403(b) Summit: Industry Rap (ERISA Plans)

April 29, 2009 (PLANSPONSOR.com) - Some 403(b) plans are still in the grey zone, trying to figure out whether or not they are ERISA plans, said David Levine, Principal, Groom Law Group, speaking to attendees of PLANSPONSOR's 403(b) Summit.

class=”NoSpacing”> In a sense, what being an ERISA plan means is that the program is subject to federal law and sponsors must fulfill their fiduciary duties, he explained.

class=”NoSpacing”> “If you are subject to ERISA,” said Samuel Brkich, VP and Chief Counsel, The Newport Group, “the 403(b) rules are indistinguishable from 401(k) rules.” When a plan sponsor is trying to outline the program and its documents, Brkich said sponsors should ask themselves, “What’s the most prudent process to take?”

class=”NoSpacing”> Although it is always a good idea to document any decisions or issues related to the plan, there is a balancing act between having too much and too little documented, Levine said. It is vital to know what your documents say and make sure that the plan is in accordance. “If you have an investment policy, make sure you’re following it,” he said. Also, Levine notes, sponsors should ensure that their information sharing agreements do not conflict with plan documents, and that they will allow for plan changes that may be anticipated in the future.

class=”NoSpacing”> The task of consolidating vendors is “not one I envy,” Brkich said. Levine noted that he has seen some issues arise with documentation surrounding the various vendors. As a plan adds new vendors, or eliminates other vendors, the plan documents must reflect all the different rules regarding multiple vendors and investment options. From a monitoring standpoint, Michael Goss, Executive VP, Fiduciary Investment Advisors, noted, having fewer vendors is better, but it is still complicated.

class=”NoSpacing”> Some sponsors at the conference expressed difficulties dealing with unresponsive vendors. Goss sympathized with their concerns, saying he has shared in those difficulties with clients – especially in the higher education space.

class=”NoSpacing”> Although it might seem tempting just to give up, putting it in writing that there is nothing more the plan committee can do and that it is throwing up its hands, “makes you an easy target,” Levine said. “Sometimes you’re sort of stuck and you just do what you can.”

class=”NoSpacing”> Brkich noted that the ERISA rules don’t require sponsors to do anything “super human” and that sponsors should just do what they can and document that.