Synod Provides WELS Organizations a Solution
to New 403(b) Regulations

In July 2007, the IRS released final regulations under Section 403(b) of the Internal Revenue Code (the "Code"). The regulations are effective January 1, 2009. Congregations and schools need to be aware that the new regulations require employers monitor certain aspects of the 403(b) arrangements in which their employees participate or to which they contribute on behalf of their employees.

A Code section 403(b) arrangement is a retirement savings vehicle that is available to employees of tax-exempt organizations. The most common forms of Code section 403(b) arrangements may be referred to as "tax-sheltered annuities" ("TSAs"), "tax-deferred annuities" ("TDAs"), or "403(b)(7) accounts."

The following are some of the key provisions in the new regulations.

  • If a worker wants to transfer funds directly from a 403(b) arrangement with one vendor to 403(b) arrangement with another vendor, the transfer may only be made to a vendor authorized by the employer.
  • Workers may only transfer funds to vendors that have information sharing agreements in place with the employer.
  • The employer must monitor worker contributions to the 403(b) to ensure that contributions do not exceed statutory limits.
  • The employer must work with each 403(b) vendor to verify that a worker is entitled to a distribution (for example, upon termination of employment). In addition, if the 403(b) arrangement permits loans and the worker applies for a loan, the employer must work with the vendor to ensure that the worker is entitled to a loan based upon the applicable loan limits. Similarly, if the 403(b) arrangement permits hardship withdrawals and the worker applies for a hardship withdrawal, the employer must work with the vendor to verify that the worker has experienced a hardship that entitles the worker to the withdrawal.

The new regulations generally require that an employer have a written plan document for a 403(b) program. WELS churches, elementary schools, and secondary schools are exempt from this "written plan" requirement unless they maintain a relatively unusual 403(b) arrangement known as a "retirement income account" or "403(b)(9) plan." While there is no "written" plan requirement in the July, 2007 regulations for "church organizations", there remain employer fiduciary responsibilities in the guidelines on how the funds are to be invested, vesting requirements, universal availability, and provisions that indicate whether or not loans and hardship withdrawals are permitted.

WELS has partnered with AUL a OneAmerica to customize a 403(b) solution for synodical and member organizations known as the Shepherd Plan Solution (SPS). Wisconsin Ev. Lutheran Synod and the Evangelical Lutheran Synod are providing their respective member organizations an alternative to having "standalone employer-administered 403(b) plans. Under this solution, known as the Shepherd Plan Solution (SPS), WELS and ELS organizations will have their own plan documents, but share a common investment platform, administrative services provider, and financial consulting services group. Discounts available from cumulative invested dollars will be tracked as if all WELS and ELS organizations were operating under one master plan.

No WELS or ELS organization is required to have a plan under SPS, but would have SPS as a viable option to maintaining a separate employer-administered 403(b). Through economies of scale there would be lower overall costs to participants in SPS family of plans than having a stand-alone plan. Further, a group plan such as SPS will assist each member plan in meeting its fiduciary responsibility under the 403(b) regulations by having a disinterested third party administrator ensuring all regulations are being properly interpreted and followed.

AUL a OneAmerica, the 403(b) provider of choice, provides an extensive investment platform in the Plan's "bundled" concept that teams up their platform of investments to GoldLeaf Partners and the Hahn Financial Group, Inc. Goldleaf Partners, a national retirement consulting and administrative firm will provide recordkeeping, administration and consulting services for 403(b) arrangements coming under the Shepherd Plan Solution. In addition the Hahn Financial Group, Inc. headquartered in Sioux Falls, SD has been selected to be the advisory firm for the arrangement and will utilize AUL OneAmerica's 403(b) platform.

GoldLeaf Partners will develop plan documents for each WELS and ELS "employer" organization that elects to participate in the Plan.

Employers will fit into the following categories:

  1. Employers not offering a 403(b) plan (none of the workers in an organization are currently contributing to a 403(b) plan) – minimal to no action required.
  2. Employers offering SPS only – minimal action required. Communication, enrollment processing, and individual counseling provided by the Plan's service team.
  3. Employers offering at least one 403(b) provider other than SPS – employer action required – Legal advice recommended.

Employees and called workers throughout WELS and ELS who participate in their employer's SPS plan will be able to maintain their accounts when relocating to another WELS or ELS organization that also maintain a plan under SPS. GoldLeaf Partners will work with the employee to assure smooth transition to another member plan or work with the calling body on establishing a new plan under SPS.

About Goldleaf Partners

Goldleaf Partners is a leading retirement consulting and administration firm that provides audit, sales support, administrative and educational services to a national client base. Goldleaf Partners supports institutional clients and advisors developing and maintaining effective plan design and retirement sales strategies. For more information, please visit www.goldleafpartners.com or call (218) 824-6119.

About Hahn Financial Group, Inc.

Hahn Financial Group, Inc. is an independent financial services firm offering investment advisory services, headquartered in Sioux Falls, South Dakota. Certified Financial Planner, Verlyn E Hahn,  WELS member and owner of the Hahn Financial Group, Inc. has more than 23 years of experience in the financial services industry. For more information, please visit www.HahnFinancialGroup.com or call (605) 275-3600.

More information on the Shepherd Plan Solution, 403(b) regulations, plan documents and service agreements will be forthcoming over the next few weeks. Webinars, web-based materials, VRU and printed materials are being developed to educate and enroll individuals that meet eligibility requirements under an employer organization.

Please feel free to direct your questions or comments to HRO@sab.wels.net.

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