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Best Practices for Non-ERISA 403(b) Rollovers

Ellie Lowder and Sue Diehl

When a participant in a non-ERISA 403(b) plan wishes to roll assets over from another non-ERISA 403(b) plan into this plan, what would be the best practices for the receiving plan sponsor or vendor to take to ensure Treas. Reg. §1.401(a)(31)-1, Q&A-14 and Revenue Ruling (Rev. Rul.) 2014-9 are followed? 

Neither plan files Form 5500 because these aren’t ERISA plans. These do not involve the old Rev. Rul. 90-24 tax-free transfers.
Following are some questions and answers concerning best practices for Non-ERISA 403(b) rollovers.

Q. 1: What does the plan administrator need to do to be able to reasonably conclude that the contribution is a valid rollover contribution?
A: The administrator can require a confirmation from the provider currently holding the account of the type of retirement plan it is. The provider in the receiving plan will also provide a letter of acceptance in which the receiving provider acknowledges the type of retirement plan in which it was held. See also the answer to question 5.
Q. 2: Does it matter whether the receiving plan permits incoming rollover documentation to be handled electronically versus using hard copy paperwork? 
A: While we are not positive, we don't think it matters.
Q. 3: Is the employer sponsor required to sign off on the rollover paperwork or is this something the vendor can handle without the employer signature?
A: Generally, the employer will sign off simply to signify that the plan document does accept rollovers in. In addition, we would say whoever the 'administrator' is in the 403(b) plan can sign off. The plan should define who the administrator is.
Q. 4: What impact, if any, do the new Department of Labor (DOL) fiduciary rules have on the necessary rollover documentation?
A: Since the new DOL fiduciary rules apply to ERISA plans, and to rollovers from employer-sponsored plans to IRAs, I don't see any impact.
Q. 5. Are there any resource materials you would recommend in drafting incoming rollover procedures?
A: The only cite we have currently is for plans that file a Form 5500. And that is covered under Rev. Rul. 2014-9. That ruling tells the receiving plan to check item 8a for the code 3C (“not intended to be a qualified plan”). Procedures for 403(b)s can request a letter from the distributing plan stating that the plan is intended to satisfy section 403(b) and the regulations. You can always request more than this but we feel this would satisfy the intent that was provided as a safe harbor for qualified plans.

Ellie Lowder, TGPC, Consultant
Susan D. Diehl, CPC, QPA, ERPA, is President, PenServ Plan Services, Inc.

Opinions expressed are those of the author, and do not necessarily reflect the views of NTSA, or its members.