Meet the Best Practices Guide for 403(b) and 457(b) Plans

In June 2009, the National Tax Deferred Accounts Association (NTSA) organized and sponsored the first NTSA 403(b) Compliance Resolution Summit (Summit) to address the pervasive service issues in the 403(b) marketplace. Several 403(b) product providers (vendors), third party administrators (TPAs), distributors, consultants, and technology firms along with invited guests from the Association of School Business Officials (ASBO), the American Society of Pension Professionals and Actuaries (ASPPA), the Internal Revenue Service (IRS) and the Investment Company Institute (ICI) participated in frank and open discussions on acknowledged marketplace problems. The goal of the summit was to identify problems and suggest reasonable measures that the involved parties might be able to use to satisfy compliance requirements and solve systemic issues.

The first summit was so successful that it was agreed that the event would become an annual meeting for professionals working with 403(b) plans to share experiences and address some unique problems that affect the marketplace. The focus of each summit would be to develop best practices for handling developing situations that are unique to 403(b) plans. In reaching this goal, the participants identified the issues that can be addressed only with external support (i.e., those that require regulatory or statutory relief) and issues that can be modified by marketplace response. The participants then develop best practices for problems that the marketplace can address.

This best practices manual, NTSA's Best Practices Guide for 403(b) and 457(b) Plans, is the product of the first and second summits and the efforts of the task force members that contributed their time and work toward the completion of the goals outlined at that summit.

The summits’ attendees agreed that if most employers, product providers and TPAs adopt as many of the best practices outlined in this manual as possible, the entire 403(b) marketplace would benefit. It is hoped that:

• employers (plan sponsors) would find administrative burdens significantly reduced and simplified;
• plan participants would benefit from more timely responses to transaction requests and product providers; and
• TPAs would be able to substantially reduce the procedural and systemic burdens required to satisfy the compliance requirements inherent in the final 403(b) regulations.

It was recommended that employers sponsoring 403(b) plans encourage product providers and service providers acting under their 403(b) plans to adapt to these recommendations and standardizations to the extent it is reasonable to do so.

In 2015, members decided that it was time to revisit the Best Practices Guide for 403(b) and 457(b) Plans to revise and update based on the experience that all parties have had since the inception of the final 403(b) regulations in 2009. As time as gone on, we all have experienced new challenges and tasks that have been introduced based on the market place or changes based on additional guidance from the IRS, Treasury, and other government agencies. This new and improved Best Practices Guide for 403(b) and 457(b) Plans is the effort of those that agreed to assist in sharing their thoughts and talents to make this a more up-to-date and complete manual.  Finally, understanding and communicating the role of each party involved in providing advice, products and services to the 403(b) marketplace is key to a successful marketplace synergy. Responsibilities must be acknowledged, redundancies must be eliminated and acceptable standardization of transactional instructions, data formats, procedures and timelines will ease the congestion in the marketplace and lead toward a more efficient plan support.

ASPPA and NTSA hope that the materials contained in this manual will further that effort. The NTSA also acknowledges and thanks the task force members that spent so much time in the preparation of  this manual. Members and other individuals whoserved as resources to the task forces are listed on the inside front cover of this manual.

Readers are invited to utilize the material in any way necessary to contribute to the final result – 403(b) plans that are both compliant and easier to manage. NTSA does not hold this manual out to be the only way in which 403(b) transactions can be processed or that it covers every possible situation. It recognizes that reasonable parties can disagree on how to handle some matters. This is the third edition of this manual.

NTSA encourages those in the 403(b) industry who may have comments on or even disagreements with some of the contents of manual to communicate with NTSA and assist with possible future editions to improve upon this manual, make it more useful, and take into account new developments and issues. Best Practices Guide for 403(b) and 457(b) Plans is available here.

For a complete guide to 403(b) and 457 plans, contact NTSA for information on The Source, a reference manual for internal staff, advisory firms, TPAs, broker-dealers, and employers.