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403(b)s: Effective Opportunity

By John Iekel

Editor's note: the following is based on an NTSA Webcast in which Ellie Lowder, TGPC, and Daniel S. Gardner, IRS Mid-Atlantic 403/457 Coordinator, discussed effective opportunity in the context of avoiding errors and audits of 403(b) plans.


IRS audits of 403(b)s are a hot topic — an evergreen concern for employers, plan administrators and the advisors that serve them. So it stands to reason that providing effective ways of avoiding one is an important consideration. And one way that could help is to keep one’s finger on the pulse of how well the plan is fulfilling effective opportunity.

Universal availability says that to the extent an institution allows one employee to make salary deferrals to a 403(b) plan, it must give all employees effective opportunity to do likewise. And gauging compliance with this rule affords another chance for an employer — or a client — to take stock of how well it’s following the rules.

A critical element of effective opportunity is how an employer or plan administrator communicates concerning a 403(b) plan, or how an advisor can suggest communication be conducted. Following are ways to effectively communication with employees concerning a 403(b) plan:

  • during new hire orientation;

  • through benefit fairs and workshops;

  • newsletters;

  • human resources and/or benefits website;

  • meetings at the start of the year; and

  • providing examples and illustrations.

An employer can dig deeper than that in the pursuit of effective opportunity. Practical steps for doing so include:

  • developing ongoing educational programs;

  • combining methods in order to reach a diverse workforce; and

  • communicating frequently.

Above all, an employer should remember that the support it provides in this regard should be front and center.

Following are tips for doing just that.

Hold seminars. If an employer works with a third party administrator, have the TPA coordinate with product providers — especially those which offer financial literacy presentations. Require the presenting providers to share lists of all approved providers as well as contact information.

Provide online tools carefully. Communicate support for online tools. Work with TPAs to make online retirement plan tools available, and communicate links to online materials. But remember that online tools and information are not a panacea; the U.S. Census Bureau has reported that 30% of the population does not have a computer or has no internet service.

Facilitate face to face meetings with advisors. Provide controlled access for advisors to meet with employees. Numerous studies reveal that participation rates increase — and results are better — when such meetings are held.

Communicate. Provide a list of approved providers with contact information. Provide links to online and notices regarding seminars. Design communication so it reaches all eligible employees.

Remember that a good education program benefits employers and advisors’ clients too! Increased participation will increase the likelihood that employees will retire since it heightens the likelihood they will be financially ready to do so. It also will save an employer or client money. And there is no need to go it alone — TPAs and product providers are available to provide assistance.

John Iekel is the Editor of the NTSA Net Web Portal and the 403(b) Advisor, and Senior Writer for ASPPA.