Earlier this week, ADMIN shared a brief discussion on the new 403(b) Prototype Document. The conversation brought up the hot topic of whether the new regulations by the IRS make it harder for Plan Sponsors to self-administer their 403(b) Plans. If you ask us, the answer is yes. Here is why self-administration may not be the right option for you.
Since 2008, the IRS has been putting rules and regulations in place that have made it harder for Plan Sponsors to self-administer their 403(b) Plans. While some Sponsors have elected to keep business as usual (often due to budget restraints), most have decided to bring in a full-service TPA, like ADMIN, to help with both the document and the day to day processing. Adding on a TPA for these services helps with the BIG questions that self-administration brings up:
Not only is it imperative that a 403(b) have a formal written document, but it is essential that the Plan is also operating in accordance with how the document is written. ADMIN’s experience with complex Plans has allowed us to see a number of Sponsors operating their Plan outside of the document or using a document that is outdated. The concern of a plan document has only increased since the deadline for the 403(b) Prototype Document was released by the IRS. This prototype document is much more involved and includes an administrative appendix, which must be completed precisely. This has Plans reaching out to TPAs like ADMIN to alleviate this burden.
Having an information sharing agreement (ISA) with the vendor(s) for the Plan is essential for accurate recordkeeping of the Plan. In our experience, there are often Sponsors who say they are self-administering the Plan, but when asked to produce a basic ISA, they cannot do so. Having a TPA in place to obtain/maintain the information sharing agreement takes this worry from the Plan Sponsor. In fact, with it becoming more common for Plans to have more than one vendor for their investments, a TPA’s involvement is a necessity. These documents allow the TPA to sufficiently track important data such as loan aggregation and historical distribution activity.
It is no secret that the rules and guidelines set forth by the IRS can be challenging to comprehend. For this reason, Plan Sponsors who self-administer their Plans are taking on a significant amount of responsibility in ensuring that the Plan itself and transactions made within the Plan are following the IRS decree. The longer the Plan is in existence, the more complicated the recordkeeping can become and for this reason, Sponsors often seek out the assistance of companies like ADMIN to mitigate the amount of work involved. A TPA like ADMIN can take on these obligations so that the employees of the Plan can focus on their operations.
Do you have questions about your Plan? We are here to help! Feel free to message us in the comment section below or at firstname.lastname@example.org and we will be in touch.