That was a comment from Monica Dodd Calhoun, Managing Partner, Giller & Calhoun LLC, in a Q&A session with industry experts for non-ERISA 403(b) sponsors and advisers at PLANSPONSOR’s 2 nd annual 403(b) Summit in Orlando, Florida. Certifying to a vendor that a loan requested by a plan participant does not violate loan limits will not cause a sponsor to be subject to ERISA, but approving plan loans and hardships for participants – discretionary decisions – may cross the line, she pointed out.
Dodd Calhoun told attendees that investment/vendor selection does not necessarily cross the line. However, if after reviewing their investment lineup, sponsors notice duplication of asset types or high fees, she advised, sponsors may be better off biting the bullet and making decisions that cause them to be ERISA-governed.
Tom Granger, AVP/Sales Director, Qualified Plans, Security Benefit, directed attendees to Department of Labor Field Assistance Bulletin 2007-02 (see EBSA: 403(b) Programs Not Necessarily ERISA Plans ) for more guidance on what actions will or will not cause a plan to become an ERISA plan. Granger said Security Benefit takes the stance that 501(c)(3) organizations cannot follow the regulations and maintain non-ERISA status.
He suggests sponsors either become ERISA-governed or terminate their 403(b) and select a new plan type to offer participants. Dodd Calhoun also argued that if a sponsor already has another plan type, it makes sense not to pay for services for two plans.
Although delegating duties and decisions to a vendor will not relieve sponsors of fiduciary responsibilities, it can help greatly with compliance, according to Dodd Calhoun.
Jim Racine, Employer Services Strategy & Projects, Lincoln Financial Services - Retirement Solutions, said sponsors who hire a TPA or other vendor to approve loans and hardships should get their responsibilities spelled out in a service agreement. Also, such an arrangement will require information sharing among vendors and sponsors should agree to information sharing in formats compatible with each other up front.
Dodd Calhoun advised that sponsors should not allow vendors that will not agree to information sharing to be part of the plan. In that case sponsors should send the vendor a letter stating that no contributions will be sent to them going forward and they should not issue loans or in-service withdrawals, she said. Sponsors should also inform participants of this, Racine added.
In addition to transaction monitoring and approval, Dodd Calhoun suggests sponsors have the TPA or vendor provide participant education, rather than someone in-house with less knowledge and time.
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