Information Sharing Agreements

Are information sharing agreements required to include current approved vendors?

Institutions are not required to enter into an information sharing agreement with an approved vendor. That being said, information still needs to be shared between the approved vendor and the employer to keep the plan in compliance.

Should I have an information sharing agreement with approved vendors even if not required?

The regulations assume that you are already sharing information with your plan’s approved vendors, so an information sharing agreement with them, technically speaking, is not required. That doesn’t mean you don’t have to share information. It just means that it doesn’t have to be incorporated into an information sharing agreement. Certainly, you will want to make sure that you are sharing information with all your approved vendors in order to keep your plan in compliance.

If you have a third-party recordkeeper or perhaps a vendor that is providing an information exchange service for you, you don’t necessarily have to be directly involved in the sharing information with all of your plan vendors. But the regulations make it clear that the vendors cannot rely just on the information provided by the employees.

If we have a currently approved vendor who is later blocked from our program, must we enter into an information sharing agreement with them after they’re dropped from our plan?

This is a question that has been debated with the IRS and among practitioners in this area. We think that the question partly is driven by whether or not you dropped the vendor before or after January 1, 2009. If you dropped the vendor between 2005 and 2009, but you want to allow participants to continue to be able to make transfers to that vendor, you need to get an information sharing agreement. To the extent that transfers are made to an approved vendor that subsequently is dropped, and then you cut off transfers, we think that the right answer is that you shouldn’t need to have an information sharing agreement with that vendor for the transfers already made.

What makes a vendor a vendor?

When we refer to a vendor, we refer to an insurance company that issues 403(b)(1) annuity contracts or an investment company that issues 403(b)(7) mutual funds.

How do we select and approve vendors?

If your plan is subject to ERISA, you have a fiduciary duty to make a prudent decision that the funding vehicles offered by the vendors are suitable for your retirement plan. And then in terms of this new concept of approved vendors, they’ve got to be vendors that are listed in your plan with whom you have a working relationship. If it’s an approved vendor, the IRS has indicated that you don’t need an information sharing agreement with the vendor because you have a relationship with the vendor that essentially does what the information sharing agreement says you are going to do, which is to share information, a back-and-forth working relationship.

Can you explain what a payroll slot vendor is?

A payroll slot vendor is a term that’s used more in the public school K-12 market. In the public school K-12 market, employers generally have a limited number of what are called payroll slots, i.e., a limited number of vendors to which they can actually send contributions. But they permit their participants to transfer accumulations from their payroll slot vendors to other unapproved vendors that do not have payroll slots. So a payroll slot vendor is really a vendor that is approved to accept contributions under the plan. TIAA-CREF generally refers to payroll slot vendors as approved vendors.


How do the new information sharing agreement rules impact former employees who are trying to roll over their 403(b)?

There are two separate rules for transfers and rollovers. The rollover rules apply to those distributions that are eligible for rollover, which means that a participant is entitled to receive a cash distribution from the retirement plan. Those distributions can be directly rolled over to an IRA the participant chooses or they can be rolled over to another 403(b) plan or a qualified plan of another employer that accepts those rollovers.

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