is not the right decision. This might also be a sign that employees are bumping up against their 415 limits on total contributions, which may warrant consideration of alternative designs. However, for the majority of 403b plan sponsors currently utilizing a mandatory contribution formula, auto-enrolment is likely a viable option.

Source: Cammackretirement.com, June 2020

IRS Allows Remote Notarization of Participant Elections for 2020

The IRS issued Notice 2020-42 to provide temporary relief for certain participant elections required to be witnessed in the "physical presence" of a plan representative or notary public, including spousal consents. The Notice is a welcomed response to the major challenges posed by the social distancing measures put in place due to the COVID-19 pandemic, and it provides plan administrators with additional flexibility to use remote notarization and similar services for all of 2020.

Source: Groom.com, June 2020

The Next Evolution in 403b Plans: Investments

While 403b plans have made great strides, lifting restrictions on the types of investments the plans can offer and considering more diverse investment types could further improve participant retirement outcomes.

Source: Plansponsor.com, June 2020

Settlement Reached in Emory University 403b Excessive Fee Case

Schlichter Bogard & Denton filed a preliminary settlement approval motion on behalf of Emory University employees and retirees in their suit against the university involving their 403b retirement plan. The plaintiffs in the case, filed in August 2016, sued for alleged breach of fiduciary duty under ERISA. The settlement terms include the creation of a $16.75 million settlement fund for the plaintiffs, as well as substantial non-monetary relief involving changes in the 401k plan.

Source: Streetinsider.com, May 2020

Judge Gives Parties in Cornell 403b Suit Options for Proceeding

The ERISA lawsuit against Cornell University could face a time delay due to the COVID-19 pandemic. A federal judge noted that the pandemic will affect civil jury trials in the Southern District of New York "for a considerable and presently unknowable time to come."

Source: Planadviser.com, May 2020

Appellate Court Calls for Another Look at a 403b Suit

A university that had won a dismissal of claims in an excessive fee suit will now have to confront some of those charges. Noting that, "at this point, the complaint only needed to give the district court enough to infer from what is alleged that the process was flawed," the Eighth Circuit Court of Appeals breathed new life into some of the claims brought against fiduciaries of St. Louis-based Washington University's $3.8 billion 403b plan.

Source: Ntsa-net.org, May 2020

Improving Investment Outcomes for 403b Plan Participants With CITs

BlackRock provides an overview of the features of CITs, why plan sponsors use CITs in 401k plans, the potential cost savings for 403b retirement savers if CITs were permitted as an investment option in all 403b plans, and ongoing legislative efforts to change the law, including the IRC, to allow all 403b plans to have the option to invest in CITs.

Source: Blackrock.com, May 2020

403b Plan Catch-Up Contributions - Updated

This IRS snapshot discusses catch-up contributions under a 403b plan. A 403b plan may have non-elective contributions (including matching and non-matching contributions) and elective deferrals. A 403b plan may also permit participants to make additional elective deferrals under the age 50 catch-up in IRC Section 414(v) and the special 403b catch-up in IRC 402(g)(3).

Source: Irs.gov, May 2020

Lawsuit Argues Fees Are Excessive for University of Miami 403b

Another lawsuit has been filed challenging fees for a university's 403b plan, this one against the University of Miami. The plaintiffs say there is additional evidence for their claims, "such as incorrect reporting on mandatory Department of Labor disclosures about the amount of administrative fees paid by [the] participants."

Source: Planadviser.com, May 2020

The IRS Extends Retirement Plan Payment and Filing Deadlines

In response to the coronavirus pandemic, on April 10, 2020, the Internal Revenue Service issued Notice 2020-23, extending the deadlines for the time-sensitive actions set forth in Revenue Procedure 2018-58 to July 15, 2020. These extensions apply to certain retirement plan payment and filing obligations that have deadlines on or after April 1, 2020 and before July 15, 2020.

Source: Truckerhuss.com, May 2020

SECURE Act: Tenfold Penalty Increase for Retirement Plan Filing and Notice Failures

To help pay for the changes that the SECURE Act will bring to the retirement system, as well as to increase compliance with filing reports and providing notices, the legislature also included a significant increase in penalties for late filing of plan returns and plan notices. These new penalties apply to all returns, plan statements, and require plan notices that must be provided after the end of 2019.

Source: Hallbenefitslaw.com, May 2020

DOL Provides COVID-19 Relief for Retirement Plans

On April 28th, the Employee Benefits Security Administration of the Department of Labor, together with the Department of the Treasury, issued helpful guidance for retirement plans that extends certain deadlines and provides other relief in light of the national coronavirus outbreak. The guidance will significantly affect ERISA-covered retirement plans, plan sponsors, fiduciaries, plan participants and beneficiaries, and plan service providers.

Source: Groom.com, May 2020

403b Retirement Plan Fee Litigation Update

Despite the COVID-19 pandemic, 403b retirement plan litigation remains largely uninterrupted. While not all claims are successful, to manage risk, plan sponsors should understand the issues and keep track of the litigation surrounding retirement plans. This is a comprehensive update on the status of 403b retirement plan lawsuits.

Source: Cammackretirement.com, April 2020

403b Plans and Optional Retirement Plan Provisions

Can a pre-approved 403b plan have an optional retirement plan provision? Would it fall under the mandatory contributions? ORPs can take on different components of a 403b plan. They are not all the same.

Source: Ntsa-net.org, April 2020

How to Correct Late Salary Deferral Deposits

Late deposits of employee 401k and 403b deferrals continue to be a common error and consistent with the top ten list of mistakes the IRS and DOL identify during their audits and investigations. When employee deferrals are not deposited timely, there are two available correction avenues: self-correction or completing a filing through the DOL's Voluntary Fiduciary Correction Program. This article discusses the rules regarding the timely deposit of salary deferral withholdings, when a timely deposit doesn't occur, and the steps the plan sponsor must take for each of the available correction options.

Source: Belfint.com, April 2020

COVID-19 World: Reducing or Suspending Company Contributions to a 401k or 403b Plan

In response to the current economic crisis caused by COVID-19, many companies are considering cost-savings measures to improve their companies' financial stability. One such cost-saving option is the reduction or suspension of company contributions to a company's 401k or 403b plan. The procedure for and the implications of such suspension will depend on the plan terms, including whether the contribution is intended to be a "safe harbor" contribution.

Source: Spotlightonbenefits.com, April 2020

A Close Look at ERISA 403b Plans, 2016

The study of 403b plans is complicated because plan sponsors span public and private sectors; also, some plans are subject to ERISA and some are not. ERISA 403b plan assets account for nearly half of the estimated total 403b plan assets. This 68-page report analyzes 403b plans covered by ERISA that also file Form 5500 Schedule H in 2016.

Source: Ici.org, April 2020

The CARES Act: Special Distributions to Qualified Participants

This article discusses a second provision of the Act that can help participants who are affected by the coronavirus (called "qualified individuals"). This is a special coronavirus-related distribution. Though discussed this in the context of 401k plans, the CRD provision applies to all qualified plans, 403b plans, and IRAs as well.

Source: Fredreish.com, April 2020

Seventh Circuit Upholds Dismissal of 403b Plan Lawsuit in Apparent Split With Third Circuit

Since the beginning of 2016, the ERISA plaintiffs' bar has filed nearly two dozen complaints targeting university-sponsored 403b plans. The majority of these lawsuits assert that plan fiduciaries breached their duties and engaged in prohibited transactions. In a significant development, the Seventh Circuit recently issued its decision in the case against Northwestern University and, in doing so, became the first court of appeals to uphold the dismissal of such claims in their entirety.

Source: Erisapracticecenter.com, April 2020

University Wins Appeal of 403b Suit

A federal appellate court has ruled in favor of the fiduciaries of a university 403b plan excessive fee lawsuit. This was the second of the 403b university excessive fee suits to go to trial and the second in which the university defendants prevailed.

Source: Ntsa-net.org, April 2020

IRS Extends Remedial Amendment Periods

The IRS has extended the remedial amendment period for 403b plans and pre-approved defined benefit plans. The IRS made the announcement on March 27.

Source: Asppa-net.org, April 2020

Retirement Plan Provisions of CARES Act

The third COVID-19 stimulus package has provisions regarding retirement plans, including expanded and penalty-free withdrawal rights, expanded loan rights, extended rights to repay loans and withdrawals, and a deferral of mandatory distributions.

Source: Wagnerlawgroup.com, March 2020

CARES Act Requires Immediate Decisions by Retirement Plan Sponsors

The CARES Act offers new avenues for defined contribution retirement plan participants to withdraw funds from their accounts to pay COVID-19-related expenses if their employer elects to open those avenues. Some of the largest 401k and 403b plan recordkeepers are forcing employers to make that choice on just a few days' notice.

Source: Spencerfane.com, March 2020

Deadlines Extended for 403b Plans

The IRS is extending the last day of the initial remedial amendment period for 403b plans from March 31, 2020, to June 30, 2020. Plan sponsors now have until June 30, 2020, to update their pre-approved and individually designed 403b plan documents.

Source: Irs.gov, March 2020

401k and 403b Hardship Distributions and COVID-19 Declared Disaster Areas

The Federal Emergency Management Agency has declared several disaster areas around the United States as a result of the spread of the coronavirus. Under final regulations issued in 2019, a federal disaster declaration has become one of the safe harbor reasons that qualifies a 401k or 403b plan participant for a hardship distribution, so it appears that plan participants may now be able to take a hardship withdrawal if they are laid off, put on an unpaid leave of absence or incur other expenses and losses on account of COVID-19.

Source: Beneficiallyyours.com, March 2020

Reminders About 403b Plans and Hardship Distributions

This is a reminder about two compliance issues that might need plan sponsor attention at this time: the March 31, 2020 deadline for correcting 403b plan documents and the need for operational compliance with hardship distribution procedural changes for 401k and 403b plans.

Source: Segalco.com, March 2020

Next Steps for 403b Plan Sponsors

Now that plan documents will be cleaned up, 403b plan sponsors can focus on strategic tasks such as plan design changes and on complying with new legislation.

Source: Plansponsor.com, March 2020

Reminders About 403b Plans and Hardship Distributions

This is a reminder about two compliance issues that might need plan sponsor attention at this time: the March 31, 2020 deadline for correcting 403b plan documents and the need for operational compliance with hardship distribution procedural changes for 401k and 403b plans.

Source: Segalco.com, March 2020

Legislation Would Allow 403bs to Invest in CITs

The bill introduced to Congress is designed to ensure public sector and nonprofit retirement plans have the same access to low-cost investments as for-profit retirement plans do.

Source: Planadviser.com, March 2020

Who Are the Top 403b Providers?

Small nonprofit businesses may struggle to find time to even look for a provider, much less handle tasks associated with a retirement plan. Often, this means defaulting to one of the larger 403b providers. The largest 403b providers are shown in this chart.

Source: Forusall.com, March 2020

Questions to Expect From Your 403b Plan Auditor

This document was prepared by the AICPA Employee Benefit Plan Audit Quality Center to provide examples of the types of questions that plan management may be asked by the plan's independent auditor. The plan auditor may also ask plan management other questions that are not on this list.

Source: Schneiderdowns.com, March 2020

IRS Announces Remedial Amendment Periods and Deadlines for Correction of 403b Plan Form Defects

The IRS issued Procedure 2019-39, which finalizes important changes to how sponsors and employers can ensure 403b plan compliance. The guidance is a welcome update from the Service, which initiated a regular system of remedial amendment periods for 403b plans in 2013, with the first period ending on March 31, 2020. This article reviews the most significant aspects of the guidance.

Source: Cov.com, March 2020

March 31st Deadline for 403b Plan Sponsors

If your organization sponsors a 403b plan for employees and has not adopted an up-to-date written plan document that complies with the applicable regulations, you have until March 31, 2020 to do so. Failure to do could cause substantial negative tax consequences for employees (and the organization) or cause the organization to incur substantial penalties to avoid those consequences.

Source: Belfint.com, March 2020

Are PEPs Available to 403b Plan Sponsors?

Are PEPs available to 403bs? The new PEP rules, do not apply to 403b plans. Thus small 403b plans are still somewhat limited in their opportunities to band together into a single plan to increase their purchasing power.

Source: Plansponsor.com, February 2020

The SECURE Act's 403b Custodial Account "Distribution" Does Not Create IRAs

The SECURE ACT introduced a concept that was not known well beyond a handful of 403b practitioners, which is the "distribution" of 403b individual custodial accounts from 403b plans. The lack of understanding of what this actually means has even led one commentator in a highly respected trade organization's technical piece to claim that this rule transforms 403b custodial accounts into IRAs.

Source: Businessofbenefits.com, February 2020

403b Plans and a Closer Look at Funds and Fees

To help Business Officers better understand their school's situation and evaluate whether employees are getting good value for their fees, PlanPILOT shares the findings of research on trends in plan fee trends and investment line-up design. Using publicly available IRS Form 5500 information, PlanPILOT examined more than 750 plans, with NBOA schools comprising roughly 20% of plans.

Source: Planpilot.com, February 2020

The SECURE Act and 403bs

The impact of the SECURE Act is well-known in many respects. Among the lesser-known impacts of the new law are those on 403b plans. A Feb. 11 NTSA webinar discussed them. Here is a summary.

Source: Ntsa-net.org, February 2020

Tips to Reduce Participant Count to Avoid Financial Audit Requirement

"We are a small nonprofit that sponsors an ERISA 403b plan. Until now our plan has been small enough to avoid the plan financial audit requirement, but, due to a lot of former employees retaining balances in the plan, we will now have more than 100 participants on 1/1/2020. We can use the 80/120 rule to avoid an audit for 2020, but I want to be proactive here to avoid crossing the 120-particpant threshold that would require audits in the future. Are there any steps I can take to reduce the number of participants in the plan?"

Source: Plansponsor.com, February 2020

2020 403b Retirement Plan Compliance Calendar

This plan compliance calendar for 2020 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 2020

SECURE Act: The New 500 Hour, Long Service Rule Does Not Apply to 403b Plans

The new rule amends Section 401(k)(2)(D) of the Code. At first glance, one may be under the mistaken impression that this is a rule which applies to all elective deferral plans, whether they be 401k plans, 403b plans or 457b governmental plans. But this impression is likely wrong: the statute, by its terms, clearly only applies to elective deferrals under 401k plans, not 403b plans.

Source: Businessofbenefits.com, January 2020

A New Year's "To Do" List for 403b Plan Sponsors

There is no shortage of concerns to occupy 403b plan sponsors and administrators. Some of these issues have been with us for some time, and some have been newly introduced by the SECURE Act. This is a short list of some of the more notable items that you might want to be thinking about in the new year if you sponsor or administer a 403b plan.

Source: Boutwellfay.com, January 2020

ERISA 403b Litigation Informs Plan Governance Practices

In the past three years, 403b plan sponsors have been subjected to the same ERISA fiduciary breach lawsuits that 401k plans have been fighting. 403b plan sponsors need help understanding their fiduciary duties, reviewing plan investment lineups and benchmarking fees.

Source: Planadviser.com, January 2020

403b Document Updates on 2020 Horizon

A new year has dawned, bringing into sharper relief that deadlines relevant to 403b documents are coming closer. March 31, 2020 is the deadline for 403b plans to update their plan documents for all current law.

Source: Ntsa-net.org, January 2020

Compliance, Fiduciary Duty Top 403b Plan Sponsor Priorities

Fulfilling responsibilities and increasing participation and deferral rates are the top priorities of 403b plan sponsors for 2020, the Plan Sponsor Council of America finds in a new survey. Survey respondents' top five priorities are noted.

Source: Napa-net.org, December 2019

403b Plan Restatement Deadline Fast Approaching

403b retirement plans are used by a wide variety of non-profits, including large university systems. These plans are required to be restated on IRS-approved documents in order to ensure they meet IRS requirements. The deadline to accomplish this, March 31, 2020, is fast approaching.

Source: Hallbenefitslaw.com, December 2019

2020 403b Plan Priorities

The Plan Sponsor Council of America conducted a survey of 403b plan sponsors in October 2019 to determine their priories for their retirement plan in 2020. The survey also assessed what changes are planned in 2020 to address those priorities. Nearly three hundred 403b plan sponsors responded to the survey, representing a diverse group of organizations. This is the 15-page report on the survey results.

Source: Psca.org, December 2019

IRS 2019 Required Amendments List Requires Plan Amendment for Hardship Distribution Changes

The IRS has now included amendments for the final hardship distribution regulations in its 2019 RAL, thus requiring affected 401k and 403b plans to be amended by no later than Dec. 31, 2021.

Source: Clarkhill.com, December 2019

2019 Plan Year: Year-End Compliance Reminders

Every year, plan sponsors must make sure their plans meet certain compliance requirements, including those listed here. This 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: Retirepru.com, December 2019

IRS Provides Remedial Amendment Period for Correcting 403b Plan Defects

IRS has issued guidance establishing remedial amendment periods for retroactive correction of form defects in individually designed and prototype 403b plans and has established a system of plan cycles for submission of prototype 403b plans for review and approval.

Source: Buck.com, November 2019

IRS and DOL Identify Fall Regulatory Guidance Priorities

The IRS and the Department of Labor Employee Benefit Security Administration have identified priority regulatory topics on their fall guidance agendas. These postings are not assurance that all items listed will be completed and issued within hoped-for timeframes, but serve as a general reference to the guidance these agencies are working to complete.

Source: Ascensus.com, November 2019

403b and 457b Plans Going Under the Regulatory Microscope

It appears that the SEC has initiated a "sweep" examination to inquire into the sales practices applicable to retirement plans for teachers and state and local government employees. Multiple SEC regional offices have issued document requests seeking information from the third-party administrators, the broker-dealers, and the registered investment advisers that work with 403b and 457b plans. Further, the New York Department of Financial Services recently launched an investigation into the sales tactics and costs involved with 403b plans, which appears to focus on the annuity practices of the insurance industry.

Source: Brokerdealerlawblog.com, November 2019

Important New Amendment Requirement Buried in New 403b Remedial Amendment Period Rules

One of the most important rules which hasn't gotten a lot of press is the very new rule that any "discretionary" amendment must -- as of January 1, 2020 -- be adopted by the end of the plan year in which the change to the plan's operation was made (a "discretionary" amendment is one which not required by law). This is a very significant change and one which should not be overlooked.

Source: Businessofbenefits.com, November 2019

University Faces Setback in 403b Plan Fiduciary Breach Case

The ongoing case, Sweda v. the University of Pennsylvania, is currently before the U.S. Court of Appeals for the Third Circuit. The Third Circuit ruled that the district court erred in granting the University's motion to dismiss. This is a major setback for the University in their current ERISA fee and fiduciary breach case.

Source: Hallbenefitslaw.com, October 2019

IRS Creates Program for 403b Plan Document Compliance

Rev. Proc. 2019-39 establishes remedial amendment periods and plan amendment deadlines for correcting defective document provisions in Code Section 403b plans. The rules are similar to those that apply to Section 401(a) qualified plans under Rev. Proc. 2016-37. The new guidance gives 403b plan sponsors a system to maintain compliant documents -- and their plans' tax-favored status -- after the initial RAP for 403b plans expires on March 31, 2020.

Source: Mercer.com, October 2019

Final Hardship Distribution Regulations Issued: Potential Plan Sponsor Action Necessary

The Bipartisan Budget Act of 2018 made some changes to the laws governing the distribution of 401k plan assets on account of hardship. The IRS issued final regulations relating to those changes in late September. The rules also apply to 403b plans. This is a summary of the changes.

Source: Hawleytroxell.com, October 2019

IRS Guidance on Initial and Recurring 403b Remedial Amendment Periods

Groom Attorneys provide an extensive explanation of the IRS' new guidance on 403b plan remedial amendment periods. Since the finalization of the updated 403b regulations in 2009 introduced a written plan document requirement for 403b plans generally effective for 2010, the IRS has been gradually issuing guidance on the timing requirements for adopting and amending 403b plans.

Source: Groom.com, October 2019

IRS Finalizes New Hardship Distribution Rules for 401k and 403b Plans

The IRS published final regulations that amend the rules for hardship distributions from 401k and 403b plans. The regulations finalize the proposed regulations issued in November 2018 to implement statutory changes made by the Tax Cuts and Jobs Act of 2017 and the Bipartisan Budget Act of 2018 intended to make it easier for plan participants to take hardship distributions. Although the final regulations make few changes to the proposed rules, they help clarify the new rules and provide other useful guidance.

Source: Hansonbridgett.com, October 2019

Final IRS Hardship Regulations -- Less of a Hardship to Take and Administer

The IRS recently published final regulations, which amend the hardship withdrawal rules for 401k and 403b plans. Most of the changes are optional and do not require employer adoption; some are not optional. This article reviews the changes that are mandatory for plans that allow hardship withdrawals and may require plan amendments.

Source: Employeebenefitslawreport.com, October 2019

SEC Probing Compensation, Sales Practices in 403b Plans

The Securities and Exchange Commission appears to be launching a broad investigation of compensation and sales practices in defined-contribution plans for school districts, an atypical move that targets a segment of the market frequently lambasted for high fees and deceptive practices aimed at winning the business of plan participants.

Source: Investmentnews.com (registration may be required), October 2019

403b's 15 year Long Service "Catch-Up" Is an "Attractive Nuisance" to Be Avoided

When you are restating your 403b plan documents, and you come across this election, your first impression may well be "why not? What a great benefit for the more senior employees!" You should, however, pause at that moment, and consider the details of what it takes to be able to support providing this benefit. It's not what it seems to be, and it truly has become an "attractive nuisance."

Source: Businessofbenefits.com, October 2019

IRS Revenue Procedure 2019-39 Establishes Recurring Remedial Amendment Periods for 403b Plans

The Internal Revenue Service issued Revenue Procedure 2019-39, which establishes recurring remedial amendment periods for individually designed and pre-approved 403b plans. Revenue Procedure 2019-39 also creates pre-approved plan cycles during which plan sponsors may submit proposed 403b pre-approved plans for IRS approval.

Source: Westlaw.com, October 2019

403bs Boost Participation, Contributions, Financial Wellness

According to the 11th annual 403b plan survey from the Plan Sponsor Council of America, increased contributions by both participants and organizations continue to have a positive impact on retirement readiness. Also, the employers that sponsor those programs have a burgeoning interest in financial wellness; a quarter of organizations have a formal financial wellness program in place. Nearly half (47%) have plans or interest in implementing one.

Source: Asppa.org, October 2019

Climbing Participation, Contribution Rates a Good Sign for 403b Plans

403b plan participation and contribution rates are showing solid growth according to new data from non-profit organizations that sponsor them. The 11th annual 403b plan survey from the Plan Sponsor Council of America reported increased contributions by both participants and organizations continued to have a positive impact on retirement readiness.

Source: 401kspecialistmag.com, October 2019

IRS Sets Recurring Remedial Amendment Periods for Correcting 403b Form Defects

The IRS has set forth a system of recurring remedial amendment periods for correcting form defects in individually designed and 403b pre-approved plans first occurring after the initial remedial amendment period ends on March 31, 2020, and provides a limited extension of the initial remedial amendment period for certain form defects. The guidance is contained in Revenue Procedure (Rev. Proc.) 2019-39.

Source: Ntsa-net.org, October 2019

IRS Finalizes Changes in Hardship Distribution Rules

On September 23, the IRS published final regulations amending the rules governing hardship distributions from 401k and 403b plans pursuant to changes contained in the Bipartisan Budget Act of 2018. The final regulations, summarized here, largely mirror the proposed regulations that the IRS published in November 2018, and include helpful clarifications on the changes and plan amendment timing.

Source: Groom.com, October 2019

Treasury Changes 401k and 403b Hardship Withdrawal Rules

401k and 403b plans aim to assist employees in saving for retirement. To encourage employees to make contributions, these plans allow participants to access their savings prior to retirement in certain limited circumstances, including a severe financial hardship for the participant or his or her beneficiaries. The new regulations make changes to the process that determines whether a participant may receive a hardship withdrawal from their 401k or 403b plan account. These changes reflect recent legislative developments.

Source: Ballardspahr.com, October 2019

403b Plan Fiduciary Breach Lawsuits Often Involve Multiple Active Recordkeepers

One of the common threads among the institutions that were sued over their retirement plans is that they had multiple recordkeepers available for active participant contributions. Out of the twenty-three lawsuits involving primarily the 403b plan of healthcare and/or higher education organizations, sixteen of them included the claim that the fiduciaries breached their responsibilities by allowing multiple recordkeepers to be active vendors in the plan. According to the lawsuits, having multiple providers allegedly led to significantly higher recordkeeping fees and subsequently lowered the account accumulations for the plan participants.

Source: Cammackretirement.com, September 2019

Four Ways to Improve 403b Plans

NTSA highlights opportunities that can help increase participation and savings for the nation's public education professionals in a new white paper that expands on the positive impact of four specific plan design features.

Source: 401khelpcenter.com, September 2019

NTSA Unveils 403b Plan Enhancement Guide

The NTSA has unveiled the "403b Plan Enhancement Guide," a new white paper that highlights opportunities that can help increase participation and savings for the nation's public education professionals. The new white paper builds on the NTSA's 2018 survey of public education 403b retirement plans and offers suggestions on how to further improve the 403b.

Source: Ntsa-net.org, September 2019

Loans in 403b Plans

Loans are a particularly difficult issue in 403b plans. 403b plans funded with individual annuity contracts and custodial accounts have contract-level requirements applicable to loans that must be addressed. The contract rights attached to the individual annuities and custodial accounts inhibit certain plan level compliance initiatives. Additionally, the rules for loans under Code Section 72(p) apply a single loan limit to all plans of the employer.

Source: Ntsa-net.org, August 2019

403b Retirement Plan Fee Litigation: An Update

Retirement plan litigation continues to plague the retirement plan space, including 403b retirement plans. This chart provides detailed information on each case.

Source: Cammackretirement.com, August 2019

403b Universal Availability Requirements Under Scrutiny by IRS

The IRS has been active in examining plans that may have employees who are excluded from participation in keeping with historical or industry practices. Common themes would be colleges with adjunct or seasonal professors or coaches; or hospitals with on-call nurses.

Source: Schneiderdowns.com, August 2019

403b Plan Sponsors Reveal Investment Preferences in Survey

Sponsors of 403b plans are more concerned about market volatility than 401k plan sponsors, according to the 2019 BlackRock DC Pulse: 403b Report. Plan advisers can help 403b plan sponsors looking for downside protection, active strategies and target-date funds that can be used as a decumulation vehicle in retirement.

Source: Planadviser.com, August 2019

Still Time to Fix Your 403b Plan

The IRS is giving its approval on the form of your restated 403b plan document going back to the 2010 plan year. This program is great for eligible employers, but time is running out. Opinion letters are only effective for plans that are amended or restated before March 31, 2020.

Source: Graydon.law, August 2019

Texas 403b Law Causes Adviser Concern Over Investor Protection

A Texas law taking effect next month is causing concern among some retirement plan advisers who are worried that the legislature has weakened investor protection for public schoolteachers in the state. Law taking effect Sept. 1 eliminates fee caps in place on some retirement products for teachers.

Source: Investmentnews.com (registration may be required), August 2019

Time is Running out for 403b Plan Sponsors to Meet March 31, 2020 Adoption Deadline

In Revenue Procedure 2017-18, the IRS announced a deadline of March 31, 2020 for adopting pre-approved 403b plans in order to receive retroactive relief for any noncompliant plan provisions. Shortly thereafter, it began issuing opinions on plans submitted by sponsors of volume submitter and prototype 403b plan documents.

Source: Benefitsnotes.com, August 2019

Another Big University 403b Plan Settles with Schlichter

While disputing allegations and denying liability, plan fiduciaries have announced the second largest monetary settlement to date regarding a university retirement plan. This settlement -- for $14,000,000 -- involves the $4.3 billion Johns Hopkins University 403b Plan, a suit brought by the law firm of Schlichter, Bogard & Denton as part of the first wave of these suits.

Source: Napa-net.org, August 2019

Federal Judge Dismisses ERISA Fiduciary Breach Claim against University for Lack of Standing

A federal district court judge in Washington D.C. dismissed an ERISA fiduciary breach suit brought by a former employee of George Washington University, finding the former employee lacked standing to sue. The plaintiff, Melissa Stanley, participated in two GW administered retirement plans, and brought multiple claims for breach of fiduciary duty against the school. The case's dismissal comes amid increased litigation targeting higher education retirement plans for fiduciary breaches and follows a similar wave of litigation over private sector 401k plans.

Source: Williamsmullen.com, August 2019

403b Plans Must Comply with the "Once In, Always In" Rule This Year

Tax-exempt employers whose 403b plans have failed to comply with the "once in, always in" eligibility rule in the past should be well on their way to compliance by now. IRS Notice 2018-95 granted limited relief from this common administrative failure. The grace period for non-compliance has ended for many, perhaps most, 403b plans, but all 403b plan sponsors should ensure that they comply this year.

Source: Employeebenefitsupdate.com, July 2019

New Texas Law Enhances School District Role in 403bs

A new Texas law will increase the role that school districts in the state play in the 403b plans they offer their employees. Rep. Dan Flynn introduced the measure on March 1, 2019. The state House of Representatives passed it on April 10; the Texas Senate received the bill the next day and passed it one month after the House did. Gov. Greg Abbot signed it into law on May 24; it goes into effect on Sept. 1, 2019. HB 2820 rescinds the power of the Teacher Retirement System of Texas to regulate those 403bs.

Source: Napa-net.org, July 2019

Giving 403b a Bad Name

There are many people like him who firmly believe that 403bs are terrible. Thus, a relatively small portion of the 403(b) marketplace gives all 403bs a bad name! And that's a shame, since many 403b plan sponsors work extremely hard to provide competitive benefits to their employees.

Source: Cammackretirement.com, June 2019

Pennsylvania Law Requires Multiple Recordkeepers for 403b Plans

A new law in Pennsylvania will require school districts sponsoring certain retirement plans to use at least four service providers, which advisers say runs counter to best practices and will perpetuate an environment of higher recordkeeping and investment-management fees.

Source: Investmentnews.com (registration may be required), June 2019

Sweeping 403b Changes in Portman-Cardin Legislation Leaves Unanswered Questions

The Portman-Cardin Bill, the Retirement Security and Savings Act - 2019, introduces sweeping changes to 403b plans by expanding their investment universe. These changes, however, also required modification to the Securities Laws otherwise applicable to 403b plans in order for them to work. A few critical issues have gone unanswered in the legislation, and there are a number of transition issues which we will have to be addressed.

Source: Businessofbenefits.com, June 2019

Rolling 403b Funds Back to a Prior 403b

An employee left our charitable foundation to work for another. When she left, she took a distribution and rolled it over to the plan of the other foundation. However, after a few months, she decided that the new position was not for her and returned to her former position. Can she roll the funds that she rolled over to her new employer's 403b plan right back to the former 403b plan?

Source: Plansponsor.com, June 2019

Communicating a 403b Plan to Employees

While many employers offer 403b plans to employees, most do not adequately educate the employees on the importance of retirement savings or promote participation in the 403(b) plan as a valuable employee benefit. Many fail to recognize the correlation between higher participation rates and earlier retirement patterns for older workers.

Source: Ntsa-net.org, May 2019

Roth 403b Plans: Rules, Tax Benefits and More

A Roth 403b plan is one type of tax-advantaged, employer-sponsored retirement savings account. While these plans share some similarities with 401k plans, they have certain characteristics that set them apart. If you have the option to save for retirement in a Roth 403(b) through your employer, this guide can help you understand how they work and what tax benefits they offer.

Source: Ktva.com, May 2019

Changing Your 403b Plan's TPA

Problems may arise when employers change their 403b plan's TPA and do not notify the product providers, the plan participants or the former TPA. In the absence of such notification, all parties continue to interact with the former TPA, but plan transactions are not processed or approved. Delays occur, contributions are not processed, information is not provided, and a logjam develops. Here are general recommendations based on successful transitions that have been made in the 403b marketplace.

Source: Ntsa-net.org, May 2019

IRS Indicates 403b Initiatives Coming This Summer

IRS officials have recently indicated that the agency expects to launch audit initiatives this summer targeting 403b plan compliance. However, 403b plans are in a remedial amendment period, and the IRS has offered much help for them to be in compliance with regulations.

Source: Planadviser.com, May 2019

Third Circuit Resuscitates Claims Against University 403b Plan Fiduciaries

Over the past several years, the ERISA plaintiffs' bar has targeted university-sponsored 403b plans, arguing that the plan fiduciaries breached their fiduciary duties and engaged in prohibited transactions in connection with offering certain investment options and the administrative fees associated with such plans. The Third Circuit recently issued the first circuit court decision addressing these claims and, in doing so, issued a split decision that breathed new life into a case involving a 403b plan sponsored by the University of Pennsylvania.

Source: Erisapracticecenter.com, May 2019

A Good 403b or a Bad 403b? A Question IRS Auditors Look to Answer

In each case, the answer depends on whether the document and operation are in compliance with the many technical requirements for section 403b plans. IRS officials have recently indicated that the IRS expects to launch audit initiatives this summer targeting section 403b plan compliance, so now is a good time for employers with section 403b plans to take a close look at their documents and administrative practices.

Source: Erisapracticecenter.com, May 2019

Settlement in Vanderbilt 403b Case Raises Plan Data Questions

The extent to which individuals should have control over their personal information and the data they generate in the on-line world has seized center stage in our national conversation. A new proposed settlement in Cassell v. Vanderbilt Univ. highlights the importance of these issues in the retirement plan marketplace.

Source: Groom.com, April 2019

Time to Review Your 403b Plan

Because of a March 2020 deadline set by the IRS to implement a "safe harbor plan," many companies are now taking the time to review their 403b plans and ensure the plan and plan documentation meets IRS requirements.

Source: Hallbenefitslaw.com, April 2019

One Year to Go Until the 403b Restatement Deadline

The one-year countdown to the mandatory 403b plan document restatement deadline is officially underway. All organizations that sponsor 403b retirement plans must restate their plan documents by March 31, 2020, using either the IRS's pre-approved document or an individually designed plan document.

Source: Cbiz.com, April 2019


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