John Marshall Law School "Lunch and "Learn" 403(b)

Views:
 
     
 

Presentation Description

The new rules for non-traditional retirement plans are the most significant set of changes since the IRS issued proposed 403(b) regulations in 1964. This presentation will provide an overview of the varied aspects of non-traditional retirement plans identified as 403(b) and 457 retirement plans. Students will increase their awareness of the basic plan designs, specific governing regulations, related processes and the importance of risk management.

Comments

Presentation Transcript

Overview of Non-Traditional Retirement PlansEB 368aBUOctober 8-9, 2010 : 

Overview of Non-Traditional Retirement PlansEB 368aBUOctober 8-9, 2010 Presented by Jerry Kalish President National Benefit Services, Inc. October 6, 2010

Non-Traditional Retirement Plans:“everything else besides 401(a)” : 

Non-Traditional Retirement Plans:“everything else besides 401(a)” Focus of Course Qualified 403(b) for educational, charitable, religious Non-Qualified 457 for tax exempt organization

An integrated learning and interactive learning experience : 

An integrated learning and interactive learning experience Outside legal counsel representing plan sponsors and providers House counsel for major 403(b) provider Internal Revenue Service Consultants with investment, administration, compliance experience

From the Syllabus: “by the end of the course you should be able to: : 

From the Syllabus: “by the end of the course you should be able to: Describe how 403(b) and 457 plans are structured, governed, and evaluated Differentiate the benefits and limitations of 403(b) and 457 plans Describe the general methods of contributions and distributions Discuss the role of the various retirement plan fiduciaries Describe current complex issues facing non-traditional retirement plans and topics of current interest in the retirement plan industry”

What this course is also about (in my opinion) : 

What this course is also about (in my opinion) =

Why these plans are important : 

Why these plans are important

403(b) defined contribution plan “kinda like” 401(k) plan : 

403(b) defined contribution plan “kinda like” 401(k) plan Plan design Investments Administration Fiduciary role Employee communication

403(b) Market Size and Scope : 

403(b) Market Size and Scope 20% - 25% of defined contribution market $600 - $700 million estimated assets $900 billion estimated assets in 2011 58% < $1 million 31% between $1 million to $10 million 40% ERISA, 60% Non-ERISA Source: Edward Jones 2008 research

403(b) Assets at 12-31-2009: $711 billion by asset allocation : 

403(b) Assets at 12-31-2009: $711 billion by asset allocation Fixed Annuity: $343 (48%) Variable Annuity: $226 (32%) Mutual Funds $143 (20%) Source: Spectrum Group

403(b) Assets at 12-31-2009: $711 billion by Plan Sponsor : 

403(b) Assets at 12-31-2009: $711 billion by Plan Sponsor Public K-12: $183 (26%) Private K-12: $51 (7%) Higher Education: $313 (44%) Healthcare: $137 (19%) Other: $27 (4%) Source: Spectrum Group

403(b) Market by Type of Plan Sponsor at 2008 Year-End : 

403(b) Market by Type of Plan Sponsor at 2008 Year-End Source: RG Wuelfing & Associates, 2008 Retirement Research

Who’s Involved : 

Who’s Involved

Who are the “Interested Parties” : 

Who are the “Interested Parties” Employee (Plan Participant) Employer (Plan Sponsor) Board Members Public

Who Are The Service Providers : 

Who Are The Service Providers Investment provider Third Party Administrator (TPA) Common or volume remitter Investment consultant Certified Public Accountant (CPA) Legal Counsel Other interested parties: IRS, DOL, SEC, FINRA, States

Slide 16: 

403(b) Regulations Timeline 1958 Added to Internal Revenue Code 1964 Regulations first issued that detailed some of basic statutory provisions 1964-2004 Hodgepodge of regulations, exam guidelines, revenue rulings, and notices 2004 Proposed Regulations issued 2007 Regulations finalized 2009 Final Regulations effective

The world has changed since 1964 when 403(b) regs first proposed : 

The world has changed since 1964 when 403(b) regs first proposed

Slide 18: 

Work Force Veterans: 1922-1945 Baby Boomers: 1946-1964 Generation X” 1965-1980 Generation Y: 1981-2000

The retirement plan operating environment : 

The retirement plan operating environment The “new economic normal” The “cautionary generation”

Original January 1, 2009 effective date : 

Original January 1, 2009 effective date Requirement for a plan document Rigorous application of the non-discrimination rules Employer responsibility for complying with contribution limits Timing of contributions Transfers to other 403(b) contracts Employer responsibility for coordinating and tracking loans Plan termination

In late 2008, the IRS extended the plan document requirement to December 31, 2009 : 

In late 2008, the IRS extended the plan document requirement to December 31, 2009 During 2009, the plan sponsor must operate the plan in accordance with a reasonable interpretation of Section 403(b), taking into account the final regulations. Before the end of 2009, the plan sponsor must make its best efforts to retroactively correct any operational failure during the 2009 calendar year to conform to the terms of the written Section 403(b) plan, with such correction to be based on the general principles of correction set forth in the IRS' Employee Plans Compliance Resolution System (EPCRS). Query: How many actually did?

Plan sponsors need help to : 

Plan sponsors need help to Understand their new role Understand their new responsibilities Identify and correct compliance concerns Review provider and investment options The Mission: provide employees with the best opportunity for a favorable retirement outcome

Despite Improvements, Most Employees Still Unprepared for Retirement : 

Despite Improvements, Most Employees Still Unprepared for Retirement Almost two-thirds (64 percent) of Americans in the two lowest preretirement income levels will run short after 10 years in retirement. • After 20 years of retirement, almost a third (29 percent) of those in the next-to-highest income level will run short of money, as will more than 1 in 10 (13 percent) of those in the highest-income level. • Those with the highest income are at the lowest risk of running short of money—but many in the highest-income category still face significant risks of not being able to pay basic expenses and uninsured medical expenses for the remainder of their lives. Source: 2010 Employee Benefit Research Institute Retirement Readiness Rating

Investment education hasn’t worked : 

1988 to 2008 Source: DALBAR Quantitative Analysis of Investor Behavior (QAIB) Study 2009 The Cost of Going It Alone Investment education hasn’t worked

Slide 26: 

Source: AllianceBernstein

And the answer is …… : 

And the answer is ……

For up-to-date information and analysis on 403(b) and ERISA matters ….. : 

For up-to-date information and analysis on 403(b) and ERISA matters …..

Visit Bob Toth’s blogwww.businessofbenefits.com : 

Visit Bob Toth’s blogwww.businessofbenefits.com

Visit Our Blogwww.retirementplanblog.com : 

Visit Our Blogwww.retirementplanblog.com

authorStream Live Help