Ask the Experts October 22, 2024

How Are Deadlines for 403(b) Plan Employer Contributions Set?

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.

Reported by

Q: When is the deadline to make employer contributions to a 403(b) plan for a given plan year?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

A: This is an interesting question for 403(b) plan sponsors, as the deadline to make employer contributions is generally the same as the deadline (including extensions) to file the organization’s tax return.

However, since tax-exempt organizations do not pay taxes, presumably this deadline would not apply. Instead, the deadline for contributions to be considered an annual addition for 415 limit purposes would likely apply instead. For tax-exempt employers, contributions must be made to the plan no later than the 15th day of the 10th calendar month following the end of the calendar year or fiscal year (as applicable, depending on the basis on which the employer keeps its books) with or within which the particular limitation year (typically calendar year) ends. Thus, if the 2023 limitation year ends December 31, 2023, and the employer fiscal year aligns with the calendar year, 2023 employer contributions must have been made by October 15, 2024, to count as an annual addition for 2023.

For a 403(b) plan that is a money-purchase plan (a relatively rare occurrence), there is a minimum funding deadline of 8.5 months following the close of the plan year (September 15 for calendar year plans). After 8.5 months, the contribution can still be made, but it is subject to a 10% excise tax.

It should also be noted that, even though these are the regulatory deadlines, your plan document could state an earlier contribution deadline. When in doubt, outside retirement plan counsel should be consulted if there is any concern that an employer contribution may not be timely.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.

Compliance October 21, 2024

Nearly 900 Firms Register with DOL Under Amended Prohibited Transaction Rule

The list, created under the DOL’s finalized amendment to PTE 84-14, is the first to self-identify managers of ERISA-covered assets.

Reported by

The U.S. Department of Labor last week published a list of nearly 900 companies that have used or planned to use the qualified professional asset manager exemption, as of September 30.

The initial public list comes after the DOL published in April a new amendment to the rule governing the QPAM exemption, which regulates transactions between an investment manager and a qualified plan. The prohibited transaction exemption, or PTE 84-14, provides relief for those employee benefit plan and individual retirement account transactions that would otherwise not be allowed by the Employee Retirement Income Security Act.

Get more!  Sign up for PLANSPONSOR newsletters.

Under the amended PTE 84-14, any firm that relies on the exemption must notify the DOL. The regulator’s list, published Wednesday, lists firms that have used the exemption and includes many of the biggest names in asset management, insurance and recordkeeping. According to the DOL, the list will be updated periodically.

The publication and maintenance of the list is required by the amendment that both broadened the types of misconduct that would require an investment manager exemption and made it easier for a retirement plan sponsor to exit a QPAM relationship. The amendment was first proposed in July 2022 and received industry pushback and comment over the subsequent years before it was finalized.

Ruth Delaney, a partner in the asset management and investment funds practice group of K&L Gates, says the DOL had indicated it would maintain a public list of firms relying on the QPAM exemption on its website and that the lengthy list makes sense, given the circumstances.

“Given that the QPAM exemption is one of the broadest and most commonly relied on exemptions in the financial services industry, the long list of entities, including many major players in the industry, does not come as a surprise,” she says.

The DOL noted in Wednesday’s release that it had not directly verified whether any of the listed entities met the exemption’s requirements and that inclusion on the list should “not be taken as the Department’s endorsement of the use of the entity as a service provider or fiduciary.” Plan fiduciaries, it noted, should consult with legal counsel regarding working with a QPAM.

David Kaleda, a principal in Groom Law Group, Chartered, says it is important that plan fiduciaries do not see this list of disclosures as a “blessing” by the DOL.

“The DOL makes clear on the webpage that disclosure on the page does not … mean that the entity is in fact a ‘qualified professional asset manager’ or that an entity that is otherwise a QPAM in fact complies with the conditions of the QPAM Exemption,” he says. “That is, the DOL does not independently verify QPAM status or exemption compliance, and it is the responsibility of plan fiduciaries to make that determination.” 

Kaleda also notes that many organizations have multiple affiliates listed, showing that “each discretionary manager” within a firm that wants to use the exemption must independently meet its requirements.

The DOL stated in April that the amendment to PTE 84-14 was designed to modernize the rule from its initial 1984 creation. It included changes such as:

  • Clarifying that foreign convictions are included in the scope of the exemption’s ineligibility provision;
  • Adding a one-year transition period intended to mitigate potential costs and disruptions to plans and individual retirement account owners when a QPAM becomes ineligible;
  • Updating asset management and equity thresholds in the QPAM definition;
  • Clarifying the requisite independence and control a QPAM must have with respect to investment decisions and transactions; and
  • Adding a standard recordkeeping requirement.

Kaleda believes the public disclosure requirement and web page will serve as an enforcement tool for the DOL. For example, if the regulator sees that a financial services firm is being convicted of certain crimes or has entered into a settlement related to certain crimes, “it may look to see if such entity or its affiliates are listed on the website. Then, it could use its investigation and enforcement authority to assure that the entity and its affiliates no longer rely on the QPAM exemption or get an individual exemption.”

In addition, he notes, the web page is the “only centralized, comprehensive list of which I am aware, available to the DOL, of asset managers who likely manage ERISA-covered assets. These are managers over which DOL has enforcement authority, regardless of whether they rely on the QPAM exemption.”

«