This was the recommendation of Susan Fulshaw, managing director, product management at TIAA-CREF, a panelist at the PLANSPONSOR National Conference.
According to Fulshaw, services and tools offered by providers include:
- Plan document service – provides specimen 403(b) and prototype 401(a) plan documents and supporting materials, with compliant provisions and ongoing updated for required regulatory amendments;
- Investment consulting – providers help with sample investment policy statements, sample investment menus, and ongoing performance monitoring;
- Compliance monitoring – provides guidance and tools to help meet compliance requirements, including loan and hardship withdrawal compliance, contribution limits monitoring and non-discrimination testing;
- Financial reporting and plan audit support – provides support for preparation of Forms 5500 and 8955-SSA through a comprehensive financial reporting package and audit support services; and
- Service and fee disclosure support – provides a complete set of disclosures plus a multi-faceted approach that includes education and thought leadership on baseline regulatory requirements.
Colleen Shull, 403(b)/457 coordinator with the Internal Revenue Service, told conference attendees that if plan sponsors are given notice that their 403(b) plan will be audited they need to find and review their plan documents, the board resolution adopting the written plan, annuity contracts and contracts for custodial accounts, good faith notice to former vendors, information sharing agreement with vendors, employee handbook and enrollment materials, and collective bargaining agreements.
Common errors the IRS is finding from 403(b) plan audits include:
- Universal availability violations – Does the plan exclude employees in operation from making elective deferrals and are exclusions being monitored?
- Excess elective deferrals – Does the plan provide for the 15-years-of-service catch up contribution, and does the plan sponsor follow the ordering rules for the 15-year catch up and the age-50 catch up?
- Employer five-year post-severance contribution violations – The plan must provide for these contributions, and plan sponsors should watch the treatment of vacation and sick leave;
- IRC 415 limit violations – All employer plans must be aggregated for this limit;
- Plan loan limitation violations;
- Hardship distribution rule violations; and
- Late deposits of employee elective deferrals.
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