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403(b) Retirement Plan Compliance. Gary Mauger and Christine Dailey Managing Partners (704) 900-5566 gmauger@newpcg.com www.newpcg.com. Agenda. Key 403(b) regulations First year audit findings Employer responsibilities Next steps Resources for help

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403 b retirement plan compliance

403(b) Retirement Plan Compliance

Gary Mauger and Christine Dailey

Managing Partners

(704) 900-5566



  • Key 403(b) regulations
  • First year audit findings
  • Employer responsibilities
  • Next steps
  • Resources for help
  • Questions and discussion
new 403 b regulations
New 403(b) Regulations

Major Changes and Requirements

  • Written plan document
  • Nondiscrimination testing changes
  • Transfers
  • In-service distributions
  • Form 5500
new 403 b regulations1
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 regulations2
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 regulations3
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 regulations4
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 regulations5
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
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
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
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
Definition of Compensation

Rule: Elective deferrals must be calculated on “Includable Compensation” (Total Compensation).

Employer contributionscan 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
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
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
Employer Responsibilities
  • Sound plan design
  • Plan document/SPD
  • Nondiscrimination Testing
  • Reporting and disclosure
  • More involvement in plan operations
  • Investment Due Diligence
employer responsibilities1
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
Next Steps
  • Compliance Audit
  • Adherence to Plan Document Provisions
  • Nondiscrimination Testing
  • Required Reporting and Disclosure
  • Investment Due Diligence Process
  • Advisor
  • Vendor information
  • Consultant
  • Regulator publications
resources links
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

Questions and Discussion

Gary Mauger and Christine Dailey

Managing Partners

New Pinnacle Consulting Group, LLC

(704) 900-5566