New 403(b) regulations require compliance by end of 2008
With the new IRS regulations taking full effect on January 1, 2009* local school districts need to set up their compliance mechanism during 2008 to protect the tax-favored status of 403(b) retirement accounts. There are resources available from the IRS, Association of School Business Officials, NEA, and other sources aimed at facilitating compliance and maximizing the value to members. Each school district must prepare a written plan that controls the district's 403(b) program.
Find out if any of the following will change because of the board’s compliance with the 403(b) regulations:
Choice of investment vehicles – It is important that the members have sufficient choices in selecting how they wish to invest their 403(b) funds. The selection process of the investment options needs to be carefully planned and performed so that it is objective and serves the best interests of members. Products should include low-cost mutual funds, retirement age target-date funds, and advisor-assisted products for members who wish to have face-to-face assistance. Roth 403(b) accounts are also permissible to allow for after-tax contributions that grow tax-free into retirement.
Administration of the plan – Some boards may use outside administrative services. Other boards may perform most administrative functions in-house. The Association of School Business Officials has resources and training meetings for business administrators that offer step-by-step assistance in complying with the new regulations. Association leaders should be concerned if one of the 403(b) providers performs the district's administrative services, placing that provider in a potentially, preferred position as the central recipient of information from all of the 403(b) providers in the district.
Plan options – There are optional characteristics (like loans, hardship withdrawals, catch-up provisions, and rollovers) that should be clearly identified and agreeable to the members. In order to maintain the existing 403(b) products, they must conform to the terms of the district's written plan.
Internet Resources - The following online resources contain details on the new regulations, compliance, and 403(b) plans in general:
NEA 403(b) Toolkit - http://www.neamb.com/savings/403btoolkit.jsp
NEA provides a comprehensive set of tools and resources that enable school employees and Association leaders to understand the new IRS regulations that govern 403(b) plans and their impact on interactions between the local Association and board of education.
Association of School Business Officials - http://www.asbointl.org/index.asp?bid=9709
ASBO provides detailed resources for school business officials in complying with IRS regulations governing 403(b) plans.
IRS site for Retirement Plans - http://www.irs.gov/retirement/sponsor/article/0,,id=155347,00.html
The IRS provides information on starting and maintaining a retirement plan, including what kinds of plans there are, how they work, and their benefits.
Supplemental Annuity Collective Trust - http://www.state.nj.us/treasury/pensions/fact35.htm
The Supplemental Annuity Collective Trust of New Jerses (SACT) is a voluntary investment program that provides retirement income separate from, and in addition to, your basic pension plan.
403(b) Wise - http://www.403bwise.com
This website was started by two teachers disappointed with the lack of unbiased 403(b) education, and the lack of quality low-fee investment choices offered by public school employers.
*School districts with 403(b) plans that are maintained pursuant to a collective bargaining agreement (in effect before July 26, 2007) have until the end of the agreement, or until July 26, 2010, whichever is earlier to comply with the new regulations.
Questions may be e-mailed to PLomonico@NJEA.org.
