Specifically, your 403(b) obligations will include:
- obtaining and adopting a written plan document,
- identifying investment providers who are authorized to receive ongoing contributions and/or contract exchanges under the plan,
- participating in information sharing with those investment providers, and
- authorizing loans, hardships, contract exchanges, and other disbursements requested by your plan participants.
However, in the rush to meet the January deadline, one critical action step may have gone overlooked, and may still not appear on many 403(b) sponsors’ checklists: How will you communicate all these changes to your employees?
After all, most 403(b) participants have had a one-to-one relationship with their investment provider, whether it is working with the provider to receive their salary reduction contributions or requesting a hardship loan or distribution. For the first time, many of these participants will be facing a new party to these decisions – you, the employer sponsoring the 403(b) plan.
You can help ease this transition by remembering to implement an effective communication plan for your employees.
Be sure to develop a 403(b) communications strategy for employees which explains:
- 403(b) sponsors must comply with these new IRS rules to keep employees' 403(b) retirement benefit tax deferred;
- these new IRS rules will mean that there are new 403(b) plan do's and don'ts, including greater employer oversight over participant transactions; and
- as plan sponsor, you are committed to communicating these changes to your employees to facilitate a painless and seamless transition to operate under the new IRS rules.
After all, by the time that January deadline rolls around, 403(b) sponsors will have had nearly 1½ years to adjust to the new 403(b) world order. You should be sure to allow your employees sufficient time to get to know the new terrain, as well.
Also, don't forget that you do not have to implement your employee communication strategy by yourself. Be sure to partner with a provider who can give you the tools to launch you on your way.
ING is a global financial institution of Dutch origin offering banking, investments, life insurance and retirement services to over 75 million private, corporate and institutional clients in more than 50 countries. ING, including its legacy companies, has been a 403(b) service provider to schools and their employees since 1967.
- Linda Segal Blinn, JD, Vice President, Technical Services, ING
NOTE: This material was created to provide accurate information on the subjects covered. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation. These materials are not intended to be used to avoid tax penalties, and were prepared to support the promotion or marketing of the matters addressed in this document. The taxpayer should seek advice from an independent tax advisor.