(b)lines Ask the Expert – Information Sharing Agreements
It certainly does not hurt to start thinking about the information sharing agreement (ISA) process now so that you can focus on getting your written plan document ready for 1/1/09. A good case can be made that the goal should be not to let the cart get before the horse, try to determine how your plan will be designed and administered, and then let that determine who will be requested to sign an ISA and what it will say, and put that in place by 1/1/09.
However, a deadline is a deadline. If you will still be allowing exchanges among multiple vendors by 1/1/09 and they are not clearly “in the plan” for administrative purposes, you will need them to execute ISAs for any post-2008 exchanges.
Also, there is a lot of confusion about when “information sharing agreements” are and are not required. The “information sharing agreement” rules generally apply as of January 1, 2009, when there are “exchanges” out of a 403(b) contract/custodial account that is a “regular” part of a 403(b) plan. As to pre-2009 exchanges, while under the final 403(b) regulations and clarifying IRS guidance issued in November 2007, you will still need to coordinate (subject to some reasonable, good faith standards) with providers of post-2004 but pre-2009 contracts/custodial accounts that were not transferred out of your plan in a pre-9/25/2007 “90-24 transfer.” A formal ISA does not appear to be required for contracts that ceased receiving contributions prior to 2009. (Some IRS staff members have informally indicated that they interpret Rev. Proc. 2007-71 to require an ISA for pre-2009 contracts that cease to receive contributions only in calendar year 2008, but that is not clear.)
In sum, regardless of which of the above rules apply to you, obtaining ISAs with all providers to which you have made contributions in 2008 may be advisable as a protective measure if you are butting up against the 1/1/09 deadline, but it is not preferable to actually getting everything done by 2009. Also, think carefully about what those ISAs say.
– David Levine, Groom Law Group, Chartered
This feature is to provide general information only, does not constitute legal advice as part of an attorney-client relationship, and cannot be used or substituted for legal or tax advice.
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