This post discusses some of the interesting and special rules and laws that govern the retirement plans established by Indian tribal governments (ITGs). Concerns over state and local government sovereignty caused Congress to exempt the plans of state and local...
Like their private sector counterparts, governmental retirement plans (e.g., defined benefit, 401(a), 457(b), and 403(b)) are all subject to the general retirement plan rules pertaining to “required minimum distributions.” The good news is that several recent law...
Having more 457(b) or 401(a) plans than you really need can create administrative headaches, cost participants unnecessary fees, and sometimes result in “excessive” participant loan situations. If an employee participates in a 457(b) or 401(a) plan, it is likely that...
Although many people think that governmental section 457(b) plans and private sector 401(k) plans are the same – because they both allow pre-tax deferrals of similar amounts of income – they are not the same. Due to their differing origins, their rules and...
As previously discussed, a public agency that does not have a section 218 agreement has a choice of participating in Social Security or providing a Social Security Replacement Plan (SSRP). Although many California local governments rely on CalPERS as their principal...
Just the other day, a public agency client contacted us to find out what to do with a participant’s 457(b) plan deferral election following the participant’s untimely death due to COVID. As with most cases, cities and special districts would owe the former employee...
The vast majority of public agencies already maintain a 457(b), or eligible deferred compensation plan. A much smaller number also maintains one or more 401(a) plans in addition. This post discusses some of the reasons a public agency might want to add a 401(a) plan...
Most public agency defined contribution plan sponsors can easily recall the current amount being contributed to participants in their plan; however, not all can tell you “how” the contribution is being allocated amongst the participants. The distinction between a...
Although financial industry reports reveal that more and more plan sponsors are offering managed account options, it is not clear that public agency 457(b) and 401(a) plan fiduciaries understand their responsibilities to select and monitor these investment options....
Recently announced changes in the IRS-sponsored Voluntary Compliance Program (VCP) may encourage public agencies with known plan compliance problems or defects to apply this calendar year under Anonymous VCP, before that option is replaced in 2022. As part of its...
Quite often, a review of the participant status within an agency’s 401(a) and 457(b) plans will reveal that the plans have a large number of dormant accounts – accounts relating to previously terminated, deceased, or divorced employees (who have divided their accounts...
Previously, we have discussed a number of the do’s and don’ts of switching plan providers, such as investment advisors and recordkeepers. This post focuses on why plan sponsors, plan administrators and plan recordkeepers all should take greater care in reviewing plan...
By Jeff Chang Investment fiduciaries and plan administrators of California public sector 457(b) and 401(a) plans are required by law to act as “prudent experts” for the sole and exclusive purpose of providing benefits and defraying “reasonable expenses” of...
By Jeff Chang In earlier posts, we discussed the plan documents you should keep as well as some of the policies and procedures you will need to properly maintain and administer your governmental 401(a) or 457(b) plan. This post discusses the participant-level records...
By Jeff Chang As we previously explained, most public agencies are not automatically subject to Social Security. They have a choice between voluntarily participating in Social Security pursuant to a section 218 agreement, or they can exempt some or all of their...
By Jeff Chang Many public agencies have come to sponsor and maintain multiple 457(b) plans, which can unnecessarily increase the compliance burden as well the fees paid by participants. Although the human resource and finance managers who typically oversee these plans...
By Jeff Chang Whenever you engage a new recordkeeper for your governmental 457(b) or 401(a) plan, the plan sponsor will be asked to complete, sign and return an authorized plan representatives form (APRF). The APRF designates the so-called “contact persons” and the...
By Jeff Chang If you are responsible for the administration of a public agency 457(b) or 401(a) plan, you know that these tax-favored plans are complicated and subject to myriad rules and requirements found in the plan document, the Internal Revenue Code (and related...
By Jeff Chang In California, charter schools are public schools that do not charge tuition or impose special entrance requirements, but are generally operated on an independent basis from local school systems. Because of the “public” nature of these schools and the...
By Jeff Chang Many cities and their retirement plan investment advisors believe that the city must periodically issue an RFP for defined contribution plan recordkeeping or investment advisory services in accordance with the city’s RFP policy or ordinance. Having...
By Jeff Chang Many public agency 457(b) plans offer a stable value fund investment option. When a plan moves to a new 457(b) plan recordkeeper, the plan’s investment lineup will usually change. In those cases where the lineup includes a stable value fund, the plan’s...
By Jeff Chang In addition to properly identifying your retirement plan fiduciaries, and substituting a knowledgeable administrative committee in place of your governing board or council, California local agencies also need to consider whether the meetings of their...
By Jeff Chang A surprisingly large number of public employees accept appointment as the plan administrator, or a member of the administrative committee, for their agency’s 457(b) or 401(a) plan. An explanation of the typical duties and responsibilities of a plan...
By Jeff Chang There is a novel recordkeeping and plan investment arrangement for governmental 457(b) plans that could create a number of problems for the plan’s sponsor, fiduciaries and participants. There may be a significant number of these arrangements throughout...
By Jeff Chang Based on numerous requests for plan documents from public agency clients, we know that many cannot find complete sets of their historical and current retirement plan documents that are properly authorized, signed and dated. If this sounds like you,...
By Jeff Chang As the harsh realities of the coronavirus pandemic, along with its widespread impact on all aspects of daily life, continue to shock and numb us all, many cities have already been identified as “high risk” from a financial stability perspective by the...
By Jeff Chang As many California public agencies are forced to furlough employees during the COVID-19 pandemic, questions arise as to how furloughs are treated for retirement plan distribution rules’ purposes. Let’s begin with a bit of terminology: What is a...
By Jeff Chang Although many employers plan to make changes to their retirement plans to take advantage of employee-friendly CARES Act provisions, public agencies should not blindly adopt recommended changes without thinking about the steps involved. The last Focus on...
By Jeff Chang As expected, the recently enacted Coronavirus Aid, Relief, and Economic Security Act contains provisions providing affected workers with greater, more tax-favored, access to portions of their retirement savings. Although it will be possible to make...
By Jeff Chang During the Coronavirus emergency, it may make sense for state and local governments that sponsor 457(b) plans to allow their employees to access the monies in their accounts as unforeseeable emergency distributions. Not all governmental 457(b) plans...
By Jeff Chang Many governmental 457(b) deferred compensation and 401(a) defined contribution plan sponsors do not take full advantage of the contribution limits for these plans. To do this, you need to understand: the limits, who they apply to, how they coordinate and...
By Jeff Chang There are several fundamental principles and concepts that governmental plan sponsors and fiduciaries need to bear in mind as they select and monitor their plan providers and the fees that these providers charge. Practically all governmental plan...
By Jeff Chang With very few exceptions, the rules governing governmental 457(b) plans require a "severance of employment" to occur before a distribution can be made. Recently, we came across yet another of those arcane, little-known rules that will likely trip-up...
By Jeff Chang A section 218 agreement is an agreement between a state (or its local governments and instrumentalities) and the Social Security Administration providing for participation in Social Security and/or Medicare for designated groups of employees....
By Jeff Chang Many state and local governments are aware that the Internal Revenue Code was changed in 1986 to prohibit most of them from maintaining a 401(k) plan. Instead, these entities can and — for the most part, do — maintain eligible deferred compensation...
By Jeff Chang Recently, we have dealt with an "epidemic" of retirement plans, both very large and very small, that all have the same problem – the lack of a proper fiduciary structure. Why? As with so many personnel and benefits-related programs, new managers and new...
By Jeff Chang Many public agencies' 457(b) plans, where all fees are paid by the plans, may be neglected for years or even decades. And while this neglect may not cost the district or the city any more money, it is definitely costing plan participants. Recently, we...