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geertom

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  1. geertom

    403 B Blues

    So the bonds are bond funds. There are different rules for distributions of different kinds of money. For money invested in mutual funds, hardship distributions are available only for employee, salary reduction contributions. It sounds like this is the case, but you should confirm that because employer contributions in mutual funds simply can't be distributed on hardship. If all contributions were salary reduction, then the next question is whether or not the custodial account agreement under which the mutual funds are held allows for hardship distributions. The reality of mutual fund investments is that the mutual fund issuer and/or broker have much thinner margins than annuity issuers, and cannot afford the time and effort involved in making hardship determinations. So don't be surprised if the custodial account agreement simply does not allow hardship distributions. If the agreement does allow hardship distributions, then, and only then, do you come to the question of who makes the determination. The broker/fund family probably won't because, again, they can't afford to get into that business. And, under the 403(b) regulations, you can't make the determination. If your employer is taking the position that they are not involved and that the money doesn't have to be on the employer's Form 5500, this means that you, and not your employer, have the legal enforcement rights under the custodial agreement. They cannot, if that is the case, make the determination. So, there is nobody to make a hardship determination. That's why the individual custodial account agreement probably doesn't allow hardship distributions. I have two other approaches for you. First, you have attained age 59-1/2. This means that the law, and almost certainly the custodial account, allow you to receive money without regard to hardship. All you need for this is a birth certificate. Second, employers like to tell people they are on layoff, not terminated. It's an HR PR thing. If you are not getting any pay or any benefits (other than COBRA you pay for) and have no definite return time, you have a severance that entitles you to distributions. Your employer should be willing to certify to that. Tom Geer
  2. geertom

    403 B Blues

    Do you know whether the money is invested in an annuity or in mutual funds? Have you contacted the issuing insurer or mutual fund/brokerage directly? Tom Geer
  3. This is an area where simple answers may be wrong. To assess fee levels and sructures, you have to look at the totality of circumstances. Congress, IRS, DOL, etc., in their infinite wisdom, have imposed many layers of regulation on retirement plans, and somebody has to pay for compliance. So a higher-cost share class may be an indirect way of paying these costs if, e.g., the issuer is subsidizing plan operational costs through sub-TA fees that reduce, explicitly or not, the plan's overt expense load. Lower fees are a good thing, when we are looking at total fees. However, an urge to look at one component only may be counterproductive. And reduction below the true cost of operations is going to result in noncompliance. The DOL fee disclosure regulations, while not perfect, focus on total fees and conflicts. That's a good start. Tom Geer
  4. And about time. In particular, the latest fee disclosure regulations will begin showing fee levels and structures for ERISA 403(b) plans and will, indirectly affect non-ERISA plans.
  5. With apologies to President Clinton, what do you mean by "do?" Documentation? Investments? Administration? Tom Geer
  6. Is the plan subject to ERISA? Is the employer governmental or church-related? Do you want a 3-year wait in employer contributions only or on salary reduction employee contributions? How would I know about ERISA? It is a non profit, not gov't or church related. end of 3-year wait on employer contributions only. Whether or not a plan is subject to ERISA is a basic threshold issue in most questions related to403(b) plans, and it is here. However, based on your response, I am going to assume that ERISA does apply. If so: ERISA does not allow a plan to require a service-based waiting period of more than two years of service. And then only if contributions are fully vested, which is likely the case in a 403(b). So, no. Note that this is two years of service, not two years, so the wait can, for part-time or seasonal employees, end up being be forever. Note also that this is an "ordinary" year of service under ERISA and for qualified plans, not a 403(b) year of service, which has other roles in 403(b), basically limited to how one calculates compensation and to catch-up calculations and means a full-time equivalent year of employment. The rules for salary reduction contributions are much more restrictive on design, based on the premise that you can exclude part timers.This of course, has a different meaning than under the year of service rules. Tom Geer
  7. Is the plan subject to ERISA? Is the employer governmental or church-related? Do you want a 3-year wait in employer contributions only or on salary reduction employee contributions?
  8. Yes. 403(b) allows both salary reduction and employer contributions.
  9. The Wall Street Journal has an article on conversions to church plan status, and an IRS project requiring some form of participant notice on conversion. Interesting read. http://online.wsj.com/article/SB1000142405...0632243300.html Tom Geer
  10. Yep, this is a sad day. Coach Wooden showed us all a model of the pursuit, and attainment, of excellence without arrogance, of the pursuit of personal growth without pride. Perhaps the only counterpart in our culture is the father in To Kill a Mockingbird, the best s###### in the county who never mentioned it to his kids. The most impressive thing I ever heard him say was that after a game observers of the team should not be able to tell whether they had won by a little, won by a lot or lost. A close second was that he liked to watch his kids play so that he could see how well he himself had done during practices. Tom Geer
  11. Tony's right that mutual funds have a hard time going bankrupt. At the least, we need more facts. Is the plan subject to ERISA? Are the investments mutual funds or annuities? Are we talking about the investment provider going bankrupt or the administrator? Are there church organizations involved, and if so is there a retirement income account involved?
  12. I apologize for giving you a sloppy answer. The position is probably correct, but not safe to act on. 1.403(b)-3(b)(3)(iii) is the basis for this view. However, as I review the regulations overall, this is uncertain. First, the TIAA-CREF analysis assumes that annuity contract means actual annuity or custodial account. However, the definition of annuity contract also includes retirement income accounts, so at best 1.403(b)-3(b)(3)(iii) is poorly drafted. While poor drafting is ordinary in the regulations, that poor drafting nonetheless creates uncertainty. For example, does annuity contract mean annuities or annuities and custodial accounts? Remember, under the annuity contract definition, both custodial accounts are "treated as" annuity contracts. Also, note that 1.403(b)-5 includes the following: "© Plan required. Contributions to an annuity contract do not satisfy the requirements of this section unless the contributions are made pursuant to a plan, as defined in §1.403(b)-3(b)(3), and the terms of the plan satisfy this section. (d) Church plans exception. This section does not apply to a section 403(b) contract purchased by a church (as defined in §1.403(b)-2)." To the extent (d) refers to ©, it would seem to be unnecessary if the TIAA-CREF reading is correct. This also makes me hesitant. The TIAA-CREF view is the more common one, and in my view correct, but I do not regard it as absolutely certain. In addition, I do not view the written plan requirement as onerous or as risking the application of ERISA to church plans, since there is a specific set of rules on how to become a nonelecting church plan that have nothing to do with whether or not there is a plan document. And, absent a written plan, whole subjects like what contracts are permitted, how to merge or terminate plans, contract exchanges, and allocations of responsibilities are undetermined. Note that the contract exchange and merger, among other, rules both specifically require authorization in the plan document, which won't be present if there is no plan document. Given that, a plan document is a practical necessity even if the more common view is correct. If I were on audit, I would certainly take the position, but if (or rather, even though) it is technically true, the inference from the bare rule that you really don't need a plan document is wrong. Last, the existence of the retirement income account option is too tempting, The RIA allows other investments, and it avoids the application of the additional restrictions on custodial accounts for mutual funds purchased within the RIA. Nor are transfers among investments held in the RIA subject to the rules on contract exchanges. There are no technical disadvantages, and I therefore believe all church plans should have their assets held in an RIA. Tom
  13. Nope, no exemption. Churches need specialized documents because their rules are different, but they need documents. Also, all churches should use retirement income accounts, because they can invest in anything and they are not subject to the additional distribution restrictions placed on custodial accounts. Tom Geer
  14. geertom

    457b Loans

    Yes. But only from governmental plans. Tom Geer
  15. 457(b) contributions are not subject to income taxes but are subject to FICA taxes. This is true whether the contribution is by the employer or via salary reduction.
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