SEC In Process of Investigating 457 and 403b Plans

Unlike a 401k plan such as a solo 401k plan for the self-employed with not full-time W-2 employees where the trustee is viewed as the shareholder, the SEC sees the 403b participant as the shareholder.  According to  a Wall Stree Journal article, the SEC agency is seeking details on how administrators—which often serve crucial roles in selecting investments for 403(b) and 457 retirement plans for employees including teachers and government workers—choose investment options and police themselves when conflicts of interest arise.

While state laws generally require government entities to manage their 403(b) and 457 retirement plans in employees’ best interests, they aren’t governed by the federal pension laws that privately sponsored 401(k) and 403(b) plans must adhere to. The enforcement and penalties for violations aren’t as stringent as with these federally regulated plans, said Bob Toth, an attorney in Fort Wayne, Ind., specializing in employee-benefits law.

In the Wall Street Journal article, the paper lists the following key points of interest by the SEC.

  • the compensation the administrators have received since Jan. 1, 2017 as a result of referring investors to specific investment options or companies, and documents related to that compensation;
  • “information and documents” concerning how investors receive investment counseling;
  • explanations concerning gifts administrators received from investment vendors; and
  • organizational charts showing companies that own, are connected to, or are partners with plan administrators.

Closing Comments

One of the big differences between a self-directed solo 401k and a 403b and 457 government plan is that the solo 401k trustee directs the investments into both equities and alternative investments such as real estate, notes, tax liens, metals, crypto currency, etc. Whereas generally 403bs and 457 plans are generally solely invested in equities and the participants don’t have a say in investing in other investment types allowed under the Code.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>


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