Products April 9, 2019

Empower Pairs with CommonBond on Student Debt Solution

Empower Retirement says its new student loan repayment solution can help individuals take action to achieve better financial security through smarter debt management.

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The topic of student loan debt and how such debt impacts retirement savings efforts has quickly become top-of-mind for retirement plan sponsors; even Congress is getting in on the action, with the recent introduction of a bill seeking to encourage employers to help their workers address student loan debt.

As a result of client demand, retirement plan recordkeepers and other service providers are aggressively rolling out student loan repayment solutions that link employees’ paychecks directly to their student loan repayment strategy. The latest to roll out a solution is Empower Retirement, which unveiled a student loan repayment program created in collaboration with CommonBond.

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The Empower solution, which will be launched later this year, will be offered to workers saving for retirement who also wish to pay down their student loan debt faster and improve their overall financial wellbeing.

“Working together with employers and plan advisers, Empower believes that we can help individuals take action to achieve better financial security through smarter debt management,” says Edmund Murphy, Empower Retirement president and CEO.

According to Murphy, the partnership with CommonBond is aimed at creating a one-stop digital platform that provides educational tools and financial guidance to help individuals better understand and manage their unique financial needs. The goal of the program is to help individuals pay down their student debt faster in order to be able to focus on other goals.

From the plan sponsor perspective, Empower will offer “a turnkey solution that enables employers to make direct payments to their employees’ student loans or to their retirement plans.”

“Smart employers are recognizing the value of doing more for their employees through student loan contribution programs,” Murphy adds. “We believe these programs are mutually beneficial to workers and their employers.”

Features of the Empower program include recommendations on how individuals can best utilize their available financial resources across student debt and retirement savings; analysis and individualized information about loan forgiveness programs and other options, such as refinancing; and a direct pathway for employers to make payments to employees’ student loan payments or to their retirement savings plan.

The solution will be made available to all Empower retirement plans, pending plan sponsor agreement, as well as individual retirement account (IRA) customers. 

Ask the Experts April 9, 2019

(b)lines Ask the Experts – What Is a 403(c) Contract Within a 403(b) Plan?

Experts from Groom Law Group and Cammack Retirement Group answer questions concerning 403(b) plans and regulations.
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“I work for a private tax-exempt that maintains an ERISA 403(b) plan. Do you have any idea what a 403(c) contract is? I noticed it when reviewing plan balance information, and asked my recordkeeper representative about it, but he appeared to be as stumped as I was!”

 

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Stacey Bradford, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:

 

A 403(c) contract is the result of yet another unique feature of 403(b) plans that make them different from other types of retirement plans, such as a 401(k). A 403(c) contract is a nonqualified annuity contract that, in general, is the result of an annuity contract that fails to satisfy the requirements of 403(b).

 

What could cause a 403(b) contract to fail to satisfy Code Section 403(b) and thus be treated as a 403(c) contract? One example of this is an “Excess Amount” or an amount in excess of the 402(g), 401(m) or 415 limits. Those excesses would generally be treated as a separate contract under section 403(c) contract. Treatment of a contract as a 403(c) contract can also be used to correct other 403(b) plan failures under the IRS retirement plans corrective procedures known as the Employee Plans Compliance Resolution System (EPCRS). It should be noted that 403(c) contacts are subject to less favorable tax treatment than 403(b) contracts.

 

Also, for 403(b) plans with a vesting schedule, another quirk of the 403(b) rules is that non-vested contributions are ALSO treated as contributions to a 403(c) annuity contract until vested. However, such contributions are NOT subject to the less favorable tax treatment of 403(c).

 

 

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 Rebecca.Moore@strategic-i.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.

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