Benefits February 26, 2008

403(b) Sponsors Want Help in Complying with New Regs

February 26, 2008 (PLANSPONSOR.com) - A new study from the Spectrem Group found 77% of 403(b) plan sponsors say it is very or somewhat important to get outside advice about what actions they must take to comply with new Pension Protection Act (PPA) and 403(b) regulations.
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While the majority of most types of 403(b) sponsors report they are somewhat familiar with the new regulations, between one-third and one-half say they are not very or not at all familiar with the new requirements. Sponsors in the Private K-12 segment (61%) and Charitable, Religious, & Other segment (50%) report the least familiarity with new regulations, according to the Spectrem Group data.

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Across all segments, sponsors say they are most likely to look to a representative of their plan provider for advice on compliance, followed by in-house staff, typically an attorney or financial officer. A small amount of plan sponsors said they would seek help from a third party administrator or benefit consultant, or a state agency or association.

The Spectrem Group found that one-third of sponsors in the Private K-12 and Charitable segments have not yet addressed this issue of new regulations and half or more across all segment are still at the stage of reviewing the regulations in order to determine what will be required of them.

The majority of sponsors across all segments say they are not likely to adopt automatic enrollment in their plans, and 56% of those who say they definitely will not adopt automatic enrollment say they believe the employee should have the choice of enrolling or not. The majority also say they are unlikely to implement a participant advice arrangement, with 52% of those definitely against such arrangement saying the participant is responsible for getting the advice he or she needs.

When considering the impact of the 403(b) regulations, the study found the administrative and compliance demands of the new regulations will result in many sponsors reducing the number of vendors offered to participants. Overall, 15% of all sponsors who currently offer multiple providers say they will definitely decrease the number of choices over the next 12 months, and another 24% say they may do so.

The report, “Not-For-Profit Sector Defined Contribution Plans,” is available for purchase here .

Benefits February 25, 2008

FL Associations Unveil Model 403(b) Plan

February 25, 2008 (PLANSPONSOR.com) - A coalition of Florida's K-12 education associations announced the development of a 403(b) Model Plan for Florida educators in a February 25 nationwide teleconference.
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The Independent Benefits Council along with consultant Gallagher Benefit Services selected five “Best in Class” investment companies to participate in the Model Plan, including AIG, AXA Equitable, and American Century Investments. A press release said the five providers signed Letters of Commitment in which they promise to lower fees to all school district employees, regardless of the size of the district that employs them.

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Through these five providers, employees will have access to more than 600 high-quality, diverse investment products, the press release said. Steve Banks, Chief Administrative Officer at PSA Consulting Group, explained during the teleconference that in searching for the Best in Class providers the groups asked about providers’ fees, investment options, participant services, company experience in the marketplace, plan conversion processes, and administrative services offered. The groups also asked for full fee disclosure and disclosure of any legal actions pending against the providers.

Banks said the chosen providers agreed to guarantee expense rates for at least three years and to automatically upgrade plans when applicable and when newer, more enhanced products become available. According to Banks, in coming weeks the model plan will be introduced to school systems.

William J. “Bill” Montford, III, the CEO of the Florida Association of School Districts said there is flexibility in the plan for systems to add providers but they must meet the model plan’s compliance criteria. In addition, he said districts who adopt the model plan will contribute $12 per employee per year to cover the cost of administration.

Banks added that districts can adopt the model plan as their entire 403(b) program or as part of their 403(b) program.

Representatives in the teleconference revealed that the main drivers for development for the model 403(b) plan were the new IRS regulations that generally go into effect January 1, 2009, plan fees for K-12 employees – which they said were the highest in the nation, and the results of a survey in which K-12 employees expressed concern that they will not have enough savings to last through retirement.

IBC spokesperson Tom Herndon, former executive director of the Florida State Board of Administration, said employees can expect to accrue one-third more assets under the model plan than with their current contracts.

“We believe it is a national model and already have a lot of interest in that regard,” IBC representative Kristin Heilman said in the teleconference.

IBC is a not-for profit formed by the Florida Education Association, the Florida Association of School Administrators, the Florida School Boards Association, and the Florida Association of District School Superintendents.

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