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As a result of rulings on motions to dismiss within a day of each other (May 10 and 11, 2017, respectively), Emory University and Duke University must continue to defend claims challenging aspects of their Section 403(b) retirement plans in plaintiffs’ proposed class actions: Henderson v. Emory Univ., N.D. Ga., No. 1:16-cv-02920-CAP; and Clark v. Duke Univ., M.D.N.C., No. 1:16-cv-01044. As we have previously reported, these cases are two out of a series of twelve proposed class actions filed against the retirement plans of 12 prominent American universities, challenging various aspects of plan management, including excessive fees and fiduciary prudence.

Multiple Universities Sued Over 403(b) Retirement Plan Investment Fees

In the last several days, a number of large private universities have been sued regarding the investment fees in their 403(b) retirement plans. The lawsuits claim that these universities breached their fiduciary duties under the Employee Retirement Income Security Act (“ERISA”) by allowing excessive fees to be charged to plan participants. All but one of these lawsuits has been filed by the same plaintiffs’ law firm. These lawsuits are, with some critical differences, similar to the many retirement plan fee lawsuits that were filed against corporate 401(k) plan sponsors over the past 10-15 years, some of which settled for very large amounts.

SEC Issues Rule 482 No-Action Relief to Non-ERISA 403(b), 457 Plans

The Securities and Exchange Commission (SEC) issued a no-action letter extending relief to certain investment-related information provided to participants in non-ERISA 403(b), 457(b), and other qualified participant-directed retirement plans.

IRS Releases Revised Retirement Plan Correction Program Including Important New Guidance for 403(b) Plans

On December 31, 2012, as Times Square in New York was getting ready to drop the crystal ball, the Internal Revenue Service (IRS) dropped long-awaited guidance regarding retirement plan corrections in the form of Revenue Procedure 2013-12. This Revenue Procedure updates the Employee Plans Compliance Resolution System (EPCRS), which includes the Voluntary Correction Program (VCP), and provides guidance on methods available to sponsors of tax-qualified retirement plans to correct operational and plan document errors in order to preserve a plan’s tax-qualified status. Rev. Proc. 2013-12 provides crucial relief for 403(b) plans and a potpourri of other enhancements and clarifications to EPCRS, which was last revised in Rev. Proc. 2008-50. EPCRS provides three correction programs known as: (1) Self-Correction Program (SCP); (2) VCP; and (3) Correction on Audit Program (Audit CAP).

Some Colleges and Universities to Receive 403(b) Plan Questionnaires from IRS

The Internal Revenue Service has announced that it is sending 403(b) compliance questionnaires to a random selection of approximately 300 colleges and universities (both public and private) as part of an increased effort to enforce certain rules that apply to these institutions’ 403(b) retirement plan arrangements. The questionnaire focuses heavily on the “universal availability” requirement, under which all employees (with limited exception) must be able to make elective deferrals into their retirement accounts within the plan. The questionnaire is designed to identify plans that are improperly excluding certain employees from making elective deferrals. More information on this IRS initiative, including a link to the questionnaire, may be found on the IRS website.

Regulation Watch.

The IRS issued final regulations relating to tax-sheltered annuities (Code section 403(b)) on July 26, 2007. Generally, the regulations adopt the provisions of the proposed regulations, and consolidate guidance since the last Code section 403(b) regulations were issued in 1964.
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