Ask the Experts August 27, 2013

(b)lines Ask the Experts – Combined Asset Report

August 27, 2013 (PLANSPONSOR (b)lines) – "We are a tax-exempt 501(c)(3) organization and maintain am ERISA 403(b) plan as well as a 457(b) plan.  Our vendor provides us a combined asset report.  Is this okay?"

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David N. Levine, Groom Law Group, answers:

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A summary of assets is not subject to any specific requirements so your vendor may just be trying to provide a user-friendly summary of all assets in one place.  However, it is key to make sure of a few things:

First, make sure that your 403(b) investments are in “proper” 403(b) vehicles (such as annuity contracts or custodial accounts in most cases).

Second, make sure that when you do the Form 5500 annual report for your 403(b) plan, you are not including 457(b) plan assets.

Third, make sure that your 457(b) assets are not held in a trust (or similar annuity contract or custodial account) unless it is a “rabbi trust” that is treated as a “grantor trust” owned by your institution.


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.


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Compliance August 26, 2013

ASPPA Asks IRS to Clarify LRMs for 403(b) Plans

August 26, 2013 (PLANSPONSOR.com) – The American Society of Pension Professionals & Actuaries (ASPPA) has sent comments to the Internal Revenue Service (IRS) on sample language issued about the Listing of Required Modifications (LRMs) for preapproved 403(b) plans.
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In conjunction with the National Tax Sheltered Accounts Association (NTSAA), Craig P. Hoffman, ASPPA’s general counsel and director of regulatory affairs, sent the comment letter to the IRS. The letter specifically asked for clarification on the draft language for LRM 24 “Severance From Employment” and LRM 65 “Vesting.”

With the first item, LRM 24, Hoffman recommended that it be consistent with LRM 22 and with existing guidance under IRS Notice 89-23. He further recommended that LRM 24 be amended to clarify that, for purposes of determining whether a “Severance From Employment” has occurred, “Related Employer” status be determined under the definition previously issued in LRM 22. Also recommended was that the new example given in LRM 24 should be excluded entirely, or at least clarified to specifically note that all public schools within the same state are not necessarily “Related Employers” under the special rules of IRS Notice 89-23. This change, he said, would eliminate confusion as to the inconsistency between LRM 22 and LRM 24.

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For the second item, LRM 65, Hoffman recommended that the IRS make it clear that nonvested amounts require appropriate separate recordkeeping entries (i.e., “separate accounting”) and not a physical segregation of assets or investment in a separate insurance contract or custodial account.

“We thank the IRS for its continued effort to make the 403(b) plan design process easier for sponsors, so that more American workers will have reliable workplace retirement plans,” said Hoffman. “Implementing our recommendations would aid the IRS in meeting that important goal.”

The full text of the comment letter can be found here.

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