The IRS issued new regulations covering the operation of voluntary supplemental retirement plans, also known as Tax Sheltered Annuities or 403b plans.  The regulations become effective January 1, 2009.  All school districts must adopt new policies to be in compliance or educators risk loss of their tax benefit.  The new IRS regulations place additional requirements on school boards and increase their fiduciary liability.

Approximately 2,095 employees have a payroll deduction to a 403(b)/457 plan. Approximately 1,808 (86%) of those employees have their investment accounts with active providers. All currently "active" 403(b)/457 providers as defined by Policy 6.1(3)(d) will be approved as a provider as long as they meet the criteria presented in response to TSA Consulting Group, Inc.'s Request for Information (RFI) plus the following three new providers: American Century, Waddell and Reed, and Plan Member Services. Approximately 287 (14%) employees who currently have accounts with "inactive" providers, will no longer be able to make payroll deductions after January 1, 2009.

Each provider will be charged a $500.00 per year administrative fee (plus 5% per year thereafter) to help defray District administrative costs for the 403(b) Program.

The Superintendent recommends approval of the 403(b) Plan Document.

Motion and approval of the 403(b) Plan Document.

Negative Impact. Collection of administrative fees from providers will reduce District administrative costs by an estimated $5,000.00 per year.

Risk Management

FB

10/27/08