Q. Is it possible to put unitized portfolios in a 403(b)7?
A. A MarketBeat column in the NTSA Advisor addressed this topic. Specifically, go to Q&A 4 which reads as follows:
Q4. Holdings in model portfolios may be shown on a participant statement, or, these models may be “unitized” and reported on statements with a daily net asset value, similar to a mutual fund. What are the implications of unitization for 403(b) plans?
A4. This is where the SEC rules governing 403(b) and 401(k) plans seriously diverge. Unitizing a model portfolio in a 401(a) plan has been a regular practice for decades, even back to the “balance-forward” days of plan administration. This has been possible because of the securities laws exemptions for 401(a) plans. However, the “unitized” unit of a 403(b) model portfolio does not have the same exemptions. It may well be a security that needs to be registered. Unitizing is also likely one of those factors which would trigger the registration of the model portfolio as an investment company. If you are engaged in this practice, seek advice of your legal or compliance staff.
But note that there are some investment advisors who say they use a look-through rule and if the underlying shares are qualified, the portfolio would be qualified as well. There are some attorneys who indicate that theory is somewhat questionable. The best advice may be to check with your own legal counsel.
Recent Comments
Does the roth requirement for catch-up contributions for people who earned $145,000 apply to 457...
Hi Ed,
I really liked this article and I think you make a lot of sense. And I had no...
I believe there's a misstatement in that last quote - it should refer to governmental and...
Working with several medical providers as clients, I note that the high-end earners tend to push...
Congratulations to NTSAA for landing a good one. Nathan's breadth of experience and...