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Getting your retirement account compliant: A burden and a blessing

By Kevin Kidwell, vice president national tax-exempt sales, OneAmerica®

If your organization offers a 403 (b) retirement plan, then you may have already received — or should be receiving — a notice from your plan provider regarding a new Internal Revenue Service (IRS) document requirement.

For the first time, the IRS has pre-approved prototype plan documents for your type of retirement plans, typically sponsored by 501(c)(3) nonprofit organizations. This IRS plan restatement requirement is happening now as a long-overdue need to mesh plans with operations. The IRS’ goal is simple — to get a certified, model blueprint similar to what protects 401(k) plans and has been available to 401(k) plans for decades. It doesn’t mean if you have a 403(b) plan that your plan is changing or was poorly planned; it just means there will be guardrails.

But time is limited. Retirement plan sponsors have until March 31, 2020 to adopt plan amendments and self-correct their organization’s retirement plan provisions that violate the Internal Revenue Code (IRC) Section 403(b) written plan rules. (You might ask about how many violations there are. When we take over a plan, we typically put them on our document.  During the review process with these new clients we typically see that most (more than 50%) have some sort of compliance issue.  Based on this experience we would expect the same percentage of plans to discover issues as they work through this required restatement.)

As an employer, it’s likely gratifying for you to look out for the welfare of your employees, particularly when it comes to helping them build a retirement. Less enjoyable though may be the administration and compliance of your nonprofit’s retirement plan. As an employer, you have responsibility, however, to work to address the IRS and Department of Labor requirements. It’ll also get you ahead in case of any unexpected audits. Additionally, from a talent recruitment perspective, we think it’ll set you apart as a more desirable company to work for.

Recently I spoke about all these issues as part of a 403(b) panel held at a national industry conference. The panel’s purpose was for attendees, many of whom run or work for organizations like yours, to review and pick panelists’ brains for information and suggestions on how to best deal with the 403 (b) plan remedial amendment period due dates, individually designed plans, and what it means to you all as a plan sponsor.

As I told that group, some employers just don’t have the time to work with their hired advisor. They’re incredibly thin in terms of their human resources staff. But during this remedial amendment period, or restatement period, understanding how your plan is operating, versus how the plan was written and designed, is a required conversation.

Let me give you an example. I was talking with an executive with a large health care organization about the things they go through. She politely didn’t admit that its retirement plan had issues. However, if you don’t have issues, my guess is you haven’t really paid close enough attention to your document or plan.

Most of these plans have some issues. What you’re DOING must match up with your written plan, and in many cases over time, actual practice has strayed from the original draft.  Most plans have some sort of defect they need to clean up.

Here are some examples, borne out of OneAmerica’s experience:

  • Your plan document says you’re going to make a 5 percent employer contribution, but you’ve only been investing 4%. Seems simple, but failure to make correct contributions is a common or repeat issue. And if it has happened to an individual worker, it’s likely happened to others in the workforce.
  • Despite it being a requirement, there is often no effective notice provided to employees that they are eligible to defer part of their salary to invest in an organization-sponsored retirement plan.
  • There is a provision under 403(b) that says if an employee expects to work less than 20 hours a week, he or she can be excluded. However, the challenge is if they go over 1,000 hours annually, the HR professional needs to provide notice of eligibility to the worker. However, that required communication rarely occurs.
  • We have seen nonprofits that fail to file its 990, and it lost its 501(c)(3) status. So, it now maintains a plan that it’s ineligible for.

If you receive a restated plan document that says ‘please sign here’ and return it, that may not be sufficient. 

It takes us on average about 15 hours to work through just the conversations about ‘Here’s what’s your current plan documents say, explain how you’re operating your plan today. Explain to any changes you would like to make.’

For us steeped in these plans, if it takes15 hours, my guess is that you’re going to have at least that much, if not more time, involved in the process.

There’s a lot of behind the scenes operational and compliance detail that you may not be aware of, but you should be concerned about. That gets back to how you want to operate your plan, versus the way you are operating your plan. Additionally, everyone who ‘touches’ the plan needs to be included, from the HR representative to the payroll department. They need to read the document, talk through the plan provisions, and most importantly, know what it means and how to properly operate the plan.


In Kevin Kidwell’s role as vice president of national tax exempt sales, he works to provide ideas, knowledge, information – both technical and practical – in an effort to facilitate improved plan and participant outcomes. Kidwell has held various positions within the Retirement Services division since 1988. Beginning in 2000, his exclusive focus has been on healthcare and tax-exempt organizations.

What can we answer for you?

About the companies of OneAmerica: Tax-exempt retirement plans have been in our DNA since 1964. Of 26 tax-exempt providers profiled in the 2018 PLANSPONSOR 403(b) Buyers Guide in terms of plans served by industry, OneAmerica nationally ranked:

  • 1st in social and community service organizations
  • 4th in charitable organizations
  • 6th in religious organizations
  • 6th in hospital/healthcare

OneAmerica® is the marketing name for the companies of OneAmerica.

Products issued and underwritten by American United Life Insurance Company® (AUL), a OneAmerica company. Administrative and recordkeeping services provided by McCready and Keene, Inc. or OneAmerica Retirement Services LLC, companies of OneAmerica which are not broker/dealers or investment advisors. Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice. • Registered Representative of and securities offered through OneAmerica Securities, Inc., a Registered Investment Advisor, Member FINRA, SIPC.

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