403(b)s, 457s, Rollovers and More

“So much to say and so little time!” A characterization that could apply to many things, including the tenor of the Nov. 16 NTSA Webcast, “Fall 2016: What’s New that Impacts You?”

Susan D. Diehl, President of PenServ Plan Services and Chair of the NTSA Communications Committee, and Ellie A. Lowder of TSA Consulting Services, who also is a member of the NTSA Communications Committee, discussed a wide range of developments and changes that affect plan administration and providing services to plans, as well as their sponsors and participants.

Among the developments Diehl and Lowder cited as making this a busy autumn are:

• changes to the rules governing rollovers;

• all-new, pre-approved 403(b) plan documents;

• changes to the allocation rules when roll overs occur from employer plans;

• the treatment of adjunct professors and other “on-call” employees;

• 457/409A proposed regulations;

• lower EPCRS fees;

• Conseco Fair Fund amounts;

• cost-of-living adjustments;

• loans and hardship distributions to Louisiana flood victims;

• Senate Finance Committee proposals for the lame-duck session of Congress; and

• the uncertainty surrounding the new DOL regulations with the change in presidential administrations.

Lowder noted that in Revenue Procedure 2016-47, the IRS says that an extension of the 60-day window can be granted in certain circumstances with self-certification by the IRA owner. “I suspect institutions will be changing their forms,” Lowder said, to reflect the changes the guidance makes and the fact that it provides sample self-certification language IRA owners can use and that institutions also can use to create forms. She characterized the guidance as good news. “It’s unusual for the IRS to do something nice for us, but they have,” she noted.

Diehl pointed out that among the new developments is that now, church plans are allowed to make transfers (referred to as 414(z) transfers) from qualified plans to 403(b) plans and vice versa. In addition, church plans may add auto-enrollment and not worry about state laws.

She also discussed the new pre-approved 403(b) plans and that release of IRS approval letters is on the horizon, remarking that the IRS’ goal “is to have them out in the first quarter of 2017,’ probably March, and that the remedial amendment period — which will be either two or three years for all employers to sign a pre-approved plan — will begin in April. Diehl suggested that it will be important to pay attention to the new administrative appendix that will be a part of the documents.

The proposed 457(b), 457(f) and 409A regulations make major changes, they noted, including provisions that address:

• income inclusion rules;

• post-death payments;

• beneficiary payment events include disability, death and unforeseeable emergencies;

• termination of plan; and

• substantial risk of forfeiture.

Diehl noted that the proposed regulations have been on the way since 2007. “It’s been a long time coming,” said Diehl, and that most of the changes are not a surprise. She suggested that it may be good to conduct a review with counsel and administrators in light of the regs. “You should all gear yourselves for changes in your documents,” said Diehl; however — indicating it is not urgent — she added: “but not until 2018.”

Amid the good news, Diehl included a reminder about the rule that only one rollover per 12-month period is allowed, and that it applies to traditional, Roth, SEP and SIMPLE IRAs. She reminded that the 12-month period is measured from the date of the distribution from the first IRA plan.

The Nov. 16 webcast is now available on demand; for more information, click here.