Plan administration can be overwhelming to an employer. There are many moving parts to the day-to-day administration of a 403(b) plan. Here are some basic rules to follow:
- Follow the terms of the plan. Employers must operate their 403(b) plans according to their written programs or the plans may be disqualified. This may lead to the loss of tax-deferred status for all plan contracts. Therefore, Employers should be familiar with the plan documents that they have put in place.
- Review the administrative appendix. This document, that is required to be a part of the new IRSapproved 403(b) plan document, outlines the various required tasks that must be reviewed annually or periodically. Employers need to ask for a copy of this form from the plan document provider, TPA or vendor that is supplying it with such plan document.
- Deposit employees’ contributions timely. Since an employee-contribution-only 403(b) plan is not subject to ERISA, generally, the timing for depositing the employee contributions will fall under the applicable state’s law. This can be even more restrictive than federal law, which specifies that the contributions must be remitted no later than the 15th business day of the month following the payroll reduction. Again, read the plan to see if the plan has adopted the federal law or if you need to look at the state’s requirements.
- Make a decision. As an employer, you will need to decide if you will hire a TPA to assist in the administration of your plan.
- Conduct periodic reviews. This can be handled with the third party administrator. The IRS provides checklists and tips to help conduct periodic reviews of 403(b) plans.
Editor’s Note: This is an occasional feature in the NTSA Advisor. This tip is taken from the 403(b) Plan Sponsor Guide, which is being made available to school districts nationally to assist them in understanding how to improve 403(b) plan participation and savings rates to help employees achieve a comfortable and timely retirement.
The 403(b) Plan Sponsor Guide is part of the content contained in the NTSA Certified Retirement Education Specialist (CRES) materials. The NTSA Certified Retirement Education Specialist (CRES) program and designation has been developed in order to equip advisors to be qualified and available to teach the NTSA educational program, which is designed to provide teachers with the basics of planning for retirement and improve their retirement readiness. More information about CRES is available here.
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