THIS INFORMATION APPLIES ONLY TO CHURCHES AND QCCOS* WHO USE the SERVANT SOLUTIONS RETIREMENT PLAN PLUS OTHER RETIREMENT PLAN PROVIDER(S)
The issuance of final 403(b) regulations caused a shift in employers’ responsibilities for the administration and compliance of all 403(b) plans. Effective January 1, 2009, the IRS treats each “employer” (i.e. each organization, including churches) that provides a 403(b) plan for its employees as responsible for maintaining that “plan” and also for managing all 403(b) vendors.
The Servant Solutions Retirement Plan that your organization provides to your employees is a valuable benefit to retain talented, energetic staff. Most of our employer relationships use this plan as their sole retirement plan provider - and compliance becomes less of a task. For employers allowing employees to contribute to multiple 403(b) arrangements, compliance requires considerably more effort. One of the most important requirements you will need to comply with if your organization uses multiple 403(b) providers (or has used multiple providers at any time since the beginning of 2005) is that your organization will be responsible for ensuring vendor compliance coordination. The organization can designate compliance and other administrative responsibilities to a Third-Party Administrator (TPA) or one of the vendors, if the vendor agrees. However, Servant Solutions does not provide TPA services for multi-vendor arrangements.
You will want to work with your legal counsel, your other 403(b) providers, and Servant Solutions to understand and comply with the regulations so that your organization and retirement plan participants avoid adverse tax consequences. Below, you will find summarized explanations of regulations that impact your organization as you move toward compliance.
Written plan document requirement
Organizations that provide a 403(b)(9) plan, like the Servant Solutions Retirement Plan, must maintain written documents that describe all material plan provisions. The individual employer must adopt a written plan that conforms to the regulations by including all the material terms and conditions of the plan including, but not limited to:
- Identification of eligible employees
- Statutory (legal) contributions limits
- Time and form of benefits
- Distribution restrictions
The written plan can incorporate materials from other documents such as written policies, employee handbook descriptions and other related documents. Servant Solutions provides general plan documentation for the Servant Solutions Retirement Plan. However, since each employer in the Servant Solutions Retirement Plan has flexibility related to certain plan provisions, your organization must develop and maintain additional written rules and procedures regarding your arrangements that address:
- Which employees are eligible to participate in the retirement plan?
- What contributions will the organization make on behalf of employees?
- Which service providers are allowed under the plan?
To help you with this, Servant Solutions has prepared an Eligibility and Participation Schedule to document the additional written rules and procedures, unique to your organization, that relate to your use of the Servant Solutions Retirement Plan. You should print out a copy of this Schedule and fill it out. This Schedule is considered part of your organization’s 403(b) plan. This means that any time you change any provisions that relate to your participation in the plan you must complete an updated Schedule. You do not have to send this Schedule to Servant Solutions but you do need to be sure to keep an updated copy in your files at all times. And, of course, you will need to be sure that you follow the rules and procedures that you set out in the Schedule.
ADDITIONAL ACTIONS REQUIRED
There are more steps for your organization, plan participants, and plan providers to complete if your organization makes contributions to more than one 403(b) retirement plan provider (or has made any such contributions at any time since the beginning of 2005).
- First, you will need to identify and list all investment providers approved for ongoing contributions. Print, complete and retain a copy of the Authorized Providers List. It is important that as you make changes to approved investment providers that the list be kept up-to-date.
- Second, your organization will also need to share information among the different providers (including those providers that are no longer eligible to receive ongoing contributions).
The purpose for sharing this information is to allow for the exchange of information that will be necessary to satisfy the regulations and other tax requirements of the Code. Such information includes, but is not limited to:
- Information concerning the participant’s employment, such as when severance from employment occurs for purposes of distribution restrictions;
- Information concerning whether a hardship withdrawal has occurred with respect to a 403(b) account and whether the hardship withdrawal rules are satisfied;
- Information regarding basis (after-tax accumulations) necessary for proper calculations of distribution of basis.
This information sharing requirement is very important because as of January 1, 2009, employers are responsible for ensuring overall compliance with statutory and regulatory requirements. If your organization offers more than one 403(b) provider for its employees, Servant Solutions is limited in the guidance we can give. In this situation, we welcome inquiries and may assist with general information that could be helpful to the employer’s own legal counsel. But the employer is responsible for coordinating compliance among the different 403(b) providers.
Other Possible Compliance Concerns
There are other compliance issues that could arise if your organization allows contributions to be made to multiple 403(b) investment providers and if transfers of money are permitted between these 403(b) providers. Money can still be moved, but there are now additional requirements on any such movement of 403(b) plan assets.
For example, some 403(b) investment providers may permit employees to make “contract exchanges.” A “contract exchange” is a movement of a participant’s plan account from a 403(b) investment provider that is approved to receive ongoing contributions under the employer’s 403(b) plan (i.e., a 403(b) provider that has a “payroll slot”) to a 403(b) investment provider that is not approved to receive ongoing contributions. The Servant Solutions Retirement Plan does not permit such contract exchanges to be made with any accounts that are held by Servant Solutions, but other 403(b) investment providers may permit contract exchanges to be made with accounts that they are holding. There are several additional requirements that apply to contract exchanges and you should discuss these requirements with your organization’s legal counsel before approving any such exchanges.
Servant Solutions has been dedicated to enhancing the financial security of our plan participants for well over 60 years. Our employees stand ready to help you. Please contact us or call (800) 844-8983 for additional information.
* Does not include Non-Qualified Church-Controlled Organizations (“Non-QCCO” defined – click here)
This information should not be considered tax or legal advice. Servant Solutions seeks to assist your organization as you work with your legal and tax advisers by providing resource information that you and your adviser may find beneficial.