Terminating 403(b) Plans: IRS Rules, Fiduciary Liability, Distribution of Assets, Required Notices to Participants

Note: CPE credit is not offered on this program

Recording of a 90-minute premium CLE video webinar with Q&A


Conducted on Wednesday, June 23, 2021

Recorded event now available

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Course Materials

This CLE course will guide ERISA counsel and fiduciaries on the complex rules and pitfalls to avoid terminating a 403(b) plan. The panel will discuss ERISA rules and requirements for plan terminations, recent IRS Revenue Ruling 2020-23 and Notice 2020-80, distributions upon termination, annuity and consent rules, and other critical items.

Description

Employers who maintain a 403(b) plan may decide to terminate their 403(b) plan. However, superior knowledge of ERISA and IRS rules is required to terminate the 403(b) plans formally. Failure to do so will continue to subject employer plan sponsors to maintaining plan document compliance and the filing of reports and notices with the government and participants.

Generally, 403(b) plans are available to public schools, cities, townships, tax-exempt organizations, or churches. These employers must invest plan assets in annuities, mutual funds, and retirement income accounts. Formal termination includes corporate action to terminate the plan followed by distributing the plan assets according to Treas. Reg. Sec 1.403(b)-10(a)) as soon as possible. However, individual or group annuity contracts or individual or group custodial accounts, described in Code Section 403(b)(7), fund the accounts, complicating distributions and terminations.

Rev. Rul. 2011-7 provided guidance on annuity contracts distributions, holding that they can be deemed to be distributed by delivery to participants or beneficiaries of an individual annuity contract or under a group annuity contract. Recently, the IRS issued Rev. Rul. 2020-23 and related Notice 2020-80 distribution procedures for custodial accounts maintained under Code Section 403(b)(7).

Listen as our panel discusses the rules and requirements for 403(b) plan terminations, recent IRS Rev. Rul. 2020-23 and Notice 2020-80, distributions upon termination, annuity and consent rules, and other critical items.

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Outline

  1. Legal implications and risk when terminating 403(b) plans
  2. Recent IRS guidance
    1. Rev. Rul. 2020-23
    2. IRS Notice 2020-80
  3. Annuity and consent rules
  4. Distributions upon the termination of 403(b) plan
  5. Administrative pitfalls and liability

Benefits

The panel will review these and other key issues:

  • What are the legal implications and other risks when terminating 403(b) plans?
  • What are the key provisions of IRS Notice 2020-80 and Rev. Rul. 2020-23?
  • What are the annuity and consent rules and potential challenges?
  • How can you ensure compliance and avoid administrative issues for distributions upon 403(b) plan termination?
  • What are the other administrative challenges to avoid potential liability?

Faculty

Levine, David
David N. Levine

Principal
Groom Law Group

Mr. Levine advises plan sponsors, advisors, and other service providers on a wide range of employee benefits matters,...  |  Read More

Mysiewicz Gill, Sarah
Sarah Mysiewicz Gill

Attorney
Groom Law Group

Ms. Mysiewicz Gill advises clients on issues relating to taxation and employee benefits in both the public and private...  |  Read More

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