The Changing Landscape of 403(b) Plans

As a result of final IRS regulations 403(b) plans, in most instances, are now subject to the full requirements of ERISA. 

What does this mean for colleges and universities who sponsor 403(b) plans? The new regulations significantly broadened the duties and liabilities of 403(b) Plan Sponsors. 403(b) plans are now subject to much greater disclosure, reporting, and claims requirements under ERISA. Additionally, 403(b) plan sponsors are now subject to the ERISA fduciary duty standards. This fiduciary requirement means that Plan Sponsors must conduct and document a prudent and comprehensive due diligence process that includes but is not limited to investment performance monitoring, fee benchmarking, assements of services provided and plan operational consistency. Administratively, 403(b) plans are now subject to audit requirements and both the IRS and DOL have been increasing the frequency with which they audit 403(b) plans.

In summary, 403(b) Plan Sponsors now have to document appropriately that they are conducting the necessary comprehensive due diligence for their retirement plans; that plans are being administered in accordance with ERISA standards and plan document requirements; and that there is an understanding and explanation available regarding all plan fees. 

Longfellow Advisors has worked with 403(b) Plan Sponsors to assist them in the following ways:

  • complete a review to compare current practices against ERISA fiduciary obligations;
  • complete a review to determine if plan operations are consistent with documents and ERISA requirements;
  • establish and implement a continuous comprehensive due diligence process;
  • prepare and position for any potential DOL or IRS audits; complete market review analysis; provide retirement planning options to plan participants.

Longfellow's consulting arrangements could be on a project basis or an ongoing engagement, depending upon the needs of the plan sponsor. Longfellow will "sign-on" as a plan fiduciary in advisory relationships so you can feel confident that our interests are aligned with yours. Through our arrangement, we work to ensure you can confidently answer the following: 

  • Do you utilize a single vendor or do you use a multi-vendor system?
    • If you decided to use a multi-vendor system, how did you decide the investment offerings between the vendors?
      • Did you select the similar investments for each vendor? 
      • Did you select different investments for each vendor?
      • Did you select one vendor to have more or less risk from a portfolio construction standpoint?
  • Have you established a fiduciary committee to govern plan level decisions/investments?
  • Did you benchmark your fees and subsequently negotiate a reduction in fees over the past couple of years?  
  • Does your plan have an ERISA Budget Account? Do you have an investment committee that meets regularly and records meeting minutes?
  • Do you have an Investment Policy Statement (IPS)?
  • Do you educate/communicate to employees regularly to help them understand the plans and investment options avaiable to them, provide them with market updates, and take them through investment allocation methodlogy and what might be the best mix for their personal situation?

We are confident that our team of expert consultants can help you manage your responsibility as plan sponsor and fiduciary and put you in the best position to move forward under these new rules. To find out more about how we can help visit the “Retirement Strategy” page of our website or Contact Us.