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.

DOL Initiates Data Collection to Reunite Workers With Lost Retirement Savings

The DOL has begun efforts to create the Retirement Savings Lost and Found database, an online tool to help workers locate lost retirement benefits. Starting Monday, plan administrators, recordkeepers, and service providers are invited to voluntarily submit data to help populate the database, which is expected to launch by December 29. The EBSA has issued a request outlining the necessary data elements and submission methods, highlighting the importance of collaboration between the government and the retirement plan community for the tool's success.

Source: Planadviser.com, November 2024

IRS Regulations Clarify 403b Plans' Obligations to Part-Time Employees

On October 3, 2024, the IRS issued guidance regarding the obligations of 403b plan sponsors to part-time employees, in light of new legislation effective January 1, 2025. This legislation mandates that long-term, part-time employees -- defined as those who work 500 or more hours in two consecutive years -- must be allowed to participate in 403b plans, regardless of previous exclusions. The IRS guidance, titled Notice 2024-73, clarifies which employees are eligible for participation, the extent of their required participation, and addresses several key questions about the rights of LTPT employees under 403b plans.

Source: Bsk.com, November 2024

Fred Reish on Things I Worry About: Automatic Enrollment - Part 2

The SECURE Act 2.0, enacted on December 29, 2022, mandates that new 401k and private sector 403b plans automatically enroll eligible employees starting in the plan year after December 31, 2024. This article focuses on the effective date as pertaining to the 2025 calendar year, which is approaching. It highlights two specific issues related to automatic enrollment: the determination of "which" eligible employees will be automatically enrolled and the inclusion of long-term, part-time employees in this requirement.

Source: Fredreish.com, November 2024

IRS Guidance: How Reliable Is It?

Federal agencies translate legislation affecting defined contribution plans into guidance, with the IRS focusing on tax laws and the DOL on labor laws. The IRS provides crucial guidance that helps plan sponsors, fiduciaries, and participants to effectively implement tax-preferred savings options. This framework is essential, as it reduces uncertainty surrounding new laws such as the SECURE Act of 2019, the CARES Act of 2020, and SECURE 2.0 from 2022, ensuring these legislative changes are practical and beneficial.

Source: Callan.com, November 2024

New Permissible Minimum Service Requirements for 401k and 403b Plans

The SECURE Act, signed into law on December 20, 2019, followed by SECURE Act 2.0 on December 23, 2022, introduced several changes to 401k and 403b plan requirements. One significant change pertains to minimum service requirements for participation in 401k plans, allowing sponsors to set criteria that help streamline administration by excluding part-time employees with minimal participation history. This is aimed at reducing the administrative burden associated with managing small accounts. Meanwhile, 403b plans must provide universal eligibility but can exclude employees working less than 20 hours per week for similar administrative efficiency reasons.

Source: Berrydunn.com, November 2024

IRS Announces 2025 Retirement Plan Limits

On November 1, 2024, the IRS announced that the contribution limit for 401k plans will increase to $23,500 for 2025, up from $23,000 in 2024. Additionally, the IRS provided technical guidance on cost-of-living adjustments impacting pension plans and other retirement-related items for tax year 2025 in Notice 2024-80.

Source: 401khelpcenter.com, November 2024

403b Specific Financial Statement Audit Considerations

This article outlines the unique aspects of auditing 403b retirement plans compared to 401k plans. It emphasizes that each Independent Qualified Public Accountant (IQPA) audit is tailored due to the diversity in service providers, plan structures, payroll systems, and internal controls. The discussion includes specific audit considerations pertinent to 403b plans, focusing on the types of employers eligible to offer these plans and other relevant factors for IQPAs during the audit process.

Source: Belfint.com, October 2024

Back-to-School Special: IRS Offers Insight on Implementing Qualified Student Loan Payments

On August 19, 2024, the IRS released Notice 2024-63, offering guidance on implementing Section 110 of the SECURE 2.0 Act of 2022. This section allows employers with 401k or 403b plans to make matching contributions based on employees' student loan payments. The Notice addresses key topics such as eligibility rules, employee certification, nondiscrimination testing, and other administrative procedures through a series of questions and answers. This article is an in-depth look.

Source: Mwe.com, October 2024

How to Compute the 15-Year Special Catch-Up for 403b Plans

Plan sponsors need historical data to accurately calculate the maximum 403b catch-up contributions for employees. If this data is unavailable, especially due to excluded contracts, sponsors should reconsider offering such a provision, as it may lead to inaccurate administration. Templates provided here can help document calculations for the 15-year catch-up eligibility, which is a unique feature of 403b plans. Without complete information, it may be wiser to forgo the provision altogether.

Source: Belfint.com, October 2024

IRS Provides Helpful Answers Regarding Long-Term Part-Time Employees in 403b Plans

In November 2023, the IRS proposed regulations regarding long-term part-time employee eligibility for 401k plans, noting that additional guidance was needed for 403b plans. The recent IRS Notice 2024-73 provides important clarifications for 403b plan sponsors, particularly benefiting colleges, universities, and teaching hospitals. This notice addresses various issues related to 403b plans, focusing specifically on the treatment of part-time and student employees.

Source: Verrill-law.com, October 2024

IRS Issues Guidance Regarding Long-Term Part-Time Employees and 403b Plans Subject to ERISA

On October 3, 2024, the IRS released Notice 2024-73, which offers guidance on Long-Term Part-Time Employees in ERISA 403b plans. The notice clarifies that part-time employees who typically work less than 20 hours per week must be permitted to participate in the plan for elective deferral if they meet certain criteria. The notice also addresses how these rules interact with nondiscrimination standards.

Source: Voya.com, October 2024

IRS Issues 403b Plan LTPT Guidance

On October 2, 2024, the IRS issued Notice 2024-73, which offers guidance on the long-term, part-time employee (LTPT) rules for ERISA-covered 403b plans. Non-ERISA 403b plans are not affected by these rules and can disregard them.

Source: Ferenczylaw.com, October 2024

The Trouble With True-ups: Make Sure You Budget for the Maximum Match

Employers that give substantial bonuses tend to allow their employees to contribute the maximum 401k or 403b deferral amount out of their bonus pay. To ensure that employees who take advantage of this flexibility get the maximum match, the employers have to make sure that their plan document has a true-up match provision. There's also a lesson to be learned by employers who don't like surprises.

Source: Belfint.com, October 2024

IRS Addresses Long-Term, Part-Time Employees in 403b Plans in New

In guidance issued on October 3, the IRS addresses long-term, part-time employees in 403b plans under SECURE 2.0 for plans beginning in 2025. The guidance comes in Notice 2024-73. The guidance includes a question-and-answer section about applying the nondiscrimination rules for 403b plans regarding LTPTEs, including rules to exclude part-time employee and student employee participation.

Source: Asppa-net.org, October 2024

Required Minimum Distributions

As we approach the end of the calendar year, it is important to be reminded about one frequently overlooked retirement plan requirement. Upon attainment of age 73, certain participants of a tax-qualified retirement plan may be required by federal tax law to withdraw a minimum amount from such plan each year. These mandatory distributions are known as "required minimum distributions."

Source: Legacyrsllc.com, October 2024

The Plan Sponsor's Guide to PEPs

The Plan Sponsor's Guide to PEPs is a resource for employers interested in providing 401k or 403b benefits using a pooled employer plan. Each section of the guide takes 401k and 403b plan sponsors through the steps of how PEPs work and whether they are an appropriate approach for an employer; how to evaluate pooled plan providers; best practices for implementation and monitoring; and reviewing plan design and investment menus that can help meet the retirement needs of their participants.

Source: Pionline.com, September 2024

Bid for Jury Trial Bounced in 403b Excessive Fee Suit

A long-running excessive fee suit involving a university 403b plan -- and is incredibly, still running -- won't have a jury trial, according to a new federal court ruling. The suit was brought by participants in plans of New York University. This case reminds us that litigation frequently involves a series of motions and countermotions, often small procedural victories that contribute little to the merits, but can influence the eventual outcome of the case.

Source: Ntsa-net.org, September 2024

Bill That Would Allow CITs in 403bs Before Senate

Legislation that would allow 403b plans to invest in collective investment trusts has been introduced by several Senate Banking Committee members, including the ranking Republican, an indication of growing acceptance of the idea. The legislation originates in part from feedback Sen. Scott received concerning the capital formations framework he released almost a year ago, a roundtable he convened concerning ways to boost minority community access to capital.

Source: Asppa-net.org, September 2024

IRS Addresses Matches for Qualified Student Loan Payments

The SECURE 2.0 Act gave plan sponsors of certain DC plans the ability to make matching contributions when workers make qualified student loan payments on qualified educational loans. The IRS has issued interim guidance that applies to 401k, 403b, and governmental 457b plans as well as SIMPLE IRAs. The interim guidance is effective for plan years beginning after December 31, 2024.

Source: Segalco.com, September 2024

Extended 403b Plan Amendment Deadlines Still Obligatory

Amendment deadlines may have been extended for a variety of retirement plans -- including 403bs -- but they are no less obligatory than they were before. The IRS in a Sept. 12 edition of Employee Plans News focuses on plan amendment deadlines that were extended by the "Grab Bag" guidance the IRS issued in Notice 2024-02 on Dec. 20, 2023, and Revenue Procedure 2022-40 on Nov. 21, 2022.

Source: Ntsa-net.org, September 2024

Multi-Billion-Dollar 403b Plan Settles Excessive Fee Suit

"After years of hard-fought litigation," a multi-billion-dollar 403b plan has struck a deal in an excessive fee suit. This suit involves plans of the MITRE Corporation Tax Sheltered Annuity Plan and the Qualified Retirement Plan with more than 23,000 participants and more than $8 billion in assets between them.

Source: Ntsa-net.org, September 2024

District Court Permits 403b Plan Fiduciary Breach Claims to Proceed

A federal district court in Massachusetts recently denied a motion to dismiss a complaint filed by plan participants in the Cape Cod Healthcare, Inc. 403b plan, which alleged that the plan's fiduciaries breached their ERISA duty of prudence by permitting the plan to pay excessive recordkeeping fees and remain invested in overpriced, underperforming investment options. Plaintiffs, both former employees of Cape Cod Healthcare, alleged that Cape Cod Healthcare (plan sponsor and named fiduciary) and individual fiduciary defendants breached their fiduciary duty in two ways.

Source: Erisapracticecenter.com, September 2024

2025 401k Contribution Limits: Milliman Halves Its Increase Prediction

It's looking like retirement savers will only see a $500 increase in the amount they can contribute to their 401k, 403b, or 457 plans in 2025, according to the newly updated final forecast for the 2025 IRS contribution limits from Milliman. For 2024, the elective deferral limit was also increased by $500 compared to 2023.

Source: 401kspecialistmag.com, September 2024

IRS Issues Guidance on Retirement Matches for Student Loan Payments

Employers now have some clarity around a new program that allows them to match retirement plan contributions to employees' student loan payments. The IRS on Aug. 19 released long-awaited interim guidelines regarding the program, a provision under SECURE ACT 2.0 that allows employers with 401k, 403b, governmental 457b, or SIMPLE IRA plans to match employees' student loan payments like they would for traditional retirement contributions. The provision took effect this year, but employers have been waiting for more guidance around the new program.

Source: Shrm.org, September 2024

IRS Issues Interim Guidance on Matching Contributions Made on Account of Qualified Student Loan Repayments

Starting in 2024, the SECURE 2.0 Act allows employers to make matching contributions to 401k, 403b, and governmental 457b plans, and SIMPLE IRAs on account of employees' qualified student loan payments. Many plan sponsors have deferred implementation of QSLP matches pending IRS guidance, and on August 19, 2024, the IRS issued Notice 2024-63, which provides that interim guidance in a question-and-answer format. It addresses discrete issues of eligibility, annual certification, ADP testing, and reasonable procedures to administer a plan with a QSLP matching feature.

Source: Wagnerlawgroup.com, August 2024

IRS Issues Guidance Regarding Matching Contributions Based on Eligible Student Loan Payments in Qualified Retirement Plans

The IRS issued Notice 2024-63 guiding qualified retirement plans that implement matching contributions based on an employee's qualified student loan payment. Notice 2024-63 is in question-and-answer format, illustrating several plan administrative issues in various examples. This is a three-page review of the guidance.

Source: Voya.com, August 2024

Employers Now Have Interim Guidance on Student Loans and Retirement Plans

The IRS provided interim guidance to employers that provide matching retirement plan contributions based on student loan payments, a new benefit courtesy of a 2022 law. Notice 2024-63 implements Section 110 of the SECURE 2.0 Act of 2022. It applies to sponsors of 401k and similar retirement plans that provide matching contributions based on eligible student loan payments made by their participating employees.

Source: Thetaxadviser.com, August 2024

Final and New Proposed RMD Regulations Issued

On July 19, 2024, the IRS and the Department of Treasury released both final regulations and proposed regulations for compliance with the RMD rules. This article focuses on important developments under these final regulations and proposed regulations that impact administrators and participants/beneficiaries of qualified plans (both defined benefit and defined contribution), 403b plans, and 457b plans.

Source: Icemiller.com, August 2024

IRS Issues Proposed Required Minimum Distribution Regulations

On July 19, 2024, the IRS bestowed upon us two pieces of "light" reading on required minimum distributions. One was the final regulations to Internal Revenue Code 401(a)(9), a mere 290 pages. The other guidance was the proposed RMD Regulation, which expounds on several of the components of the SECURE 2.0 Act of 2022 impacting RMDs. That is the subject of this article.

Source: Ferenczylaw.com, August 2024

Domestic Abuse Withdrawal Penalty Exception

Can a client's 401k plan, which requires spousal consent for distributions, be amended to adopt the new domestic abuse victim distribution option? SECURE Act 2.0 provides a new exception to the 10 percent additional tax on early withdrawals for domestic abuse victim distributions. But, such distributions may not be part of defined benefit plans or defined contribution plans that are subject to the spousal consent rules.

Source: Retirementlc.com, August 2024

Interim IRS Guidance Published on Student Loan Matching Payments

The IRS published guidance to assist plan sponsors providing or planning to provide matching contributions based on employees' qualified student loan payments. The IRS published Notice 2024-63, which uses a question-and-answer format, to illustrate the rules for employers with 401k, 403b and governmental 457b plans to provide matching contributions based on qualified student loan payments, abbreviated as QSLP, rather than based only on elective contributions to retirement plans.

Source: Planadviser.com, August 2024

IRS Issues Guidance on Employer Matches of Qualified Student Loan Payments

The IRS on August 19th issued interim guidance concerning employer matching contributions made to retirement plans related to qualified student loan payments (QSLPs) made by employees. The guidance, which is in question-and-answer format, comes in Notice 2024-63. It addresses issues that may arise in 401k, 403b, governmental 457b, or SIMPLE IRA plans in administering such matching contributions.

Source: Asppa.org, August 2024

IRS Issues Guidelines on Retirement Matches for Student Loan Repayments

The IRS issued highly anticipated guidance for plan sponsors wanting to match retirement plan contributions to qualified student loan payments (QSLPs). Notice 2024-63, posted by the IRS, implements section 110 of SECURE 2.0, which allows employers to match contributions for employees based on their QSLPs.

Source: 401kspecialistmag.com, August 2024

Is Your Individually Designed 403b Plan Eligible for a Determination Letter?

The IRS rollout of this qualified plan determination letter program for 403b plans began in June 2023. Plan sponsors of Code Section 403b tax-sheltered annuity plans that have not already done so may want to consider applying for an IRS determination letter or planning and budgeting for the process next year if they are not yet eligible. Here is why.

Source: Erisapracticecenter.com, August 2024

All Plans Are Not Created Equal

Like Neapolitan ice cream, 401k, 403b, and 457b are just three flavors of the same product. Like Baskin Robbin's 31 flavors are all good in their way, all the varieties of retirement plans sponsored by different types of employers also do their job well: improving retirement readiness for employees of for-profit, nonprofit, and governmental entities. However, all plans are not created equal, and cannot be audited the same. This article focuses on audit procedures specific to 403b plans.

Source: Belfint.com, August 2024

2024 PLANSPONSOR 403b Market Survey

The 2024 PLANSPONSOR 403b Market Survey includes data from 27 recordkeepers reporting on their U.S.-defined contribution recordkeeping business and focuses on recordkeeping of more than $1.3 trillion in single-employer 403b plan assets, including 70% in non-ERISA plans and 30% in ERISA plans. The survey found that regulatory changes are narrowing down the differences between the two largest kinds of defined contribution plans in the U.S. retirement market.

Source: Plansponsor.com, August 2024

Lawsuit Alleges TIAA, Morningstar, Pushed Participants Into Proprietary Annuities

Retirement plan participants have filed a class action lawsuit against TIAA and Morningstar for allegedly breaching their fiduciary duty by using a jointly created retirement planning tool to steer participants into TIAA investment products. The plaintiffs alleged that a retirement tool -- known as the Retirement Advisor Field View -- was designed to push participants in college and university retirement plans into TIAA annuity investment offerings.

Source: Planadviser.com, August 2024

The LTPT Rules and 403b Plans

The SECURE 2.0 Act's LTPT rule took effect on January 1, 2023, which means that as of January 1, 2025, any employee who has worked at least 500 hours (but no more than 999 hours) annually for two consecutive years (and has reached age 21 by the end of those two years) must be permitted to contribute elective deferrals to a 403b plan, unless otherwise excluded.

Source: Belfint.com, August 2024

Senators Introduce Bipartisan Bill to Allow CITs in 403bs

A bipartisan group of Senators introduced a bill on Aug. 1 to allow 403b plans to include collective investment trusts as part of their investment menu options. The bill, S.4917 mirrors a version passed in the House on March 8.

Source: Asppa.org, August 2024

IRS Issues Final Regulations on Required Minimum Distributions

The final regulations apply for purposes of determining RMDs for calendar years beginning on or after January 1, 2025. For prior calendar years, the previously issued final regulations apply and presume a reasonable, good-faith interpretation of amendments issued under SECURE and SECURE 2.0. The final regulations address certain ambiguities regarding the interpretation of the RMD provisions in SECURE and SECURE 2.0.

Source: Voya.com, August 2024

Treasury Guidance on Retirement Plan RMDs

The Treasury has issued a final rule governing required minimum distributions from certain retirement plans. The final rule reflects changes made by the SECURE 2.0 Act and closely follows the 2022 proposed rule. The final rule generally applies to years beginning and distributions made on or after January 1, 2025. Here are the details.

Source: Segalco.com, August 2024

IRS Finalizes (and Proposes More) Required Minimum Distribution Rules

The Treasury Department and the IRS issued final (and newly proposed) regulations that address the major changes to Code section 401(a)(9) under the SECURE Act 1.0 and SECURE 2.0 and make other conforming changes to the eligible rollover rules. These regulations impact the calculation of required minimum distributions from qualified plans, IRAs, 403b, and 457b plans. This is a summary that highlights the key provisions of the 2022 proposed regulations, noting changes made in the final regulations and the new 2024 proposed regulations.

Source: Groom.com, July 2024

Hardship Distributions From Restricted 403bs

The hardship distribution rules for restricted 403b accounts are the same as those applicable to 401k plans. All amounts in these accounts (including earnings), may be distributed due to a hardship. The plan and contract would, of course, need to have language permitting the distribution.

Source: Ntsa-net.org, July 2024

Automatic Enrollment Is Mandatory in 2025: Now Is the Time to Prepare

SECURE 2.0 implemented almost 100 different changes to the retirement plan landscape. This article is focused on one of the most impactful of such changes which is scheduled to first become effective in 2025. This change is the requirement that most plan sponsors adopt automatic enrollment provisions for their 401k and 403b plans.

Source: Legacyrsllc.com, July 2024

IRS Guidance on New Exceptions to the Penalty Tax for Early Qualified Plan or IRA Withdrawals

The IRS recently issued guidance in Notice 2024-55 on the application of two new exceptions to the 10% additional tax under Code section 72(t) for early withdrawals from a qualified plan or IRA. These exceptions are for (1) emergency personal expense distributions and (2) domestic abuse victim distributions. This guidance will assist plan sponsors and plan administrators in implementing these provisions. Formal plan amendments are not required until December 31, 2026, at the earliest.

Source: Groom.com, July 2024

Exceptions to Penalty on Early Retirement Plan Distributions Outlined

The IRS issued guidance on exceptions to the Sec. 72(t)(1) additional 10% tax on early distributions from retirement plans for emergency personal expense distributions and for domestic abuse victim distributions, which were added by the SECURE 2.0 Act. The provisions of the act became effective Jan. 1. However, Notice 2024-55, issued Thursday, notes it is optional for a plan to permit emergency personal expense distributions and domestic abuse victim distributions.

Source: Thetaxadviser.com, June 2024

Financial Incentives for Employee Participation in 403b

Employers who sponsor 401k and 403b plans without auto enrollment provisions have traditionally been challenged with increasing participation rates. Most employers were interested in different options to encourage more employees to affirmatively make elective deferral contributions into their retirement plans. Thanks to SECURE 2.0, for plan years beginning after December 29, 2022, employers that sponsor 401k or 403b plans may offer employees a "de minimis" financial incentive.

Source: Consultrms.com, June 2024

Form 5500 Deadline Fast Approaching

The deadline for filing the Form 5500 Series for 2023 calendar year plans is fast approaching. Employers and plan sponsors with a calendar-year plan must submit the Form 5500 Series by July 31, the last day of the 7th month after the end of the plan year about which they are to report. So they must submit the Form 5500 series for reporting about the 2023 plan year by July 31, 2024.

Source: Asppa.org, June 2024

2025 IRS Retirement Plan Limits Forecast -- May

This is an update to the Milliman 2025 IRS Limits Forecast using the U.S. Bureau of Labor Statistics report published June 12, 2024. This article includes information about the limits for qualified retirement plans, how these limits are calculated, how they are affected by SECURE 2.0, and why they may be relevant for certain plan sponsors.

Source: Milliman.com, June 2024

Nuts and Bolts of 403b Plan Terminations

What are the rules for terminating a 403b plan? In general, the rules for defined contribution plan terminations apply to 403bs. In this article, John Iekel writes about a recent presentation by Kelsey Mayo J.D., Partner, Poyner Spruill, and Director of Regulatory Affairs at the American Retirement Association, on the subject.

Source: Ntsa-net.org, June 2024

401k Versus 403b: Guiding Clients Through Retirement Plan Choices

For building their retirement savings, investors have many options. There are many employer-sponsored retirement accounts, and the 401k plans and 403b plans are just two examples. Of the two, the 401k is the more popular and more familiar. Meanwhile, the 403b, even if lesser known, has its merits. So, what's the difference between 401k and 403b plans? In this article, InvestmentNews provides some insight into the question.

Source: Investmentnews.com, June 2024

Disclaimer of Opinion Removal Analysis

Fifteen years have passed since 403b plans became subject to the same financial reporting and disclosure requirements as 401k audits. Auditors have been disclaiming their audit opinion on account of the financial statements potentially missing permissibly excluded contracts. Is it time to consider whether there is a continuing risk that the financial statements are potentially missing assets?

Source: Belfint.com, June 2024

Top Considerations for 403b Plans in 2024

Sponsors of 403b plans have some new choices to consider in 2024. Under the SECURE 2.0 Act of 2022., plan sponsors can add new features to their 403b plans to increase opportunities for participation and access to retirement plan funds. Separately, the IRS recently expanded its determination letter program to include individually designed 403b plans. This affords plan sponsors who do not use a service provider's pre-approved plan document a helpful new avenue to seek approval of their 403b plans in written form.

Source: Plansponsor.com, May 2024

Customization Is Coming to the 403b Space

Retirement for the American worker is a popular topic today, not only in the financial media but also in the halls of Congress, where new legislation is continually considered to offer more retirement options, especially in employer-sponsored plans. The Pension Protection Act of 2006 and the SECURE 2.0 Act of 2022 are examples of bills that made significant changes and allowed for new features to be offered in retirement plans. But customization usually also requires advanced expertise as to the pros and cons of implementing these features into an employer-sponsored retirement plan.

Source: Planpilot.com, April 2024

University 403b Excessive Fee, Fiduciary Breach Suit Sacked, Again

It's said that if at first, you don't succeed, try, try again, but if you're suing in federal court, you had better make your case. The suit in question this time -- which was last decided in favor of the fiduciary defendants almost exactly a year ago -- had alleged fiduciary wrongdoing in the Georgetown University 403b plan.

Source: Napa-net.org, April 2024

Report Reveals 403b Plan Sponsors Support Retirement Saving and Investing

Employers' commitment to their 403b plan participants is evident in a new report just released by the ICI. Analyzing the plan year 2020 data for large 403b plans filing Form 5500 under the ERISA, the report finds that nearly one-third of large ERISA 403b plan participants were in plans that put their employees on the path to retirement saving with automatic enrollment.

Source: Ici.org, April 2024

Too Little, Too Late? Plan Contribution Timing Requirements and How to Correct Delays

One of the most basic duties of a defined contribution plan sponsor is to ensure that that there is no delay and participants' salary deferral elections are correctly and timely deposited into the retirement plan. Not only is this duty necessary for proper administration of the plan, but it is also part of a plan sponsor's fiduciary duties under ERISA. This is a review of the plan contribution timing requirements and how to correct delays.

Source: Brickergraydon.com, April 2024

403b Compliance Check: Universal Availability and the Student-Employee and Part-Time Employee Exclusions

If you administer a 403b plan you should be familiar with the term "universal availability." This concept means that, as a general rule, all employees must be allowed to make elective deferrals into the plan immediately upon hire. There are a few limited exceptions to this rule that permit the plan sponsor to exclude certain groups of people, but compliance with these exclusions is often akin to traversing a minefield.

Source: Brickergraydon.com, April 2024

Automatic Enrollment: This Is The Way

Thanks to SECURE Act 2.0, newly established 401k and 403b plans must now have automatic enrollment. Plans with an automatic enrollment feature immediately enroll employees in the employer-sponsored plan once employees satisfy eligibility requirements. 401k and 403b plans established after December 29, 2022, must have the automatic enrollment feature.

Source: Benefitslawadvisor.com, March 2024

Yale University Challenges Appeal in 403b Excessive Fee Suit

In a lengthy filing (109 pages), Yale University says the plaintiffs who lost their excessive fee case in a jury trial shouldn't get a "do-over." More specifically, the Yale fiduciary defendants in that case have filed the aforementioned brief stating that the Second Circuit need not concern itself with entertaining an appeal of that judgment, the first (and to date only) jury trial in this genre of cases.

Source: Napa-net.org, March 2024

CITs in 403bs Bill Headed to Senate

A bill that would authorize the use of collective investment trusts in 403bs is headed to the Senate after the House of Representatives passed it. The Expanding Access to Capital Act (HR 2799), sponsored by House Financial Services Committee Chair Patrick McHenry, includes three measures that were approved as amendments, including the 403b plan measure.

Source: 401kspecialistmag.com, March 2024

Calculating Earnings for 401k and 403b Plan Corrections: Do Your Best to Do Better

Practitioners tend to use the DOL's online calculator for late deferral deposits since EPCRS permits estimates, but to the extent one is being practical and making participants whole, the cheaper result of the online calculator should not prevail over the participant's, the plan's, or the default investment alternative's actual rate of return. Some other alternatives are presented here.

Source: Belfint.com, February 2024

Nearly Three Quarters of Higher Ed Institutions List Retirement Readiness as Top Concern

A new study on retirement plans in higher education institutions likens the past year's challenges to those during the COVID-19 pandemic and highlights how continuing economic fallouts have marred retirement planning for participants. According to Transamerica's latest Pulse survey, 71% of institutions say retirement preparedness is one of their top concerns, yet 86% cite the cost of living and inflation as their leading worry.

Source: 401kspecialistmag.com, February 2024

DOL Guidance on Pension-Linked Emergency Savings Accounts

The DOL has provided guidance on pension-linked emergency savings accounts, a special type of short-term savings account within a 401k or 403b account. The SECURE 2.0 Act authorized PLESAs to encourage elective contributions to 401k or 403b accounts because the limited ability to access money from those accounts in the event of an emergency has tended to discourage those who are lower paid from making elective contributions and thereby receiving an employer match.

Source: Segalco.com, February 2024

When It Comes to Vesting, the IRS Says Once a Long-Term, Part-Time Employee, Always a LTPT Employee

Under the SECURE Act and the SECURE 2.0 Act, employers must provide long-term, part-time employees the opportunity to make elective deferrals under their 401k plans and, beginning in 2025, their 403b plans. However, long-term, part-time employees are not required to be eligible for employer matching or profit-sharing contributions until they satisfy the regular plan rules. Despite this fact, one of the most salient issues surrounding the implementation of the new rule is how it impacts -- and complicates -- tracking when employees become vested in such contributions.

Source: Mwe.com, February 2024

IRS Confirms Long-Term, Part-Time Employees Excludible From Certain Nondiscrimination Testing

Under the SECURE Act and the SECURE 2.0 Act, employers must provide long-term, part-time employees the opportunity to make elective deferrals under their 401k plans and, beginning in 2025, their 403b plans. When this occurs, certain special rules apply to such employees that impact whether they must be included in annual nondiscrimination testing or receive required top-heavy vesting and benefits. As a result, employers need to understand these requirements, as they may impact how annual testing is performed and the results.

Source: Mwe.com, February 2024

Whatever Happened to CITs in 403bs?

403b plans still may not use collective investment trusts, an investment similar to a mutual fund that is subject to fewer regulations and requirements and often carries lower fees for defined contribution retirement plans. This is despite other defined contribution plans, such as 401ks and 457s, being able to use CITs and, according to recent data, doing so in greater volume every year. At the moment, the best chance in the near term for 403bs to access CITs is a bill in the U.S. House of Representatives that could come up for a vote in early March.

Source: Plansponsor.com, February 2024

IRS Confirms Same Hours-Counting Rules Still Add Up for Long-Term, Part-Time Employees

The new long-term, part-time employee rule has generated questions about whether all employers will now be required to track the actual hours all employees work to ensure compliance with this rule. The recently proposed regulations released by the IRS confirm that the answer is no. Employers do not need to change how they count periods of service toward plan eligibility. However, employers should revisit how such service is currently counted under their plans and consider the impact that may have on if and how the long-term, part-time employee rules apply.

Source: Mwe.com, February 2024

The Maximum Contribution May Be Lower Than You Thought: ADP and ACP Test Basics for 401k and 403b Plans

Business owners and Highly Compensated Employees are often shocked to hear that they cannot contribute the maximum 401k or 403b deferral because their plan did not pass the discrimination tests. Much to their surprise, through the Actual Deferral Percentage and the Aggregate Contribution Percentage tests, the Internal Revenue Code prevents HCEs from benefiting from tax deferrals significantly more than NHCEs, unless the plan is a safe-harbor plan. Maria T. Hurd, CPA, provides a full review of the issue.

Source: Belfint.com, February 2024

Can 403bs and CITs Some Day Be Friends?

403b plans still may not use collective investment trusts, an investment similar to a mutual fund that is subject to fewer regulations and requirements and often carries lower fees for defined contribution retirement plans. But, legislation to permit the pooled investment into 403b plans continues to inchworm its way through Congress.

Source: Planadviser.com, February 2024

A Long-Term, Part-Time Employee or Not a Long-Term, Part-Time Employee, That Is the Question

Under the SECURE Act and the SECURE 2.0 Act, employers must provide long-term, part-time employees the opportunity to make elective deferrals under their 401k plans and, beginning in 2025, their 403b plans. Because certain special rules apply to employees who enter an employer's plan as long-term, part-time employees, all employers need to understand when an employee is long-term, part-time.

Source: Mwe.com, January 2024

New IRS Guidance on Roth Employer Contributions

The IRS gave plan sponsors an early Christmas gift with the release of new guidance late last year addressing several key provisions contained in SECURE 2.0. A welcome portion of the notice was further guidance on the new option allowing for participants in 401k and 403b plans to elect to receive employer matching and nonelective contributions on a Roth basis. While this guidance is welcome, Plan Sponsors who wish to adopt this provision should first have an in-depth conversation with their recordkeeper to ensure that their recordkeeping system has been updated to support this new option.

Source: Brickergraydon.com, January 2024

SECURE 2.0 for 403b Plans

The SECURE 2.0 Act of 2022 is a sprawling bill, affecting 403b plans with many provisions that have come into force since passage. Retirement experts at PLANSPONSOR's recent webinar, SECURE 2.0 for 403b Plans, examined the provisions of the law that took effect this year and before.

Source: Plansponsor.com, January 2024

IRS Highlights Changes to Pre-Approved DC Plan Program

There have been significant changes to the IRS Pre-Approved Defined Contribution Plan Program, and two of the IRS officials involved in the thick of it recently provided a refresher on the program rules and recent developments. Central to recent developments is Revenue Procedure 2023-37, which the IRS issued in November 2023. It provided fresh guidance on qualified pre-approved plans and 403b pre-approved plans, and combined, conformed, clarified, and updated rules for those plans outlined in prior revenue procedures.

Source: Asppa.org, January 2024

Mandatory Auto-Enrollment is Coming for Some Plans: What to Know

Studies show that auto-enrollment increases plan participation, and soon it will not be optional for some plans. Among the many changes enacted in SECURE 2.0 is a requirement that new 401k and 403b plans have auto-enrollment and auto-escalation beginning in 2025. As with most of the SECURE 2.0 changes, there were many questions about how the rules would work in practice. Part of the "grab bag" guidance issued in recent Notice 2024-02 fills in some of the blanks but also leaves important questions unanswered.

Source: Cohenbuckmann.com, January 2024

2024 Benefits Limits

Employee benefits limits for 2024 have been promulgated by the government. Here is a one-page 2023-2024 comparison chart of important employee benefits limits.

Source: Clarkhill.com, January 2024

The Plan Sponsor's Guide to PEPs

This guide to PEPs is a resource for employers interested in providing 401k or 403b benefits using a pooled employer plan. Each section of the Guide takes 401k and 403b plan sponsors through the steps of how PEPs work and whether they are an appropriate approach for an employer; how to evaluate pooled plan providers; best practices for implementation and monitoring; and reviewing plan design and investment menus that can help meet the retirement needs of their participants.

Source: Pionline.com, January 2024

Bipartisan Bill Would Lower DC Plan Eligibility Age to 18

The Helping Young Americans Save for Retirement Act (S 3305) seeks to spur more savings by younger workers in DC plans. The bill would require sponsors of 401k and ERISA-covered 403b plans to let employees aged 18 through 20 contribute after they complete one year of service. However, employers could exclude these younger workers from receiving any employer-matching or nonelective contributions.

Source: Mercer.com, January 2024

IRS Notice 2024-2 Provides Guidance for Multiple SECURE 2.0 Provisions

On December 20, 2023, the IRS released guidance concerning certain provisions of the SECURE 2.0 Act of 2022. Notice 2024-2, which is in a Q&A format, is not intended to be comprehensive guidance but rather to offer assistance in commencing implementation of these provisions. The Treasury Department and IRS invite comments on the matters discussed in the Notice. Additional guidance is anticipated.

Source: Voya.com, January 2024

2024 Retirement Saver's Credit

The Saver's Credit, also known as the Credit for Qualified Retirement Savings Contributions, was designed to help low- to moderate-income individuals save for retirement by providing an additional credit toward tax liability on top of existing retirement savings incentives. Learn who is eligible and how it works.

Source: Usicg.com, January 2024

EBSA Releases Form 5500 Series for 2023 Reporting

New year, new forms. The Department of Labor's Employee Benefits Security Administration on Jan. 1 released Form 5500, Form 5500-SF, and Form 5500-EZ for reporting concerning the 2023 plan year.

Source: Asppa.org, January 2024

De Minimis Financial Incentives to Participate in a 401k or 403b Plan

On December 20, 2023, the IRS issued Notice 2024-2, which provides question-and-answer guidance on various aspects of the SECURE 2.0 Act. This article focuses on "de minimis financial incentives" under SECURE 2.0 Act Section 113.

Source: Spotlightonbenefits.com, December 2023

Why SECURE 2.0 Act Auto Enrollment and Escalation Will Boost Financial Wellbeing

The SECURE Act 2.0 contains dozens of changes to retirement plans, but perhaps none bigger than these two: New 401k and 403b plans will be required to automatically enroll participants in the respective plans, and employee salary deferral rates will automatically escalate each year. Here's what you need to know.

Source: Hubinternational.com, December 2023

403b vs. 401k - 2024

403b plans are generally subject to fewer technical requirements and less administrative burdens than 401k plans. But there are other differences as well. Here is a 4-page chart comparing the two types of plans.

Source: Consultrms.com, December 2023

403b Participation Hits All-Time High: PSCA

While participation rates in 401k plans dropped in 2022, participation rates increased in 403b plans last year and hit a record high, according to PSCA's 2023 403b Survey. The survey gathered information from 250 nonprofit organizations that sponsor 403b plans for employees and revealed that 80% of eligible employees contributed to their plans in 2022.

Source: 401kspecialistmag.com, December 2023

How Does the New Long-Term Part-Time Rule Affect 403b Plans?

Experts from Groom Law Group and CAPTRUST answer the question, "How does the new Long-Term Part-Time employee rule under the SECURE 2.0 Act of 2022 affect 403b plans since we already have a universal availability requirement?"

Source: Plansponsor.com, December 2023

IRS Updates Publication 571 for 403b Tax-Sheltered Annuity Plans

The IRS has released a draft of the updated version of Publication 571. This publication is intended to help taxpayers better understand the tax rules that apply to 403b tax-sheltered annuity plans. It covers maximum contribution amounts, excess contributions, the retirement savings contributions credit, and basic rules for distributions and rollovers.

Source: Napa-net.org, December 2023

Can a Plan Sponsor Limit Hardship Distributions?

The article answers this question, "Our 403b plan currently allows for hardship distributions, but the number of such distributions has been on the uptick in recent years. We don't wish to eliminate hardship distributions, but is there any way we can restrict their availability?"

Source: Plansponsor.com, November 2023

IRS Issues Guidance on Pre-Approved Plans

The IRS in Revenue Procedure 2023-37 has issued fresh guidance on qualified pre-approved plans and 403b pre-approved plans which combines, conforms, clarifies, and updates rules for those plans set forth in prior revenue procedures.

Source: Asppa.org, November 2023

Cornell Captures Another Win in Long-Standing Excessive Fee Suit

Another university 403b plan has won yet another victory in staving off an excessive fee suit by the Schlichter law firm. The case involved Cornell University, which had already successfully fended off most of the claims in 2019. In this most recent ruling in the U.S. District Court for the Southern District of New York, Judge P. Kevin Castel ruled that the plaintiffs had plausibly argued that it was imprudent to pay annual recordkeeping fees of more than $115 per participant but presented no evidence that this caused the plan to suffer losses.

Source: Napa-net.org, November 2023

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