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Working with WEA WEA Trust has created a Survival Kit for districts, which includes documents for the district to use, including document plan creation forms, universal availability statements, information-sharing agreements and more. WEA Trust also offers a competitive 403b plan that has low costs, good returns and is well positioned to meet all asset class and diversification needs. “We were created by WEAC to serve the members,” said Susan Winchester, director of retirement and investment services at WEA Trust Member Benefits. , “so I would say we have a vested interest to make sure they are served well and get the best products and services available.” |
Choices, choices. Beginning January 1, participants in 403(b) Tax Sheltered Annuity (TSA) plans will have fewer of them when it comes to investing their retirement money, and that can be either good or bad, depending on your point of view.
Of course, people generally like choices, but having very large numbers of vendors to choose from can be both daunting and confusing. So, as part of sweeping changes to the 403(b) tax code, the government is requiring plan administrators, such as school districts, to be more selective in the vendors they include in their plans.
“School districts have to slim down the number of vendors in the plan, meaning places employees can contribute money,” said Susan Winchester, director of retirement and investment services at WEA Trust Member Benefits. “In the past, they almost had unlimited choices.”
Districts are now required to have a “document plan,” outlining the fine details of its 403b plan; included is a finite list of approved vendors to which participants can make contributions. In the past, a district may have offered, for example, two dozen vendors to choose from; now, Winchester said, the average is three to five.
Districts can opt to create a second list, or appendix, of vendors with which it has information-sharing or good faith agreements. Contributions cannot be made directly to these secondary vendors, but participants can transfer initial contributions from the preferred vendor to the secondary vendor. However, districts are not required to offer this second list.
WEAC Member Services Specialist Bob Moeller said the most common question he gets from members about these changes is, “What should I do?”
He and Winchester agreed that, first and foremost, members should research vendors.
“This is a chance for members to closely examine what they have and think a little about what they will demand in a TSA before they choose a vendor,” Moeller said.
Questions to ask include, but are not limited to:
“I think of all this should impact the participant pretty heavily,” adds Winchester. “You can’t just say, ‘I want to use John down the street who I’m comfortable with’ anymore. You have to do your research and homework.”
Harder for hardships
Another major shift in 2009 is that hardship distributions rules have become much more stringent.
Before, Winchester said, participants would send in a form declaring their need for a hardship distribution and it would be processed. Participants must now provide thorough documentation and prove they cannot meet the hardship any other way. If approved, the participant must stop contributions to any plan for six months.
“And that’s only if they allow it in the first place,” Winchester said.
Greater awareness
Plan participants can expect to see more literature and notification regarding their district’s 403b plans as new requirement on districts is to meet “universal availability” rules.
“Districts are now required to notify employees of their right to participate in the program,” Winchester said. “This is not something that had to be done in the past.”
She adds that: “These plans were pretty loose in form before, and it’s a move by the IRS to make districts more accountable for their plans. The IRS is looking to avoid lost money and employees not knowing they could participate.”
Posted August 27, 2008