403(b) retirement plan compliance
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403(b) Retirement Plan Compliance. Gary Mauger and Christine Dailey Managing Partners (704) 900-5566 [email protected] www.newpcg.com. Agenda. Key 403(b) regulations First year audit findings Employer responsibilities Next steps Resources for help - PowerPoint PPT PresentationTRANSCRIPT
403(b) Retirement Plan Compliance
Gary Mauger and Christine Dailey
Managing Partners
(704) 900-5566
www.newpcg.com
Agenda
Key 403(b) regulations First year audit findings Employer responsibilities Next steps Resources for help Questions and discussion
New 403(b) Regulations
Major Changes and Requirements Written plan document Nondiscrimination testing changes Transfers In-service distributions Form 5500
New 403(b) Regulations
Written Plan Document Required for ERISA and non-ERISA plans Must be congruent with vendor
contracts/custodial agreements SPD requirements
New 403(b) Regulations
Plan Transfers Transfers-in
Target contract must be as strict Benefit must be equal
Transfers-out require an Information Sharing Agreement (ISA)
New 403(b) Regulations
In-Service Distributions Employer must coordinate loan and
hardship information May delegate to a third party Triggering event required for in-service
withdrawals for employer contributions
New 403(b) Regulations
Nondiscrimination Testing Repeal of Notice 89-23 Elimination of permitted disparity safe
harbor Age and service graded plans must now
test each grade
New 403(b) Regulations
Form 5500 Full Form 5500 required beginning with 2009
plan years Significantly more complex Audit required for plans with 121 participants or
more
Timeliness of Contribution Remittance
Rule: Remittance must be sent as soon as administratively feasible but no later than 15 business days following the month of withdrawal.
Issue: Late remittances must be reported on the Form 5500 and a correction including lost earnings made for each participant.
Best Practice: No safe harbor for large plans (more than 100 participants). Seven day safe harbor for small plans. Remit ASAP after every payroll.
Hardship Withdrawal Compliance
Rule: Use Safe Harbor Criteria; Stop deferrals for six months
Issue: Who is determining eligibility for hardship? Have deferrals stopped for six months?
Best Practice: Delegate eligibility determination to vendor if possible. Stop deferrals for six months.
Plan Document Accuracy
Rule: Plan document must accurately reflect actual administrative practice.
Issue: Does the plan document accurately describe key administrative practice such as eligibility requirements, hours of service definition, etc.
Best Practice: Carefully follow the plan document. If changes are made, amend the document.
Definition of Compensation
Rule: Elective deferrals must be calculated on “Includable Compensation” (Total Compensation).
Employer contributions can be made on a different definition of Compensation.
Issue: If the two definitions of compensation (elective deferrals and employer contributions) are different, this must be administered correctly with payroll deductions and the Salary Reduction Agreement.
Best Practice: Review definitions of compensation for each and revise practice as necessary.
Compliance Testing
Rule: Plan must be tested for nondiscrimination each year..
Issue: Tests are not performed.
Best Practice: Test annually and retain the results.
Fidelity Bond
Rule: A fidelity bond of 10% of plan assets with a max of $500,000 is required. Annuity only plans may be exempted.
Issue: Many plans now have mutual funds requiring the bond and there is uncertainty about the annuity exemption.
Best Practice: Purchase and maintain a bond.
Employer Responsibilities
Sound plan design Plan document/SPD Nondiscrimination Testing Reporting and disclosure More involvement in plan operations Investment Due Diligence
Employer Responsibilities
Fiduciary Duties What is your fiduciary responsibility?
• Learn duties• Prudent expert standard• Plan decisions• Plan compliance and administration• Investment due diligence process
Named Fiduciary Fiduciary Insurance
Next Steps
Compliance Audit Adherence to Plan Document Provisions Nondiscrimination Testing Required Reporting and Disclosure Investment Due Diligence Process
Resources
Advisor Vendor information Consultant Regulator publications
Resources Links Final 403(b) Regulations:
http://www.treasury.gov/press/releases/hp501.htm
IRS Information: http://www.irs.gov/retirement/article/0,,id=172430,00.html
Department of Labor Bulletin: http://www.dol.gov/ebsa/regs/fab2007-2.html
Questions and Discussion
Gary Mauger and Christine Dailey
Managing Partners
New Pinnacle Consulting Group, LLC
(704) 900-5566
www.newpcg.com