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403(b) Market Faces Change |
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In a just completed study of multiple school districts, Spectrem Group found that the K-12 market is likely to undergo dramatic change when the proposed 403(b) regulations issued by the Internal Revenue Service take effect.
 These regulations may cause school districts to significantly reduce the number of 403(b) providers used in the future compared to their current level. This will cause major changes in relationships with existing advisors and product providers.
Today, these schools are serviced by multiple vendors. Today, most districts average around 15 providers. 63% of districts indicate they may reduce vendors due to increased administration efforts required from the school districts.
Specifically, the two items with the greatest potential to have an immediate impact are the proposed regulations that would require a 403(b) plan sponsor to maintain a written defined-contribution plan document and ensure they are operating the plan in accordance with its terms. In addition, employer’s procedures to monitor employee eligibility, contribution limitations and distributions.
 Providers must reassess their existing business model in the context of this change if they want to remain viable players in the K-12 market.
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High Net Worth Advisor Insights Newsletter April 2008
