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403(b) and 457 Retirement Plans Under New Scrutiny

The SEC wants details on how the plan administrators choose investment options

The US Securities and Exchange Commission (SEC) recently sent letters to companies that administer Section 403(b) and 457 retirement plans to investigate whether violations of federal securities laws have occurred in administering the plans. The SEC wants details on how the plan administrators choose investment options and police themselves amidst conflicts of interest. The investigation, which is non-public, also seeks the following:

  • Documents on any compensation the administrators have received since Jan. 1, 2017 for referring investors to specific investment options or companies;
  • Explanations of any gifts administrators have received from companies that sell investments;
  • Documents on how administrators provide investment counseling to investors; and
  • Organizational charts that show companies that own or have ties or partnerships with 403(b) and 457 plan administrators.

According to the Internal Revenue Service (IRS), a 403(b) plan is a retirement plan for certain employees of public schools, employees of certain 501(c)(3) tax-exempt organizations and certain ministers. Both the employer and employee may contribute pre-tax funds to a 403(b) plan.

A 457 plan, on the other hand, is a deferred compensation plan available to certain state and local governments and tax-exempt non-governmental entities. 457 plans come in one of two forms: 457(b) or 457(f). 457(b) plans allow employees to defer income tax on deferred compensation into future years. 457(f) plans allow the employer to make contributions into the employee’s account above the 457(b) limitations also providing for tax deferral.

For more information, email Jeff Evans, a member of the American Society of Association Executives (ASAE) policy staff, at

This article was provided to OSAE by the Power of A and ASAE's Inroads.

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