403 B Regulations
Hi, as promised I would discuss some of the topics covered at the PASBO conference two weeks ago.
One of the relatively new regulations to come to public school Districts is the regulation of 403B plans from the IRS.
403B plans are investment plans similar to a 401K but used in the non-profit/education sector. For years the schools made payroll deductions and remitted the money to the various TSA Companies (AUL, Lincoln, ING, etc..) with no real paper trail or way making sure that the employees were following IRS rules in handling these accounts.
In August, 2007 the IRS issued Procedure 2007-71 which set guidelines for the administration and monitoring of these accounts effective January 1, 2009.
The key change was that the school districts were to appoint a Third Party Administrator (TPA) to monitor all transactions between their employees and their respective TSA's.
This change has led to school districts (an other non-profits) in developing an action plan that would be compliant under the IRS rules. Not only would current employees be monitored but any employee with a 403B after January 1, 2009 who left your employment would have to be tracked for compliance.
Most School Districts in Washington County selected a independent TPA to handle this issue. The costs were small and it enable Districts not to tie up hours of staff time dealing with paper work.
How these regulations play out in the long run remain to be seen, but hopefully this will prove to be one Federal Regulation that doesn't cause too many headaches.
One of the relatively new regulations to come to public school Districts is the regulation of 403B plans from the IRS.
403B plans are investment plans similar to a 401K but used in the non-profit/education sector. For years the schools made payroll deductions and remitted the money to the various TSA Companies (AUL, Lincoln, ING, etc..) with no real paper trail or way making sure that the employees were following IRS rules in handling these accounts.
In August, 2007 the IRS issued Procedure 2007-71 which set guidelines for the administration and monitoring of these accounts effective January 1, 2009.
The key change was that the school districts were to appoint a Third Party Administrator (TPA) to monitor all transactions between their employees and their respective TSA's.
This change has led to school districts (an other non-profits) in developing an action plan that would be compliant under the IRS rules. Not only would current employees be monitored but any employee with a 403B after January 1, 2009 who left your employment would have to be tracked for compliance.
Most School Districts in Washington County selected a independent TPA to handle this issue. The costs were small and it enable Districts not to tie up hours of staff time dealing with paper work.
How these regulations play out in the long run remain to be seen, but hopefully this will prove to be one Federal Regulation that doesn't cause too many headaches.
posted by Paul Sroka at
12:20 PM
1 Comments:
The only two problems we saw with this regulation was 1) fees administered by the TPA to the clients that they did not have before and 2) some districts deciding to go with only a single company to invest with. This caused a lot of our own clients problems with now having to pay an annual fee to the companies they invest with if their investment dollars are under a certain amount, and in addtional ANOTHER annual fee with the TPA. Also, some that were not originally invested with the company (or companies) the district chose, experienced rollover and transfer fees and penalties if they did not meet the January 1st deadline.
In the long run, I'm sure it will help the districts stay compliance with the rules and regulations, but short term, it's been a customer service and paperwork nightmare.
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