If you’ve spent any time working with retirement plans, you know how complicated they can be. It seems like every rule has an exception and an exception to that exception. It is no wonder that accidents occasionally happen despite everyone’s best efforts to follow the rules.
Topic Archive: 403(b)
It’s funny how the human brain (or maybe it’s just my brain) forms associations with words or phrases. Whenever I hear the word “revoked,” I immediately think of a scene from one of the Lethal Weapon movies. The bad guy had been using his diplomatic immunity to get away with all sorts of nefarious deeds. At the end of the movie as he lay clinging to life after being on the wrong end of a shoot-out, Danny Glover’s character says rather pithily, “Your diplomatic immunity has just been REVOKED.”
Over the last several years, the answer has been a little of both. Beginning with the 2009 effective date of the IRS overhaul to the 403(b) regulations, it was establised that 403(b) plans could, indeed, be terminated. However, that legal fact has been somewhat of a practical fiction for plans funded by individual contracts. The reason being that sponsors of such arrangements had no authority to compel distribution of those individual contracts. Bob Toth has an excellent explanation of the conundrum here.
Crikey! We’ve just discovered the rare non-ERISA 403(b) plan meandering along, oblivious to such details as filing Form 5500 or worrying about fiduciary responsibility. Wait…could it be this harmless creature only offers investments from a single vendor? Danger! Danger! Danger!
As an industry, we have spent a great deal of time over the last 2 years discussing issues like investment advice, default investments and fiduciary responsibility ostensibly for the purpose of improving retirement savings for employees. While these are important issues, we have been avoiding the elephant in the room – participants simply aren’t sufficiently equipped or disciplined to successfully manage their retirement savings.