Wise Cracks Commentary with Dan and John New Tax Law is a Field of Dreams for 403(b) Participants. Will Benefits Directors Now Play Ball with Low-Fee Vendors?     The recent tax news out of Washington should have all of us leaping for joy. Yes, the new White House T-ball field is supposed to be that nice. Seriously though, the new tax bill, signed into law by Mr. T-ball himself, is a field of dreams for 403(b) participants. Gone (as of December 31, 2001) is the annoyingly complex MEA (maximum exclusion allowance) calculation which required participants to factor in such things as years of service and prior contributions when determining how much they could stash away each year in their 403(b). Starting in 2002, participants will be able to contribute up to $11,000. That figure rises to $12,000 for 2003 and eventually rises to $15,000 by 2006. For those fortunate enough to have employer contributions, the limits are higher — $40,000 or 100% of compensation, whichever is less.   Additionally, the new law adds a second catch-up clause (while retaining the first) for workers over 50. They will be able to contribute an additional $1,000 annually going up to $5,000 by 2006.   While not quite a grand slam — the law doesn't force benefits directors to offer quality vendors — the new provisions are clearly another step in the road to real 403(b) reform. We at 403bwise have to believe that sites like this and their visitors are in no small part responsible for these improvements. For that we should all feel a measure of satisfaction. The game, however, is far from over.   For example: will these changes be enough to get benefits administrators to play ball with low-fee vendors, who are severely under represented in 403(b) plans?   At first glance it would seem absolutely. After all, the major fear of benefits administrators has always been compliance errors. And most of these errors can be attributed to the often confusing MEA calculations. In turn these calculations, and the errors they have caused are largely responsible for the dubious hold harmless agreements imposed by school districts that effectively lock out low-fee vendors. Simple logic would dictate that the hold harmless should now go the way of the MEA and Tim McVeigh. But there's the rub: simple logic and the 403(b) plan. Two things, that unfortunately, do not go together like baseball and hot dogs.     Home | Disclaimer | © 2001 403(b)wise. All rights reserved.				Back to the latest Wise Cracks