Are Plan Administrators Prepared to Meet the New Regulatory Requirements?

David P. Richardson, Ph.D.
Principal Research Fellow
TIAA-CREF Institute

Paul J. Gallagher

February 2010 |

In July 2007, the IRS issued the first comprehensive guidance for 403(b) defined contribution pension plans in more than 40 years. Additional regulations on Form 5500 reporting have been issued by the Department of Labor (DOL) within the past two years that also impact 403(b) plan administration. Several of the new regulations have major consequences for 403(b) plan sponsors, requiring changes in both plan design and administration. To better understand the effect of the new regulations on plan compliance, the TIAA-CREF Institute recently conducted a survey of more than 400 plan administrators at not-for-profit and governmental institutions with 403(b) plans. The results indicate that nearly three-quarters of respondents believe they are fully compliant with the new IRS and DOL regulations. However, nearly half also acknowledge that they have difficulty simply understanding the regulations. The lack of confidence in understanding the new regulations is most pronounced around two issues—the new standard of compliance and evolving fiduciary responsibilities and sponsors’ readiness for annual plan audits. Respondents note that plan loans and hardship distributions are especially problematic. Few respondents appear to have the capability of coordinating loans and hardships through multiple third-party plan vendors and then monitoring total activity through a consolidated report. Only half of the institutions with 403(b) plans subject to DOL Form 5500 information reporting believe they are familiar with the associated requirements—a situation that could result in penalties for those plan sponsors.

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