Should We Continue to Refer to Our 403(b) Plan by an Outdated Name?

I work in employee benefits for a health care entity, and I noticed that our 403(b) plan is named the XYZ Hospital Tax Deferred Annuity Plan, even in the plan document. Our plan hasn’t even had annuities for several years (we converted to an all-mutual-fund platform a decade ago), and we also now have Roth 403(b) accounts in addition to traditional tax-deferred accounts. Is there any reason that we should continue to refer to our plan by a name that is so outdated and potentially confusing to participants?

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

No, and you’re not the only institution that still refers to its 403(b) plan as a “Tax-Deferred Annuity (TDA)” or “Tax-Sheltered Annuity (TSA)” plan, as these terms have been around for decades, despite the fact that, as you indicate, annuities are no longer the exclusive funding vehicles for 403(b)s, and Roth accounts have been added to traditional, tax-deferred accounts. The primary reason that a number of 403(b) plans have retained this nomenclature is inertia: Some terms were in place for decades upon decades, and even the IRS was slow to adapt to 403(b) terminology that was not focused on annuity contracts.

It should be noted, however, that if you wish to change the name of your plan, a discretionary plan amendment will be required, and that amendment must be executed by the end of the plan year in which you change the name of your plan. In addition, if your plan is subject to ERISA, there are a myriad of reporting and disclosure documents that include the plan name, such as the Form 5500, SPD/SMM, SAR and participant fee disclosure. All of these documents will require updating to change the plan name.

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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