In the discussion taking place at PLANSPONSOR’s 2 nd annual 403(b) Summit in Orlando, Florida, David Levine, Principal, Groom Law Group Chartered, noted that 403(b) sponsors are afraid of Department of Labor oversight, but they also fear the costs associated with increased responsibility for their (typically) multi-vendor plans. He suggests sponsors consider the costs and explore what services current vendors may offer at no additional charge before making the decision to become ERISA-governed.
Levine noted that entities with both a not-for-profit and for-profit component especially are considering the move to one plan type, usually 401(k), rather than deal with the added responsibilities and costs of administering both a 401(k) and 403(b). He warns, however, that highly compensated employees would need to be informed of their deferral limits, and employees moving from a 403(b) to a 401(k) would no longer enjoy the benefit of the extra catch-up contribution after 15 years of service.
The panelists pointed out that ERISA or not, under the new regulations 403(b)s are looking more like their 401(k) counterparts. For example, Mark B. Manin, President, Cammack LaRhette Consulting, noted that the new monitoring and information-sharing rules have led many plans to shed vendors, with a good number paring down to just one. Sponsors are also including or considering including a Roth deferral option in their plans more so than before, a benefit Manin says is a great deal for employees.
Manin encourages plan sponsors to use the changing environment to consider how to make their plans a better benefit for participants.
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