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K-12: 403(b) Arrangements for Schools — Compliance with the New Rules

The Internal Revenue Service recently issued final regulations outlining the changes that will have to occur by January 1, 2009 to comply with the new rules. For most school districts, the changes will be sweeping.

Plante & Moran will be assisting many districts with a systematic, balanced, and thoughtful approach to compliance. Our approach is a five-step process that many districts will want to tailor to meet their particular needs.

  1. Planning. Develop an understanding of the new rules and create a compliance game plan. This will include identifying an implementation team and an implementation timeline.
  2. Provider Management. Most districts will assess the number of current providers and establish the expectations that the district will have of their providers. The greater the number of providers, the more burdensome the administrative process may be.
  3. Plan Design and Administration. Many districts will offer fewer options and less flexibility in the future. Among the items to be considered will be ensuring that universal availability rules are met, tracking contributions, plan loans, 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, districts 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 arise.

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