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NAGDCA Note: 403(b) Plans: A look at Compliance Third Party Administrators and Fiduciaries

Effective January 2009, the IRS issued final regulations for reform of 403(b) plans. The changes require plan sponsors to take on far greater oversight and administrative responsibilities of these plans. The regulations require that 403(b) plans maintain a written plan document that includes the requirements of Internal Revenue Code (IRC) 403(b). The document is the manual for operating and administering the plan and must be updated to comply with any IRC changes.

Governmental plans are exempt from ERISA so fiduciaries must comply with state statutes and plan documents. A fiduciary is:
  • Anyone named in the plan document as a fiduciary
  • Board or committee members as well as plan administrator and trustees
  • Fiduciary status is based on the functions performed, not just a person's title. Fiduciaries are anyone who:
–        Exercises discretion over plan assets
–        Develops rules and procedures necessary to operate the plans,
–        Administers or operates the plans, or
–        Selects and/or monitors service providers and investment options.

Plan compliance is the responsibility of the plan sponsor, but some may use an assisted compliance model where a vendor or compliance third party administrator (Compliance TPA) coordinates compliance with assistance from the employer.  What does a Compliance TPA do?  The Compliance TPA may serve as the central point for all plan administration activities in multiple vendor or multiple plan environments. They serve as an interface between the employees, vendors, beneficiaries, employer, insurance agents, and often times with the IRS.
For additional information, visit the 403(b) Resource Center to watch NAGDCA's 403(b) pre conference workshop videos from the 2012 Annual Conference.   Other compliance resources and 403(b) information can also be found in the 403(b) Resource Center.
Additional Resources:
NAGDCA created a glossary of terms for 403(b) plan administrators, the glossary can be found at
The IRS has issued a 403(b) Checklist which plan sponsors can use as a quick tool to assist in testing for overall compliance.
The IRS created a brochure that outlines features of 403(b) and 457 retirement plans in an easy-to-read chart.
Neither NAGDCA, nor its employees or agents, nor members of its Executive Board, provide tax, financial, accounting or legal advice. This memorandum should not be construed as tax, financial, accounting or legal advice; it is provided solely for informational purposes. NAGDCA members, both government and industry, are urged to consult with their own attorneys and/or tax advisors about the issues addressed herein.


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