403(b) Plan Sponsors Roles

Despite the headlines that frequently discuss 401(k) plans and their fees, the dirty little secret is that the not-for-profit 403(b) world is also rife with liability and in many cases, hasn’t been a focal point for Plan Sponsors until recently. A rash of institutions of higher learning faced litigation recently which shined a light on the processes that Plan Sponsors should have in place.

In those lawsuits investment line-ups, administrative fees, committee benchmarking and other items were targeted. Originally 403(b) plans were invested in annuities. For those ERISA 403(b) plans that allow custodial accounts (e.g. mutual funds), sponsors started to add choices. Just like their 401(k) cousins, many of the issues with plan management had been overlooked over the years as fund line-ups expanded and multiple recordkeepers were allowed.

Unfortunately the 403(b) Plan Sponsor has challenges that his for-profit peers do not. Their plan may have individual contracts. Those assets might be tied to onerous surrender charges. A recordkeeper switch might involve convincing long terminated employees to rollover their account. The challenges are many but in the coming weeks we will highlight some of the best practices.