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The Impact of New
Regulations on 403(b) Plans
THE 403(B) MARKET
is experiencing rapid change. With the passage of the
Pension Protection Act of 2006 (PPA) and the recently
finalized 403(b) regulations, the time is now for most
plan sponsors and their advisors to act.
For the first
time since 1964, new 403(b) regulations were issued by
the Internal Revenue Service that effectively replaces
previous guidance and reduces the many differences
between the rules governing 403(b) and 401(k) plans.
For years, 403(b) plans have traditionally lagged their
401(k) counterparts in terms of innovation. These new
rules which generally apply for taxable years beginning
after 2008 (although certain provisions apply earlier)
were designed to modernize 403(b) plans and to introduce
a new level of fiduciary responsibility not previously
required of 403(b) plan sponsors.
The changes that
will shape 403(b) plans in light of the PPA and new
403(b) regulations provide a great opportunity for
advisors to articulate the steps necessary to respond to
these new regulations and compel their clients to
re-examine their plans. In addition, new regulations
issued by the Department of Labor will hold 403(b) plans
to the same annual 5500 requirements that apply to
tax-qualified plans, beginning with the 2009 plan year
(forms filed in 2010). Moreover, the increased fee
transparency requirements and fiduciary burden may
result in many plan sponsors considering consolidating
vendors. As an advisor, you can add tremendous value to
your relationship by assisting with:
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Evaluating
the need for vendor consolidation
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Drafting a
new investment policy
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Facilitating
a fiduciary audit and offer process and,
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Conducting
benchmarking studies or RFPs to evaluate provider
costs and services.
The new
regulations shaping 403(b) plans present opportunities
for you, your clients and their participants and now is
the perfect time to create an action plan that outlines
how to respond to and take advantage of these changes.
To learn more
about Diversified, call 800-770-6797 or visit their Web
site at
www.divinvest.com.
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