January 1, 2009, marks the first time in over 40 years that significant changes to 403(b) qualified plan regulations have occurred. The result of these modifications requires that 403(b) plans must now function more like their 401(k) plan cousins.
For the first time, employers will have to comply with specific reporting requirements and maintain a written plan document. Further, the employer must create and comply with an investment policy statement, demonstrate compliance and file annual reports with the IRS. Also, 403(b) plan now must be compliant with IRC section 404(c) investment diversification requirements. These changes are a significant shift in the responsibilities assumed by the employer/plan sponsor and will result in significant expense in both hard costs and resources and time in order to keep 403(b) plans in compliance or face significant penalties.
The most important questions to consider if you currently maintain a 403b plan are:
- Do you have a current plan document? Is it up-to-date?
- Do you have a written Investment Policy Statement?
- Are you compliant with your Investment Policy Statement?
- Do you have the enough investments and the right investment options to be compliant with the IRC section 404© diversification requirements?
- Do you have the right plan design?
- Are your plan fees and fund expense ratios inline with industry standards?
- Is your plan adequately communicated to your employee population?
- Do you provide regular educational seminars for your plan participants?
Since changes are becoming effective this year, now is a great time to review your plan. Keeping your 403(b) plan current, competitive and compliant can result in providing a successful retirement benefit plan at the optimum costs.
This article was written by ’William Snoke with Greenberg, Wexler & Eig, LLC independently owned and operated and Offers Securities Through M Holdings Securities, Inc’ A Registered Broker/Dealer, Member FINRA, SIPC. He can be contacted at 301.656.0660 x311 or firstname.lastname@example.org.