(b)Mused: Different Strokes

June 24, 2011 (PLANSPONSOR (b)Mused) – At the PLANSPONSOR National Conference in Chicago last week, I spent some time talking with 403(b) sponsors about their biggest issues and concerns.

While I was wanting to learn something new and perhaps uncover needs I could address through (b)lines content, I did expect to hear the familiar issues that we have already covered (such as Form 5500 filing and audit issues). What I learned, however, was something quite different.  

I didn’t hear the same thing twice, and no one mentioned the Form 5500 and audit experience. A church plan sponsor said he was concerned because one of his plan’s providers didn’t seem familiar with that market segment and he felt they were getting bad advice; a health organization plan sponsor was trying to fill a void in participant education because she feels participants are still not feeling the urgency to save or understanding how much they need to save; and a non-profit organization plan sponsor was wanting to “encourage” employees to move money from an old, discontinued vendor to their new vendor and didn’t know how to do that.  

While we’ve done articles on how 403(b) sponsors can look to 401(k) sponsors for plan management best practices (see 403(b): Older Brothers) and on how 403(b)s differ from 401(k)s (see 403(b) and 401(k) Plans – Siblings, not Twins), my experience speaks to the speculation that has been going on since the new 403(b) regulations came out in 2007: that 403(b)s will disappear and be replaced by 401(k)s. Something I think should not happen.  

I now understand more clearly the contention made by Mike Webb, Vice President, Retirement Plan Services, Cammack LaRhette Consulting, in a (b)lines Ask the Experts column, that even if it does happen, it will take some time before 403(b) plans and 401(k) plans are identical (see Ask the Experts – The Demise of 403(b)s). Not only are there special provisions for 403(b) plans that are more likely to be favored, many 403(b) plans have a history (lack of plan sponsor involvement and legacy accounts) that is not likely to soon be erased.  

401(k) plans have had more than 30 years to evolve into what they are today – and many would argue they are still far from perfect in design and operation. 403(b)s should have their time and opportunity to evolve as well.