Grasping the New 403(b) Rules

The biggest change for employers will be to maintain a plan document–and this is where advisors have an opportunity to step in and help employers. "This is a fundamental shift away from the employee responsibility to an employer oversight and guidance through the plan and document," Moore said. "The employer is responsible for the contributions and distributions and the oversight of those from their plan."

An area that's caused some confusion is what's known in the 403(b) world as the 90-24 transfer. The transfers, as the industry knew them, were effectively abolished under the new rules as of September 24, 2007, Ohl said. "90-24 transfer really goes back to this idea of a 403(b) being an individual plan." Under the old rules, a participant in a 403(b) plan could move the money accumulated under his employer's program to another individual product offered by an insurance company or mutual fund, Ohl explained. Now, however, while an individual can still perform these individual transfers, it has to be done under what Treasury is calling an "information sharing agreement" in which employers have to approve the investment provider and product that the account is being transferred to. Since there are grey areas concerning the transfers, Treasury plans to issue clarifying guidance. "While the regs are effective in 2009, it covers plans dating back to September 24, 2007," says a Treasury spokesperson. "The clarifying guidance will be on the treatment of those transfers from September 24, 2007, to 2009 and then 2009 and afterwards."

A recent Cerulli report found that 62% of all advisors who work in the retirement plan arena have 403(b) assets, but their average AUM have been small–only $2.3 million. So the 403(b) rule changes present a golden opportunity for advisors.

Washington Bureau Chief Melanie Waddell can be reached at [email protected].