Delay in 403(b) Regulations

The final 403(b) regulations are being postponed, probably until the Fall of this year. This means that they simply cannot be effective for 2007, which is a good thing. Employers can now take some time to absorb their implications and to adopt a more intelligent approach than simply calling their providers for advice.

With the increasing emphasis on fees (DOL refers to them as Enroning plans, which is not a good analogy, but is a good indicator of attitude ) and behind-the-scenes payments (see the article dated June 20th), there is likely to be a real shakeout in a market based in large part on high fees being used to make payments for endorsements.

I'm not sure I would want to handle that issue and the final regulations all at once, but may will end up doing exactly that. In any event, employers are going to have to start asking questions about fee levels and hidden payments, and this column will focus on how to do that over the next few posts. And, any employer needs to start asking now about how providers will handle issues like:

-How will the written plan document requirement be handled?
-Does a written plan always make the employer a fiduciary? If not, how not?
-How will the provided handle overall limitations when there are multiple products in place or being phased out?
-What are all of the fees and costs between employees and the ultimate investments?
-Are there funds moving around behind the scenes? If so, who is paying, who is receiving, how much are the payments and what are they for?

This is, in fact, a harder issue for plans and arrangements not subject to ERISA, for various reasons. The next entry here will cover them in more detail, but the essence is that ERISA preempts a whole host of state laws that can be applied to money moving around from place to place. Just ask the Enron and MCI/WorldCom executives, and imagine 50 state attorneys general jumping on the bandwagon with Elliott Spitzer.