New 403(b) Retirement Plan Rules Media Backgrounder
Lincoln Financial Group Market Facts • Ranked among industry leaders o Ranked first in new 403(b) contributions and number of new participants, in a recent survey of 5 21 major companies 4 o 5th total 403(b) assets 4 o 10th employer sponsored plans • Flagship company established in 1905 2 • Fortune 500 company , NYSE: LNC • Lincoln Financial Group total assets under management of 3 $225 billion • More than 40 years’ experience with 403(b) plans 4 • Retirement plan assets over $36.1 billion Here is a checklist for employers to consider: Start early to plan effectively and work to maximize endresults for plan participants Evaluate your current 403(b) plan provider relationships Consider partnering with established firms that offer resources and expertise to help you become compliant Work with providers and advisors to develop an action plan to comply with all aspects of the new regulations Prepare a detailed timeline to achieve compliance status by January 1, 2009 Educate your employees about new plan offerings and encourage increased participation
403(b) Basics As a leader in the 403(b) market, Lincoln Financial Group is committed to serving as an educational resource on various topics for employers and employees. With the new 403(b) Regulations taking effect on January 1, 2009, we encourage organizations to think about the impact on their retirement plans and why it is critically important to comply.
According to 403(b) providers, the following implications will affect plan sponsors and participants the most: Requirement of a written plan document
57%
Elimination of 90-24 transfers Clarification of a distributable event Nondiscrimination rules Requirement of universal availability
57% 29% 14% 14%
What are the new 403(b) regulations? Plan sponsors will need significant help from providers to comply with the complex requirements of the new regulations. The regulations, the first in almost 40 years, will dramatically increase the role of employers in governing investments, transfers, documentation, administration and participant disclosures. The new regulations will substantially change the way 403(b) arrangements are sold and serviced, and will likely encourage employers to consolidate their current arrangements which may cause the number of plan providers in the market to shrink dramatically. Officials from the Department of the Treasury have indicated that by requiring plan sponsors to manage and report on the status of their 403(b) accounts, they hope these plans will be better positioned to enable participants to save for retirement in the future. In the past, plan sponsors were not typically actively involved in overseeing 403(b) plans. Now, the new rules will make the role of plan sponsors in the administration of 403(b) plans very similar to 401(k) plans.
Source: National Tax Sheltered Accounts Association & Cerulli Associates 403(b) Vendor Survey, April, 2007. Vendors included insurance companies, mutual fund companies, and asset management firms.
FAQ’s What happens if an organization does not comply? Organizations could face a number of repercussions if they do not comply with aspects of the regulations. Most notably, plan sponsors’ plans could lose their 403(b) status and/or individual 403(b) accounts could lose their tax advantaged status. This could lead to a significant taxable event for employees. Organizations also may face considerable penalties and/or litigation.
How will these new regulations affect plan sponsors and employees? • Organizations must play a larger role in governing and overseeing retirement plans for their employees. • The new regulations will likely result in true partnerships between plan sponsors and vendors, leading to better management, control and consistency of plan features. • With the anticipated vendor consolidation in the marketplace, plan sponsors can request more competitive products (e.g., price, flexibility and features) and receive more comprehensive administrative and regulatory support to help with plan compliance. • Increased participant education opportunities and product level disclosures will likely encourage higher participation rates among employees.
Will Lincoln Financial assist organizations in becoming compliant? Lincoln Financial offers assistance and comprehensive services to help organizations comply with the new regulations by January 1, 2009.
How significant is the potential impact of these regulations? In 2007, it was estimated that 403(b) plans accounted for $735 billion in 1 assets, or 17% of the total defined contribution retirement plan market.
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For more information on Lincoln 403(b)e SURE Advantage, a suite of services aimed at providing access to assistance, products and tools that will help plan sponsors prepare for the changes ahead, please visit: http://www.lfg.com/LincolnPageServer?LFGPage=/lfg/lfgclient/fprod/ret plan/pss/index.html
1) SPARK Staff Analysis, 2007 2) Fortune, April 3, 2007 3) As of March 31, 2008 4) As of September 30, 2007 5) LIMRA International, Not-for-Profit Market Survey, First Quarter 2008 Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. LCN 200807-2018366