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Changes in 403 (b) regulations provide employer’s with unique opportunities to offer an improved benefit package to employees, increase program management effectiveness, and streamline costs. Through economies of scale, the new 403 (b) regulations will allow employers to actually offer more for less.

By improving the management system of 403 (b) programs, employers, such as school districts, will be able to reduce benefit fees, improve fund performance, strengthen employee services, provide investment advisement, and support complete compliance initiatives and oversight requirements. School districts, and other employers, should follow a menu of new strategies for responding to the new 403 (b) regulations and improving the management of their benefit program.

The initial step that an employer should take is to consolidate or reduce the number of plan providers. This can be accomplished by announcing an RFP for the purpose of soliciting proposals or bids for providing a 403 (b) program. Through an RFP, competitive bidding will result in reduced fees, lower administrative expenses, assistance in compliance requirements, and an improvement in benefits.

In addition, the RFP initiative will allow the employer to limit the number of plans provided rather than supporting a multiplicity of benefit plans. Over the years, the growth of multiple plans have put business benefit offices o overload. Managing an excessive number of plans has generated complexity, confusion, a higher level of administrative responsibility, and the need for greater levels of compliance and oversight. By limiting the number of plans that are available, employees will still enjoy a wide range of available programs and the District will tighten its management capabilities.

The RFP process will help an employer in three distinct ways. First, the RFP award to limited providers will strengthen the employer’s policies as well as employee contract clauses for providing benefits, managing benefits, and investing public funds.

Second, an employer will be able to make better use of the services that are available through a plan provider. Moreover, the availability of such services should be at no cost to the employer. Such services would include scheduled planning for program participants, educational seminars and workshops for staff, and periodic awareness meetings where employees can gain a full understanding of the provided benefits.

Third, the due diligence practices of the employer will be enhanced. This is essential in order to generate taxpayer confidence and to respond to audit reviews.

School districts and other similarly situated employers are encouraged to take a few immediate steps.

Current policies, contracts, and management procedures for 403 (b)’s and other benefits should be reviewed.

A list should be developed of all current benefit providers that details benefits offered, fees charged, and services provided.

Compliance practices should be reviewed in the light of new requirements.

Steps should be initiated for developing a benefit RFP or engaging in provider contract negotiations. The RFP or the contract negotiations should include specifications for fees, services provided to the employer and the employees, compliance requirements, oversight activities, and fund performance reporting.

A strategic plan for benefits that includes goals and objectives should be generated.

And, finally, due to the complexity of the new 403 (b) regulations, an employer should seek the guidance of experienced professionals whose business is benefits, regulatory awareness and tax law understanding.

With professional guidance, there is no reason that the new 403 (b) regulations should intimidate employees. Rather, professional planners with benefit and experience can assist employers in using the new regulations as an opportunity to improve benefit management and employee services.

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Tags: 403(b), 403b regulations, education funding, education planning, edward milliken, school systems

About the Author: Dr. Milliken is President and CEO of EJM Consulting Services, a company that specializes in education and planning services. He retired from public education in 1998 after having completed a 35 year career. He has served as District Superintendent of Suffolk County’s First Supervisory District and Executive Officer of Eastern Suffolk County’s Board of Cooperative Educational Services (BOCES) serving more than 50 school districts.

This entry was posted on Friday, May 1st, 2009 at 8:47 am and is filed under 403(b). You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.