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Retirement Planning > Saving for Retirement > 403(b) Plans

New Bill Could Help Schools Use Multiple Employer Retirement Plans

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What You Need to Know

  • Sen. Maggie Hassan, D-N.H., is one of the original S. 1703 sponsors.
  • A 403(b) MEP plan that included two or more annuity contracts would be treated as a single plan.
  • Rules for church plans would be different.

Three senators have introduced a bill that could expand the market for multiple employer plans (MEPs).

Sen. Charles Grassley, R-Iowa, has joined with Sen. James Lankford, R-Okla., and Sen. Maggie Hassan, D-N.H., to back S. 1703, the “Improving Access to Retirement Savings Act” bill.

S. 1703 would let the schools, charities and other nonprofit employers that offer 403(b) tax-sheltered annuity plans team up with other nonprofit employers to offer their employees retirement benefits through MEPs.

The list of organizations supporting the bill includes the American Council of Life Insurers, the Insured Retirement Institute, the American Benefits Council and the American Retirement Association.

A 403(b) Plan Primer

A 403(b) plan typically looks like a 401(k) retirement plan, but it operates under a different set of rules — Section 403(b) of the Internal Revenue Code, rather than Section 401(k).

The IRS has posted an extensive 403(b) plan information page.

In practice, one big difference is that 403(b) plans are more likely to place assets in annuities.

Some 403(b) plans provide the benefits using group annuities. Others provide the benefits by helping participants contribute money to individual annuities.

Multiple Employer Plans (MEPs)

Congress put the provision creating the MEPs in the Secure Every Community Up for Retirement Enhancement Act of 2019, which is better known as the Secure Act.

The Secure Act MEP provision created a new type of MEP, called a pooled employer plan.

In the past, states and federal regulators had discouraged employers from joining together to offer benefit plans, because some multi-employer plans had suffered from administrative problems.

The Secure Act MEP provision clears some of the regulatory obstacles to use of MEPs and attempts to provide governance standards and other standards that may prevent administrative problems.

S. 1703

S. 1703 would let 403(b) plans join MEPs.

A program manager could treat a MEP for multiple 403(b) plans as a single plan, even if the MEP was formed from two or more annuities.

The bill would not affect church plans.

The bill also includes some changes to Secure Act provisions that are not focused on 403(b) plans. The non-403(b) plan provisions would:

  • Let a  small employer that joined a MEP use the Secure Act pension plan startup tax credit for three years, no matter how old the MEP was.
  • Create a grace period the MEP manager could use to correct administration errors. The grace period would end 9.5 months after the end of the year in which the mistakes were made.
  • Give employers more time to make backward-looking plan changes that increase the participants’ benefits.

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