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Who administers 403(b) plans?

We are a small 501(c)3 nonprofit with 6 employees. We have a SEP plan for employees that the company contributes to. We also have a 403(b) plan where employees can contribute to their own 403(b) through salary deductions, and the company does not pay into the 403(b) or match any employee contributions. Only 3 of out the 6 employees choose participate in the

403(b) at this time.

The retirement plan company through which we have these retirement plans set up just started imposing a $110 per month fee to cover their cost of administering the 403(b) plan, including preparing the Form 5500 (I think) for us to sign and submit to the IRS etc.

For the amount of money that the 3 employees contribute to their own 403(b) accounts, the total $110 per month administrative fee to the company seems excessive. So, we are looking to see if we can move our 403(b) plan elsewhere.

Frankly, we don't understand a lot of the language used in this field, but in talking with some retirement plan providers (such as Vanguard), they said that employers can either: 1) handle their own administration of the 403(b) including filing forms with the IRS etc. (probably too complicated for us, in my opinion); 2) hire and pay a "third party administrator" to administer the plan; or, 3) find another company, such as a mutual fund company, that offers 403(b) plans for employers and who will do the administration of a plan like ours for free or at a very minimal cost.

The problem is that we are having a hard time finding companies that can or will do # 3. We are in the process of calling companies such as Vanguard, ING, Fidelity, TIAA-CREF, etc. etc. to ask if they do this -- that is, if they offer 403(b) plans like ours for employers and also handle the administration part (Form 5500 etc) at little or no cost.

So, one question is, can anyone suggest companies that we should try contacting about this so we can move our 403(b) plan to them?

Another question is, since our plan only involves processing the employees' voluntary salary reductions as contributions into their own 403(b) accounts, and our company does not contribute to or match contributions to the 403(b), would it be fairly easy for our company to figure out and do the Form 5500 filings ourselves? There are no issues of top heavy benefits etc. in the

403(b) plan because our company does not contribute to the plan.

Hopefully, I am explaining this correctly. If I need to clarify or explain anything more, I would be glad to follow up.

Thanks.

Reply to
RogerT
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I would never suggest doing a Form 5500 yourself; the penalties if you get it wrong are just too high. For example, while the IRS charges $25 per day if you file the form late, the Department of Labor charges $1,100 per day! In addition, the form now must be filed electronically; no paper filing is available. For your small organization, a better choice might be a SIMPLE: it allows participants to deduct up to $11,500 from their salary to put into the plan. The organization has to contribute 3% of the employees who participate or 2% of the compensation of all employees who earn at least $5,000 in the year. If that amount is smaller than what you've been putting in the SEP, an alternative is to increase employees' compensation so they can (if they wish) put the increase into the SIMPLE. You need to set up the SIMPLE by the end of next month if it is to be effective for 2010; and you can't contribute to the SEP for

2010 if you do this. You have no reporting obligation for a SIMPLE (the SIMPLE custodian does that for you, just as is the case for a SEP). Check with your CPA to make sure you're doing this correctly.
Reply to
Tom Healy CPA

You might try Costco. They have a lot of programs for small businesses. But I'm inclined to agree with the other poster. I'm not a tax practitioner, but I did work for a benefits consulting firm for

7 years and have my certification in Employee Benefits. My certification predates most of the newer plans like SIMPLE and SEP, but those plans are out there mostly for your precise situation.
Reply to
Hank Youngerman

Thanks. I agree that doing the Form 5500 on our own seems like a bad idea.

We want to be able to keep contributing to the SEP plan since that is a direct benefit to all employees and already amounts to more than a SIMPLE plan would allow -- and we know we can't do both. We'll probably just keep searching for other retirement fund providers to see if we can do our 403(b) through them.

I know the new regulations (including the electronic filing of the Form

5500) were put in place to protect employees, but the end result is that it tends to make us want to drop the 403(b) plan and it discourages employers from wanting to offer a 403(b) plan.
Reply to
RogerT

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