New Strategy Helps Financial Professionals And Clients Solve A 403(b) Dilemma

When 403(b) plan participants have assets held by former service providers, it can pose major administrative and compliance problems for plan sponsors—problems that could eventually lead to action from Federal regulators.

A new strategy from the Principal Financial Group® and National Benefit Services, LLC (NBS) can help financial professionals and their large-plan 403(b) clients manage the so-called “ legacy asset” dilemma.

The strategy combines the service delivery of The Principal ®, including education and transition services, with deeper legacy asset expertise from NBS—a third party administrator (TPA), highly experienced in meeting the administrative and compliance demands of plans with legacy assets.

“Plan sponsors often try to solve the legacy asset dilemma by encouraging participants to transfer assets from the prior service provider to the current service provider. But frequently, all assets are not transferred,” said Aaron Friedman, tax-exempt national practice leader, at The Principal. “These plan sponsors need a strategy to help ensure they can fulfill their entire plan administrative and compliance responsibilities. With NBS, we are able to bring the service and expertise needed to address these complex legacy plan asset requirements.”

Complexities for sponsors of 403(b) plans with legacy assets include Form 5500, small amount payments, qualified domestic relations orders, beneficiary designations and death claims. These are in addition to relatively well-known complexities with loans and hardship distributions.

An opportunity for financial professionals

“The Department of Labor and Internal Revenue Service have focused on educating 403(b) plans about the rules and have not yet embarked on rigorous enforcement. However, we believe the agencies will begin actively enforcing the regulations in the near future,” said Friedman. “Financial professionals can take the concern off the table for 403(b) sponsors by helping them with the complexities surrounding legacy assets.”

The new comprehensive strategy from The Principal and NBS can help financial professionals:
  • Reduce time and effort for the plan sponsor.
  • Ensure completeness and timeliness of plan administration and compliance.
  • Provide assurance of a responsibly run plan for a plan with legacy assets.

For more news and insights from The Principal, connect with us on Twitter and The Principal Blog.

About the Principal Financial Group

The Principal Financial Group ® (The Principal ®) 1 is a global investment management leader offering retirement services, insurance solutions and asset management. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies. Founded in 1879 and a member of the FORTUNE 500 ®, the Principal Financial Group has $466.2 billion in assets under management 2 and serves some 19.0 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit

1 “The Principal Financial Group” and “The Principal” are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.

2 As of Sept. 30, 2013.

Copyright Business Wire 2010