1.
Determine if all annuity contracts and custodial account
agreements incorporate required provisions on (a) vesting, (b)
nontransferability, (c) limits on elective deferrals (currently
$15,500), (d) minimum required distributions (Code Section
401(a)(9)), (e) direct rollover options for participants, and (f)
limits on any permissible annuity contract death benefits.
Also make sure current annuity contracts do not include life
insurance or endowment contracts (pre-September 24, 2007
arrangements are grandfathered).
2.
Determine if service providers will assist in the preparation of
compliant plan document(s) to assure implementation by December
31, 2008. No retroactive plan amendments are permitted under
the final Section 403(b) regulations, so the revised plan
documents must be formally adopted by the compliance deadline,
typically December 31, 2008.
3.
Determine if service providers will make written disclosures in
accordance with Department of Labor fee disclosure regulations
proposed on December 12, 2007 in advance of entering into any
service agreement. These disclosures will assist plan
fiduciaries who are charged with determining that the plan pays
only fees which are "reasonable" in amount. Such
disclosures include:
(a)
All services provided and, with respect to each service, the
compensation and manner of payment (will compensation be billed
to the plan or deducted, either directly or indirectly, from
plan investments, through "revenue-sharing" with mutual
funds or otherwise);
(b)
The identity of any affiliates, subcontractors and any other
parties that receive any compensation charged against plan
investments or charged on a transactional basis (such as
finder’s fees, brokerage commissions and "soft dollar"
expenditures) and the amount of such compensation;
(c)
Whether or not the provider (or an affiliate) has a financial,
referral or other relationship with a money manager, broker,
other client of the provider, other service provider to the plan
or any other party that may create a conflict of interest in
performing services for the plan;
(d)
A description of any incentive, performance based, float or
other contingent compensation that the provider may be able to
earn; and
(e)
A disclosure of the provider’s policies or procedures to
address conflicts of interest and to prevent those conflicts
from being a factor in performing services for the plan.
4.
Determine if service providers will warrant compliance with fee
disclosure regulations and the reasonableness of fees in any
service agreement, and indemnify employer and other plan
fiduciaries with respect to any noncompliance.
5.
Determine if any service provider will assist with the selection
and monitoring of plan investment options as the plan’s
designated "investment manager." Consider engaging a
financial institution to serve in this capacity in order to
diminish the fiduciary responsibilities of the employer or plan
administrator who are otherwise charged with selecting and
monitoring plan investment options.
6.
Determine if any service provider is rendering investment advice
to participants and, if so, will provider agree to formally act as
a fiduciary advisor pursuant to an "eligible investment advice
arrangement" including a requirement that the provider render "objective" investment advice not tied to incentive
compensation.
7.
Section 403(b) plans subject to ERISA that have 100 or more
participants must have an annual financial audit beginning with
the 2009 plan year. This audit will be a component of the
plan’s annual report on IRS Form 5500. Private auditors
need to begin compiling comparable data before the end of the 2008
plan year. Determine if any internal procedures need to be
changed to facilitate the compilation of data for purposes of the
annual audit.
