The next few editions of Ask the Experts will highlight some of the questions from that conference.
“As someone who works with a lot of small plan sponsors I feel that the current 403(b) regulatory situation is quite difficult for them. Many have compliance issues, but do not have the time and money to address them, nor the time and money to hire consultants and attorneys to institute best practices. Do the Experts have any words of wisdom?”
Michael A. Webb, Vice President, Retirement Plan Services, Cammack LaRhette Consulting, answers:
As you probably guessed, there are no “magic bullet” solutions. Except for some filing fee reductions for smaller nonprofits under certain corrective programs, and a Department of Labor (DOL) safe harbor with respect to elective deferral remittances, the Internal Revenue Service (IRS) and DOL expect the same level of compliance with the rules by smaller nonprofits as they expect from larger organizations. And you are correct, in that many nonprofits are short on staff and funds, both of which are necessary to address plan compliance issues and to make certain that the plan operates smoothly going forward.
However, it is not an impossible task for a small nonprofit to effectively maintain a 403(b) plan. In the Experts’ experience, many smaller nonprofits make it more difficult on themselves by utilizing multiple recordkeepers, complex plan provisions, or both. Simplicity is key for a smaller nonprofit to sponsor a 403(b) plan with as few compliance concerns as possible.
As for consultants and attorneys, it is possible to pay for many types of expenses from plan assets. However, such expenses can add to overall plan costs for participants, to the point where such expenses might be prohibitive. And, in an ERISA plan, as we know, such costs must be “reasonable”. In addition, some vendor contracts may not permit the payment of such expenses from plan assets, so check with your vendor for details.
Excellent question, and we hope you enjoyed the Conference!
NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.