1. 403(b) PLAN COMPLIANCE & IRS AUDITS

2. Matthew Josten, RVP TSA Consulting Group, Inc
Matthew Josten, RVP TSA Consulting Group, Inc

3. 403(b) HISTORY PRE 2009: “WILD WEST” ERA
1958 – IRC Section 403(b) for 501(c)(3) organizations (Annuities only)
1961 – Added Public Education Institutions
1974 – Passage of ERISA added mutual funds
No Plan Document or Information Sharing
Self-Certification by employees
Life insurance policies
Transfers to unauthorized Investment Providers

4. 403(b) HISTORY POST 2009: THE PARTY’S OVER
403(b) Final Regulations issued in 2007, went into effect in 2009:
Plan Document & Plan-level recordkeeping
Investment Provider Information Sharing Requirements
Limiting Transfers to Providers that have agreed to share information with Plan Sponsor
Formal Correction Procedures
Expanded IRS Examinations
Emergence of Third Party Administrators (TPAs)

5. EMPLOYER RESPONSIBILITIES
WRITTEN PLAN DOCUMENT
Must have a Plan Document that specifies all of your Plan’s terms and conditions
Plans with multiple investment providers are expected to adopt a single plan to coordinate administration among the providers
Must keep document up to date
HEART & WRERA amendments (2012)
Must maintain a list of authorized investment providers
New: IRS Pre-Approved Plans (Prototype and VS)
Adopting before end of Remedial Amendment Period (3/31/20) can retroactively correct form defects

6. EMPLOYER RESPONSIBILITIES
Plan Administrator
AXA
American Century
Fidelity
Horace
Mann
VALIC
Voya
Employer
PLAN LEVEL RECORDKEEPING
Aggregate data from all investment providers
Why is this important?
Participant Data
From Providers
Demographic/Payroll Data From Employer

7. EMPLOYER RESPONSIBILITIES
UNIVERSAL AVAILABILITY/MEANINGFUL NOTICE
In general, if you allow one employee to make 403(b) elective deferral contributions, then you must allow all employees
Limited Exceptions:
Nonresident Aliens, Student Employees
Part-time Employees who normally work fewer than 20 hrs./week (1,000/yr.)
Are you tracking actual hours worked? Do you have procedures in place to notify employees who go over?
You must notify employees annually of their ability to participate

8. EMPLOYER RESPONSIBILITIES
MAC LIMITS AND TRANSACTION APPROVALS
Monitor annual contribution limits
Ensure accurate processing/recordkeeping of plan transactions:
Loans, Hardships, Distributions, Rollovers, Transfers, QDROs, etc.)
TIMING OF REMITTANCE
As soon as administratively feasible
No later than the 15th business day of the month following the month in which the amount was withheld

9. 403(b) PLAN AUDITS NATIONAL IRS AUDIT FACTS
IRS audits are a product of the new regulations in 2009
Audit activity has been increasing since 2011
Several releases from the IRS state that audit activity will continue to increase
Our firm has been involved in over public education 403(b)/457(b) audits nationally since 2011
Current years under examination

10. 403(b) PLAN AUDITS AUDIT TRIGGERS Random Low participation rate
W-2 Forms show excess contributions or corrections of excess contributions
Employee complaint

11. 403(b) PLAN AUDITS HOW DO 403(b) AUDITS WORK?
What types of plans will they audit?
How will they notify employers?
What exactly is the IRS looking for?
Are you, the employer, ready to answer their questions?
What alternatives do I have to ensure compliance?

12. 403(b) PLAN AUDITS WHAT TYPES OF PLANS?
Most audits originate with the 403(b)/457(b)
Typical Audit will also ask for any other retirement plans offered by the employer: 401(a), 457(f), Bonus/Incentive Plans, etc.
Many audits ask for review on employment contracts for all types of employees: Superintendent, Board Members, Executive Staff, etc.

13. 403(b) PLAN AUDITS HOW WILL I KNOW?
Notification by letter – regular mail
Problem: Sent to whom? Unrelated department?
Solution: Notify all of possibility in order to ensure proper response
Notification letter is followed by multiple INFORMATION DOCUMENT REQUESTS (IDRs)
Time limit for response – usually three weeks
Working with TPA? Form 2848 must be submitted

14. 403(b) PLAN AUDITS WHAT ARE THEY LOOKING FOR?
Plan Documents for ALL Plans – Up to date?
Eligibility and Participation – Who is eligible? Who is participating?
Evidence of delivery of employee communications regarding Eligibility and Enrollment
Contributions that appear to exceed limits
Loan calculations
Hardship Withdrawals (supporting documents, suspension of contributions, copies of 1099s, etc.)

15. 403(b) PLAN AUDITS WHAT ARE THEY LOOKING FOR?
Copies/reports of 1099s issued for distributions in the year of audit
Remittance files by each payroll
Do remittances match the Salary Reduction Agreement (SRA) on file for each payroll period?
Contribution deposit files from providers
Do the deposits match remittance files?
Are they timely?

16. 403(b) PLAN AUDITS WHAT ARE THEY LOOKING FOR?
Vendor Agreements for the sharing of information (ISAs)
Completion of an employer questionnaire
Entity background, system procedures, plan administration, etc.
Policies and procedures (HR, Benefits, Payroll, etc.)
Staff interviews – new employee orientation, materials given to Subs, etc.

17. 403(b) PLAN AUDITS ARE YOU READY FOR AN AUDIT?
Do you have the home office contacts for your vendors’ compliance departments?
Do you have copies of plan transactions and the supporting documentation?

18. 403(b) PLAN AUDITS ARE YOU READY FOR AN AUDIT?
Do you have copies of loan calculations?
Account balance at time of loan
Previous loan balances
Confirmation of no defaulted loans
Do you have data from vendors?
If no data, do you have a documented log of every call made to verify that transactions were acceptable and compliant?

19. IRS CORRECTION PROGRAMS
SELF CORRECTION PROGRAM (SCP)
Used to correct insignificant operational errors
Eligible operational errors include:
Failure to follow the written terms of the plan
Excluding eligible participants
Loan failures
No notification to the IRS and no fee
Must be done timely (typically before the end of the second plan year after the failure occurred)

20. IRS CORRECTION PROGRAMS
VOLUNTARY CORRECTION PROGRAM (VCP)
Used to correct egregious mistakes with plan document or plan operation
$1,500 for plans with assets of $500k or less
$3,000 for plans with assets of over $500k to $10M
$3,500 for plans with assets of over $10M

21. PLAN ADMINISTRATION OPTIONS
Self Administration
Local Firm
Vendor (data aggregator)
Third Party Administrator – Vendor or Independent

22. Questions
Thank you