It's Not So Bad: 403(b) Rules Create Benefits for Employers

August 25, 2008 ( - Sponsors of 403(b) plans are facing challenges in getting into compliance with 403(b) regulations, but John Arant, Head of 403(b) Markets Growth, Lincoln Financial Group, wants them to know the resulting environment will be a good thing.

The new rules will allow sponsors to have better control and oversight of plan features and transactions, getting their programs more organized, Arant told attendees of The SPARK Institute’s 403(b) Plans Issues & Answers Forum.

The new regulations are also providing sponsors with the opportunity to get a handle on the number of vendors and product features they wish to offer in their programs going forward. This can result in better administrative services provided to sponsors and improved plan fees, Arant contended.

In addition, plan sponsors will now be able to deliver better and more consistent plan and financial education to participants, including investment advice. Arant pointed out that statistics show plan participation and deferral rates increase as the educational message is clearer and participant choice is more defined. Average 403(b) plan participation is now 40% to 60%, whereas average 401(k) participation is 70% to 90%, he added.

Finally, Arant said that in the new 403(b) world, sponsors will enjoy better leverage over plan providers and a true partnership with them. The market will see more competitive pricing, better technology, and more fiduciary support for sponsors.

To realize these potential benefits, Arant suggests sponsors:

  • Seek plan design advice;
  • Review current vendors' commitment to the market, product features, pricing, flexibility, administrative and compliance assistance, and education and communication services;
  • Consider engaging a consulting firm that specializes in 403(b)s;
  • Select vendors with experience in plan conversions, flexible compliance solutions, common remitter capabilites, robust technology, participant advice capabilities, and competitive pricing;
  • Work with vendors to develop a consistent participant education program;
  • Develop annual plan goals;
  • Develop a plan Investment Policy Statement; and
  • Require a detailed annual plan review from vendors and/or the plan's consultant.