The IRS has issued new regulations for 403(b) plans that will be effective January 1, 2009.  What does this mean to Martin County School District employees?  Follow the link below for more information:

Upcoming Changes to Voluntary Retirement Plans. Also visit www.themodelplan.com

New Process for Transfers, Hardships and Withdrawals

A part of the new IRS regulations includes a new process for employees requesting transfers, hardships and withdrawals from their voluntary retirement plans.  In the past, employees worked directly with their investment company for these requests. Now these requests must be approved by the employer before they may be processed.  Our third-party administrator, TSA Consulting Group, will be performing the approval process on behalf of Martin County Schools.  Please be aware that this process will add additional time to your request. 

You may still obtain and start the process with your investment company, and then all paperwork should be faxed or mailed to the Risk Management office for processing.  Below are forms for each specific transaction:

Transaction Routing Request Form (employee or employer to complete)

Hardship Withdrawal Disclosure (employee must complete)

Transfer Disclosure Form (employee must complete)

WHAT IS A 403(b)?
Retirement Savings Plans (403b/ 401a/ 457b) are qualified savings accounts that are available only to employees of public school systems and certain other non-profit organizations. The legislation creating these tax-deferral plans originated in 1958 and specifically added public school employees as eligible participants in 1961. As a result, these plans became regulated by Section 403(b) of the Internal Revenue Code.

The School District has approximately 11 active vendors that can provide access to these retirement savings accounts through payroll deduction.

Benefits of participation include:

• Immediate Income Tax Savings
• Pre-Tax Dollars Deposited into Individual Accounts
• Convenience of Payroll Contributions
• Generous Annual Contribution Limits
• Flexible Load Provisions
• Flexible Contributions
• Benefits Paid To Your Beneficiary at Death

You may choose from several types of 403(b) TSA accounts for your retirement savings it is important to select the type of plan best suited to your needs and goals. All employees who are normally expected at least 20 hours per week are eligible to participate. This can include substitute teachers, cafeteria workers and extended day employees.

For more information on the plans available to Martin County School District employees please visit TSA Consulting Group, Inc. website at tsacg.com.

• www.403bwise.com - A site run by teachers. Learn about savings and annuities from others in the field.

Deferred Compensation 457b Plan

A Deferred Compensation 457b plan is another section of the tax code that offers retirement savings. Unique features of a 457b plan are that it offers catch-up provisions during the last three (3) years of employment and access to money upon separation of service. However, a 457b plan has different provisions than the 403(b) plan including who owns the funds, differences in contribution limits and on access to monies contributed under the plan. Employees should consult their authorized vendor and/or financial planner for advice on how this plan could work to their advantage.

Special Pay Plan – 401(A)

The Special Pay Plan was implemented in 2001 as a mandatory program for administrators and instructional staff. Non-instructional employees approved the plan in 2002. The plan is designed to provide permanent savings of social security taxes and deferral of federal income tax on payment of accumulated sick leave, annual leave/vacation pay and bonuses upon termination of employment. The plan is administered by Bencor Inc. with investment vehicles provided by Diversified/Transamerica Investments.

DROP participants will have their annual leave placed into the 401(a) plan subject to contribution limits at the beginning or end of their DROP period (whatever the employee has chosen). Also, an employee participating in DROP will have terminal sick leave pay deposited into their account as follows:

Year 1 - 20% of balance of terminal sick leave
Year 2 - 25% of balance of terminal sick leave
Year 3 - 33% of balance of terminal sick leave
Year 4 - 50% of balance of terminal sick leave
Year 5 - 100% of balance of terminal sick leave

Employees terminating prior to their pre-selected DROP end date will be paid 100% of their eligible sick leave balance upon retirement. Employees that terminate or retire and have over $2,500 in terminal pay will have these funds paid through the 401(a) plan with Bencor.

An employer-sponsored “stacking” 403(b) was recently added under the 401(a). The addition of this option provides a “rollover” for employees whose terminal pay exceeds the 401(a) annual limit. The remaining pay is subject to the 403(b) limit and is exempt from FICA taxes. Allowing employees to shelter their terminal pay in this fashion maximizes the terminal pay that can be sheltered.

Bencor - www.bencor.com

• Bencor Administrative Services (Ohio) – 1-888-258-3422
• Bencor Regional Representatives – Dave Anders or Greg Brick – 1-800-330-4014