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geertom

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Everything posted by geertom

  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.
  16. The 403(b) rules permit (a) withdrawals of rollovers at any time, and (2) hardship distributions at any time. This is true even for amounts held in custodial accounts. So the problem is not in the rules, but on the facts. The first question I would ask is whether the custodial account truly prohibits distributions to your friend. They can be long, and none are written for readability. Second, can you bring pressure to bear either on the custodian or on the broker? If their lack of 403(b) knowledge created the situation, threats may help. Third, presumably there is a plan document in place now. What does it say? What does the plan's administrator say? It is not uncommon for the custodial agreement to defer to the plan and its administrator as to distribution eligibility. I would (1) review the custodial agreement word-for-word, then (2) contact whoever is administering the plan for a copy of the plan document, and (3) review the plan document word-for-word.
  17. Yes, if the money is 403(b) money that has been rolled over, and the new plan so provides, which it usually will. As a cautionary note, there is a difference between a rollover and a direct transfer from one plan to another. Distributions rolled over were properly distributable under the first plan, and continue to be so under the new one. However, an amount could be directly transferred when not distributable under the first plan, at which point it would have to be otherwise distributable under the new one.
  18. Yep-- If the $4400 is an employer pick-up, yor HR person is right. If it's a salary reduction/401(k) contribution, TIAA-CREF is right.
  19. Tom: Could you please explain why you think TIAA-CFREF is correct??? Just to bring you up to speed, TW is making a $4400 contribution to a 401(a) qualified plan which not a 401k plan subject to 402(g) but is an state ORP in which employee contributions are excludible from income as an employer contribution under IRC 414(h)(2) but which are not includible as an employee salary reduction contributions under 402(g). See Rev Rul. 81-35. I read the references to "MY" contributions to the qualified/401(a) plan to mean they are salary reduction. If so, TIAA-CREF is correct. If they are employer pick-up contributions under 414(h)(2), then TIAA-CREF is wrong, not because they are not aggregated but because they are subject only to the overall 415 limitation and not 402(g).
  20. 1-Overall contributions are determined at the employer level. Intruder is correct about the control issue, but only as to non-salary reduction contributions. 2-Salary reduction contributions are limited, for 403(b) and 401(a), at the employee level, because both are made under 402(g). 3-457 contributions are wholly separate, except for some interaction between the 457 catch-up and the regular, 414(v) catch-up. TIAA-CREF is correct. If you want to increase beyond one times the limit, you should ask your HR person if they have a 457.
  21. No, they are not coordinated as to employer contributions.
  22. Please calm down. Nigerians have nothing to so with this. It's about derivative securities that are derived from derivative securities and mark to market accounting rules. Every "crisis" promotes rules that address, in some then-current politically correct way, the last crisis. The latest crisis appears to be be based on rules adapted to the last set of political configurations. That doesn't mean it's a real crisis or that the latest rules "a la mode" or "au courant" reflect it in any intelligent or even meaningful fashion the underlying economic realities. The bailout plan, virtually any plan, will eat the low "mark to market" values that are based on short-term market trends and/or panic. Then, more likely than not, the RTC-equivalent will sell off the assets and risks in an orderly and likely profitable manner. The $700,000,000,000 is a nominal/gross figure that has little relationship to the real world. Calm down, be patient, and understand that SOX and mark to market increased the apparent volatility of the market well above the benefit/cost of the actual risks. Whether Brother Buffett approves or not matters not at all. As a reminder to other mere mortals, he is fundamentally an investor in financial institutions. Accordingly, he is subject to the temptation to say what makes his investments cheaper in the short run. And pricier in the long run. Ultimately, the market will sort out risk and give a profit to those, like Buffett and/or the RTC-equivalent, who understand the difference between a trend and a perturbation. FYI, this is from a person who would be perfectly happy to see AIG go down in flames. preferably along with the other insurers who have distorted the 403(b) marketplace by ignoring the plain requirements of 403(b) for written plans and plan-level compliance, for the sake of a buck. The real world is that all the noncompliance has been effectively grandfathered, and we honest souls ought not to react to that by overstating the crisis, such as it is. Tom Geer
  23. Yes. What's the DB plan's funding status? Overfunded? Underfunded? Transition planning dependc heavily on those issues. Tom Geer
  24. In the brave new world of 403(b), compliance services and investments are becoming de-linked. The pattern is going to become more like 401(k) where the TPA handles compliance and a broker handles investments. One very clear thing is that your SD has to pick one outfit to handle compliance. That compliance provider will then have some sort of offering, with attached or semi-attached investment support. Whether and to what extent the primary vendor will tolerate and/or facilitate other investment options is variable. I would say that, as a general rule, the folks who have been TPAs or stock brokers/advisers are likely to tolerate others better, for two reasons. One is that they are more accustomed to investment flexibility within a plan environment (and so have likely better suited systems and business methods). The other is that, frankly, they have to facilitate annuities because they so dominate the market at the moment. As, perhaps, a third reason, the margins in mutual fund are lower and less worth going to the mat to keep. Any time you see a vendor saying the compliance is free, you know it's being subsidized out of existing high margins. So, during the SD's winnowing process you should speak up and say what investments you want to have available, and better yet get some other folks to make up and give the SD a combined list of desired options. To the extent these include mutual funds, you should encourage the development of an open architecture platform to allow the benefits of the daily valuation structure you are used to seeing in the business world. Best of all possible worlds would be a platform that allows you to select to some extent your broker, but more fundamental is to have a competent broker and a daily valuation trading platform. Remember, you may be the only person at the SD with any real plan/investment backgtound. At least in the more developed and effective world of 401(k) plans. Tom Geer I concur that knowing ALL the fees is fundamental, However, insurers don't consider all their fees to be fees. A significant chunk of their internal fees are treated as either part of their internal accounting process or as mortality costs. For a tool to get full fee disclosure, go to the ICI web site and download their fee worksheet.
  25. You may also want to check AMI Benefit Plan Administrators, 800-451-2865.
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