Ask the Experts July 14, 2009

(b)lines Ask the Experts – Single Vendor Intentions Gone Wrong

July 14, 2009 (PLANSPONSOR (b)lines) - Prior to 2009, an organization which serves as an umbrella organization for a group of 403(b)-eligible entities provided a multi-vendor 403(b) plan for the organization and its related entities. In 2009, it intended to move to a single vendor solution, but a few of its related entities inadvertently continued to allow contributions to other vendors.

Reported by

The plan sponsor asks: “Is there a way we can unwind this structure to keep our single vendor structure intact?”

Unfortunately, there is no definitive answer to this question, because it is not clear what type of unwinding or other correction would satisfy the requirement to make “best efforts to retroactively correct” under the limited transition relief of IRS Notice 2009-3 (see That Relief on the 403(b) Written Plan – It May be Better than You Thought ). Further, the extent to which a correction could be made under Employee Plans Compliance Resolution System (EPCRS) is not currently clear. Lastly, any effort to switch participant investments could also have fiduciary implications under ERISA (if applicable) that would also need to be considered.

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We would suggest that arrangements in this situation should probably seek individualized advice on their particular facts and the products involved.

– David Levine and David Powell, Groom Law Group, Chartered

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.