Wise Cracks Commentary with Dan and John We Smell a Rat: Why Did the IRS End 90-24 Transfers So Soon And Fail to Require True Fiduciary Duties?     For years participants stuck with lousy 403(b) choices have had the option of transferring funds from their employer plan to an outside-of-plan vendor. Known as a 90-24, many participants used this transfer option to move valuable nest egg money to low-cost vendors such as Fidelity, T. Rowe Price, Vanguard and others that were typically not available via work plans.   While it is not a surprise that this type of 90-24 will all but disappear — the IRS announced way back in 2004 that changes were coming to the 403(b) and that in all likelihood the 90-24 would be eliminated — what is a surprise is that these "old style" 90-24 transfers will cease to be allowed after September 24 of this year which is more than a year before implementation of the rest of the new regulations on January 1, 2009. Most school personal were not even at work when the new regs were released on July 23, 2007. Clearly this development has put a servere burden on employers and employees. Furthermore, new regulations fail to put true fiduciary pressure on employers. Sure the requirement to have a written plan is nice but at the end of the day it just means participants will get their bad news about their lousy offerings both orally and in writing. Gee, thanks IRS. What gives? Why would the IRS end 90-24 transfers so soon, and fail to require true fiduciary duties? To say we smell a rat is an understatement. And, of course, these nose glasses just make the aroma more pungent.   Is rat spelled: I—N—S—U—R—A—N—C—E   I—N—D—U—S—T—R—Y? Having sat in meetings with these people during the creation of the California consumer protection website 403compare it is not a stretch to suggest that the insurance industry might have exacted undue influence on the creation of the regulations. Plus the rule of thumb in such situations is to follow the money. Cleary, the Insurance Industry has the most to lose from fiduciary responsibility that requires a consideration of fees and the most to gain from the end of the "old-style" 90-24 transfers so soon. We always feared that the end of the 90-24 would be a disaster for participants if fiduciary responsibility was not required of employers. Let the disaster begin. As Morningstar wrote last month, there is a "withering onslaught coming from the big insurance companies against any attempts to replace the absurdly overpriced, junky investment options they offer all too often to schoolteachers in 403(b) plans."   It sure would have been nice if the IRS had thrown a bone or two to the littlest of little guys — the 403(b) participant. We are not suggesting the insurance industry will now throw some big bones in the form of cushy jobs to those in the IRS who "crafted" these new regulations, but we also aren't saying this isn't a possibility. We'll be watching...   Home | Disclaimer | © 2001-2007 bWise Guys, LLC. All rights reserved.				Back to the latest Wise Cracks