David W. Powell, Esq., The Groom Law Group, speaking to attendees at the National Tax Sheltered Accounts Association’s (NTSAA) 403(b) Advisor Summit, pointed to the Uniform Management of Public Employee Retirement System Act (UMPERSA), which imposes a prudent standard for the main employee retirement system of states. It excludes 403(b)s, but, Powell noted, as states adopt 403(b)s, such language is used in state law.
Other state common law that can apply to 403(b)s include contract theories and agent theories, Powell said.
Under agency law, school districts can be seen as an acting agent for employees, added Robert J. Toth Jr., from the Law Office of Robert J. Toth Jr.
Federal securities laws related to the purchase of contracts and deposit of premiums can also apply. Toth said 403(b) sponsors need to be careful of misrepresentation, state security violations, employment law violations, various insurance law claims and consumer protection violations.
According to Ellie A. Lowder, TSA Consulting and Training, an adviser can help non-ERISA 403(b) clients manage their fiduciary responsibilities by helping with the administration of the plan. Advisers should know what provisions are in an employer’s plan.
Lowder said many providers have databases for advisers to keep track of plan information.
Advisers can also help by finding providers who will comply with information sharing agreements and money handling issues.
Sponsors need to decide whether to appoint an investment committee and whether to consolidate to a single provider to make compliance easier, Lowder said.Powell added: Whatever decisions are made, sponsors must document them and be prepared to defend the reasons for them.