Compliance May 2, 2006

Report: Permanent 403(b) Regs Could be out by Summer

May 2, 2006 (PLANSPONSOR.com) - Finalized regulations for 403(b) plan could be out by summer and are expected to change the way the education and non-profit plans are operated and how many vendors can be involved in each program.
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Under proposed regulations, the Internal Revenue Service (IRS) wants all 403(b) plans to have written guidelines including product providers, loan provisions and other details – similar to those of 401(k) plans, according to a news report in Investment News (See  Feds Put Out 403(b) Rule Clarification ).

Even though the already publicized regulations could become official as early as January 1, 2007, many in the industry expect that the new regulatory scheme will be put into effect a year later in 2008, the news report said.

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According to the news report, the rules could lead to more involvement among school administrators in retirement plans, because they are required to create a written plan.

School districts have not been required to have a written plan, and many offer dozens of vendor options for 403(b) plans. School districts may prefer to restrict themselves to one vendor if requirements for a written plan are adopted, Bruce Delbecq, a partner at Plante and Moran PLLC, which is based in  Auburn Hills, Michigan, told Investment News.

“I think the 403(b) world is decades behind, and most employers don’t feel like they have a responsibility and don’t want to be involved,” Delbecq said. “I think there’s a concern about the added level of responsibility that employers are going to have.”

A reduction in the number of vendors would occur because schools have to commit to following their written plans, and that means ensuring that vendors within the district adhere to them, said Richard Ford, senior vice president and chief marketing officer of PlanMember Financial Corp. The Carpinteria, California firm manages about $1 billion in 403(b) plans.

“When it’s all said and done, we hope that the IRS backs off a little bit,” Ford said, according to Investment News. “I think the employers don’t want to take on fiduciary responsibilities, such as selecting plan sponsors.”

Compliance May 1, 2006

EEOC Sues Universal for Race Discrimination

May 1, 2006 (PLANSPONSOR.com) - The US District Court for the Central District of California has rejected a motion by Universal Pictures to dismiss a race discrimination case brought by the Equal Employment Opportunity Commission (EEOC).
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According to the EEOC announcement, the court found that the agency had presented direct evidence that Universal’s decision to fire Frank Davis was motivated by his race.   In addition, the court said that the reasons Universal gave for firing Davis raise a genuine issue regarding the motive for the firing and “could support an inference that he was fired because of his race.”

Davis was hired as First Assistant Director for the film “2 Fast 2 Furious.”   The director, John Singleton, who is also black said that Davis did not have any performance problems and he was opposed to Universal’s firing, the announcement said.

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The EEOC presented evidence of a telephone interview during which the interviewer asked Davis, “What color are you? Are you black?”   In addition, the EEOC said that Davis was replaced with a white assistant director.

The court said Universal gave inconsistent reasons for firing Davis.   Universal also gave reasons for the firing for which white assistant directors were not fired.

“Movie studios like Universal are not above the law and cannot flagrantly violate the rights of people brave enough to complain about discrimination,” said EEOC Los Angeles Regional Attorney Anna Park, in the announcement.

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