The Principal Offers Legacy Asset Support

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 issues with legacy assets.

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. The strategy combines the service delivery of The Principal, including education and transition services, with legacy asset expertise from NBS—a third-party administrator (TPA), 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,” says 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 complexities with loans and hardship distributions.

“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,” says 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 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; and
  • Provide assurance of a responsibly run plan for a plan with legacy assets.