More Sweeping Changes Are in Store for Colleges and Universities That Utilize Multiple 403(b) Providers
Employee Benefits Alert — Higher Education Services, Fall 2007

Many institutions have merely made the 403(b) available to employees as a salary deferral vehicle and have agreed to withhold and forward elected amounts to the provider of the employee’s choice. Employers have traditionally had little involvement in these non-ERISA plans. The new rules will provide sweeping changes to the administrative requirements and degree of employer involvement for these types of plans.

Our approach is a five-step process that many organizations will want to tailor to meet their particular needs.

1. Planning. Understanding the new rules and developing a compliance game plan. This will include identifying an implementation team and an implementation timeline.

2. Provider Management. Most organizations will assess the number of current providers and establish the expectations that the organization will have of their providers. The greater the number of providers, the more burdensome the administrative process will be.

3. Plan Design and Administrative. Many organizations will offer fewer options and less flexibility in the future. Among the items to be considered will be ensuring universal availability rules are met and tracking contributions, plan loans, hardship distributions, and transfers and exchanges to ensure the IRS limits are met.

4. Written Plan Document. The final regulations indicate that it is expected that a single plan document will be adopted for any program with multiple investment providers.

5. Provider Agreements. Since many of the plan administrative functions will be delegated to providers, you will need an agreement that spells out which party is performing each function. The agreement will ensure cooperation, set expectations, and provide approaches to remedy issues that may come up.