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Financial Planning - Selecting a Payroll Reduction Plan

Selecting a Payroll Reduction Plan

FIRST: Become familiar with your school district's procedures and requirements. Many school districts have a list of existing products from which you must choose, forms to use, and a prescribed procedure to follow.

SECOND: Determine which of the following types of investments you wish to consider. Then determine which products on your school district's list are included under that type:

  1. WEA TAX-SHELTERED ANNUITY TRUST: (800-279-4030 or 608-276-4000) In 1978, WEAC created the WEA Tax-Sheltered Annuity Trust to find the best available fixed (guaranteed) rate plan. Being non-profit and avoiding commissions to insurance agents, the WEA TSA is considered the best fixed-rate plan available to members. For 2009, their fixed rate is 5.25%. The WEA TSA also has 16 no-load mutual funds from several nationally known mutual fund families and five Vanguard target retirement date funds that members can choose to use in addition to the fixed account.
  2. WISCONSIN DEFERRED COMPENSATION PROGRAM (457 Plan) managed by the Department of Employee Trust Funds. A wide spectrum of investment options in addition to a self-directed brokerage option. Telephone 608-256-6200 or 800-257-4457. Web site www.wdc457.org
  3. MUTUAL FUNDS: If you are not concerned with guarantees and are looking for maximum investment flexibility with minimum costs, you might consider using a mutual fund family. Mutual funds operate according to stated policies and objectives set forth in a prospectus. Investors can choose mutual funds with investment objectives and risk levels corresponding to their own. Under new IRS requirements, very few school districts now offer direct participation in a no-load mutual fund TSA. You can check your district's list for Vanguard, Fidelity, or T. Rowe Price but most likely they will not be on the list. You should note that the WEA Trust TSA product mentioned above uses only no-load mutual funds.
  4. LIFE INSURANCE COMPANY TSAs: I do not recommend life insurance company tax-sheltered annuities. The fees and transfer penalties are too high.