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403b Plan Updates
 

403b Plan Updates

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Information on the latest nonprofit retirement plan - 403b plans - including plan documentation, filing, fiducuiary responsbilities and Form 5500 requirements - Tate Tryon CPAs - Nonprofit CPA Firm ...

Information on the latest nonprofit retirement plan - 403b plans - including plan documentation, filing, fiducuiary responsbilities and Form 5500 requirements - Tate Tryon CPAs - Nonprofit CPA Firm Washington DC

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    403b Plan Updates 403b Plan Updates Presentation Transcript

    • 403b PLAN UPDATEIs Your Plan in Compliance?March 23, 2010
    • Presenters: Cynthia L. Keith, CFA Executive Director-Investments and Senior Portfolio Manager Oppenheimer & Co. Inc. Erin Hultman, CPA, MST Senior Manager-Audit and Assurance Services Tate & Tryon, CPAs and Consultants
    • Final Regulations• Effective for plan years beginning on or after January 1, 2009• Written plan document• Nondiscrimination rules• Closes the gap between 403b and 401k plans• Form 5500 filing requirements
    • Plan document• Must be written• Stand-alone or collection• Must include material provisions ▫ Eligibility ▫ Benefits ▫ Investment options
    • Nondiscrimination rules• No more good faith• Universal availability
    • Closes the gap between403b and 401k regulations • Timely employee deferral remittances • Form 5500 filing requirement if subject to ERISA • Plan administration • Fiduciary responsibilities
    • Who are the plan’s fiduciaries? • Discretion • Control • Examples ▫ Administration ▫ Trustee ▫ Investment consultant or manager
    • Who is not a fiduciary? ▫ Attorneys for the plan ▫ Accountants for the plan ▫ Actuaries for the plan
    • What are the fiduciaries’responsibilities? • Act solely in the interest of participants • Act prudently • Follow plan documents • Diversify investments • Pay reasonable expenses
    • What is the liability for fiduciaries?• Personal liability• Ways to limit that liability 1. Document processes 2. Full reporting 3. Provide participants with control over investment options 4. Provide default investment options 5. Liability indemnification or fidelity bond
    • Form 5500 filing requirements • ERISA v. Non-ERISA – new regulations did not impact directly • Non-ERISA plans • Church & governmental plans • Employee deferral ONLY plans • Increased scrutiny by DOL of sponsoring organization
    • Form 5500 filing requirements • ERISA plans • Small plan v. large plan • 80/120 rule • Schedule H • eFiling required
    • Determining Plan Assets…
    • Transition guidance• Revenue Procedure 2007-71 ▫ Contracts issued prior to 1/1/2005 ▫ Contracts issued 1/1/2005 – 1/1/2009 – reasonable good faith effort ▫ Contracts issued after 1/1/2009 – include in plan assets
    • Transition Relief:DOL Field Assistance Bulletin 2009-02 • Contract issued before 1/1/2009 • No obligation to make contributions since 1/1/2009 • Rights under contract enforceable against insurer, no employer involvement • Owner of contract is fully vested
    • What qualifies as employerinvolvement?• EBSA Field Assistance Bulletin No. 2010-01 ▫ Involvement can include keeping plan compliant ▫ Employer can confirm employee information ▫ Employer cannot approve transactions
    • So you have to have an audit…
    • Preparing for the audit • Obtain TPA reports, 2009 and 2008, by investment and by participant • Document internal controls • Determine participant count and plan asset totals • Properly value plan assets
    • Accurate investment valuation is afiduciary duty Why is accurate valuation important? • Responsibility to maintain records and report on form 5500 • Plan Distributions need to be correct
    • What is fair value?• GAAP requirement• Old definition of fair value• New definition of fair value
    • How should investments be valued?• Level 1 – quoted prices in active markets for identical assets 1. For identical assets only 2. Accessed at the measurement date 3. Must be used if available• Level 2 – observable inputs 1. Not exchange prices but directly or indirectly observable 2. What market participants are using• Level 3 – unobservable inputs 1. The plan’s assumptions about market price 2. Based on information available 3. May rely on investment manager
    • Ensuring appropriate investmentvaluations Why is this important to you as a fiduciary?• Custodian etc may provide prices• Fiduciary remains responsible• Fiduciary required to evaluate pricing
    • Internal controls• Process for determining fair value• Select appropriate valuation method• Identify and support assumptions
    • Practical steps• Obtain SAS #70 report 1. Type 1 report 2. Type 2 report• Caveats 1. Without SAS #70 2. Mutual funds and marketable securities 3. SAS #70 does not cover alternative investments
    • Valuation short cuts that may not work• Custodial reports 1. Valuation date not equal to plan year end 2. Pass through pricing• Certification from custodian or trustee 1. ERISA allows this in certain cases 2. Should state prices are fair value• Hiring an appraiser 1. Relieves some responsibility for fair value pricing 2. Fiduciary still responsible for review
    • Types of audits • Limited scope • Full scope
    • Audit opinions • Unqualified – full scope only • Qualified – possible as a result of missing plan information • Disclaimer – due to limited scope audit • Disclaimer – due to other limitations • Adverse • What opinions will DOL accept on Schedule H? • Good faith effort
    • Common audit pitfalls to avoid • Employee contributions not remitted timely – no safe-harbor for large plans • Incomplete employee files
    • Questions?