Employer
Sponsorship of Section 403(b) Annuity Plans
Tax-exempt
employers such as schools and hospitals frequently become involved in tax
deferred annuity programs for their employees.
These plans are generally governed by Section 403(b) of the Internal
Revenue Code. Because 403(b) plans
can be funded by individual annuity contracts, there may be no employer
involvement in the promotion or funding of such arrangements. However, some employers actively promote 403(b) arrangements
for their employees. Doing so may
trigger duties under ERISA if the employer becomes too involved in such
activities.
To
provide tax-exempt employers some guidance in this area, the Department of Labor
has issued regulations which describe what an employer can do without causing
its 403(b) plan to become an ERISA plan. The
permitted activities include the following:
(a)
permitting annuity contractors to publicize their products to employees
(this would include insurance companies and mutual fund brokers or companies);
(b)
requesting information concerning proposed funding media, products, or
annuity contractors;
(c)
summarizing or otherwise compiling the information provided with respect
to the proposed funding media or products which are made available, or the
annuity contractors whose services are provided, in order to facilitate review
and analysis by the employees;
(d)
collecting annuity or custodial account contributions as required by the
salary reduction agreement, remitting such contributions to annuity contractors
and maintaining records of the contributions;
(e)
holding in the employer=s
name one or more group annuity contracts covering its employees; and
(f)
limiting the funding media or products available to employees, or the
annuity contractors who may approach employees, to a number and selection that
is designed to afford employees a reasonable choice.
Andrew
S. Williams
Aronberg Goldgehn Davis & Garmisa
One IBM Plaza, Suite 3000
Chicago, Illinois 60611
312/755-3145
awilliams@agdglaw.com
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