IRS Proposed 403(b) Regulations
The IRS has issued extensive regulations for §403(b) plans & arrangements for the first time in over 40 years. The regulations, if adopted as written, would change §403(b) plans substantially.
As reported in a recent NTSAA bulletin, the IRS appears intent on its desire to change the way 403(b) plans are structured and administered. Both Ellie Lowder and Kristi Cook have met with an IRS work group for additional discussions on the proposed 403(b) regulations and the NTSAA has submitted written comments to the IRS.
From an industry perspective, two of the biggest concerns presented by the proposed regulations involve:
1. Requiring the employer to assume a much greater and unfamiliar role by establishing a plan document which would include all material provisions regarding eligibility, benefits, limits, and products available under the plan, as well as the time and form under which benefit distributions would be made.
2. Eliminating 90-24 transfers to vendors and products that are not approved under the Plan.
Despite the additional burdens these regulations would place on the employer, and the loss of control and choice suffered by the participant, the IRS appears determined to include these two provisions in the final regulations.
So where does this leave us? There is still time to influence
the outcome. Here are some suggested actions:
1. Contact your 403(b) clients and employers and encourage them to contact their members of Congress regarding the loss of benefits these regulations would cause;
2. Encourage your schools to write the IRS to explain the burdens these regulations would place on them. The IRS has indicated that they have not heard many concerns from employers regarding these regulations. For more information including fact sheets and sample letters, visit www.ntsaa.org.;
3. If you’re not a member of the NTSAA, now is a great time to join and participate in their efforts to preserve the uniqueness of 403(b) retirement benefits. The NTSAA is the only independent organization dedicated to the 403(b) marketplace.
4. Think about how your own approach to the market will change as a result of these regulations. Be aware that your clients may be reading about these changes. Because the proposed regulations eliminate 90-24 transfers, many commentators are suggesting any contemplated transfers be completed sooner rather than later before the transfer privilege is lost.