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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