Experts Stress Benefits of Information Sharing Best Practices for 403(b)s

December 19, 2008 ( - Due to new 403(b) regulations requiring plan monitoring for compliance with distribution and loan rules and withdrawal and contribution limits, plan sponsors have faced the task of deciding on procedures for information sharing to and from plan vendors.

In the 401(k) world, since typically plans have a third party administrator or recordkeeper responsible for making sure funds are invested properly and recorded, the TPA or recordkeeper may have required formats for sponsors to send participant contribution, loan repayment, and census data. However, in the 403(b) world, this “aggregator” role is new, so sponsors may consider enlisting the help of a provider of common remitter services.

In a Webinar sponsored by The SPARK Institute, Jim Racine, Assistant Vice President, Lincoln Financial Group said, “A standard format [for information sharing] is a need specific to the 403(b) market due to the multiple-vendor environment.” Ralph Sanna, Director-Strategic Initiatives, TIAA-CREF, added that it is hard for vendors to have hundreds of different formats coming in from sponsors and to customize their systems for these different formats.

Paul Jackson, Vice President-Institutional Services, AIG Retirement said a best practices format for information sharing not only simplifies things for common remitters, but also for employers who will continue sending data to each vendor and want to use a standard file format.

Jackson added that TPAs and vendors should encourage the use of information sharing best practices by sponsors since it will not help with common remitter, but can help facilitate information sharing among plan providers.

The SPARK Institute has developed a Best Practices guide for information sharing that includes data formats for transmitting transaction data (See SPARK Updates 403(b) Info Sharing Best Practices for Roth Values ). Sanna noted that the SPARK data format not only can be used for common remitter data such as contribution amounts and loan repayments, but can facilitate 10-b-10 reporting (for contribution timing), plan limits monitoring, and providing census data for other plan administrative duties.

Racine added that the SPARK format facilitates auto enrollment, and sharing of data for FINRA monitoring requirements such as anti-money laundering rules, and providing contact information for participants.

Larry Goldbrum, SPARK General Counsel, said in the Webinar that the SPARK has two parts for the common remitter function, one for sending data to vendors only for participants who selected them, and one for sending all data, including census data, to a plan "aggregator." He suggests that adopting the best practice format even benefits sponsors in an exclusive-vendor environment because it consolidates all plan data.

Jackson noted that the SPARK task force that developed the best practices is encouraging questions to SPARK regarding the format. The questions will help in refining the best practices, but he assured Webinar attendees that the task force will try to make adjustments with minimum format changes.

The "Best Practices for 403(b) Plans Information Sharing -- Minimum and Comprehensive Data Elements Version 1.03," as well as Q&As on the best practices can be found at .

In the SPARK Institute Webinar, Paul Jackson, Vice President-Institutional Services, AIG Retirement, pointed out to attendees that the relief provided by the Internal Revenue Service in Notice 2009-3 (See IRS Offers Relief on 403(b) Written Plan Requirement ) from the 403(b) written plan document requirement as of January 1`, 2009 only delays the time for getting the document in place; it does not delay the effective date of new regulations pertaining to operational procedures.

"This is key because plans will be required to correct any pre-adoption deviations to the plan from document that is finally adopted," Jackson said. He warned sponsors that providers that receive contributions after January 1`, 2009 are in the plan, so sponsors should operate the plan in accordance with intent to minimize any operational errors. Therefore, it is prudent to work toward information sharing compliance by January 1`, 2009.