Under proposed regulations, the Internal Revenue Service (IRS) wants all 403(b) plans to have written guidelines including product providers, loan provisions and other details – similar to those of 401(k) plans, according to a news report in Investment News (See Feds Put Out 403(b) Rule Clarification ).
Even though the already publicized regulations could become official as early as January 1, 2007, many in the industry expect that the new regulatory scheme will be put into effect a year later in 2008, the news report said.
According to the news report, the rules could lead
to more involvement among school administrators in
retirement plans, because they are required to create a
School districts have not been required to have a written plan, and many offer dozens of vendor options for 403(b) plans. School districts may prefer to restrict themselves to one vendor if requirements for a written plan are adopted, Bruce Delbecq, a partner at Plante and Moran PLLC, which is based in Auburn Hills, Michigan, told Investment News.
“I think the 403(b) world is decades behind,
and most employers don’t feel like they have a
responsibility and don’t want to be involved,”
Delbecq said. “I think there’s a concern about
the added level of responsibility that employers are
going to have.”
A reduction in the number of vendors would occur because schools have to commit to following their written plans, and that means ensuring that vendors within the district adhere to them, said Richard Ford, senior vice president and chief marketing officer of PlanMember Financial Corp. The Carpinteria, California firm manages about $1 billion in 403(b) plans.
“When it’s all said and done, we hope that the IRS backs off a little bit,” Ford said, according to Investment News. “I think the employers don’t want to take on fiduciary responsibilities, such as selecting plan sponsors.”