The IRS has changed the rules for 403(b) plans; I think most everyone is aware of that by now.  Being aware is about the extent of what many districts have done at this point.   When I bring up the topic up, most administrators say they are waiting on the AG opinion and their 403(b) vendor is going to take care of it for them.  Many have not taken the cellophane wrapper off the AASA tool kit titled “A Guide to Public School Plans 403(b) and 457(b)" that was provided to every school district in Texas.   

IRS says that every school district has to have a tax-compliant retirement plan by the January 1, 2009, IRS deadline.  

Because 403(b) is a very “Hot Topic,” I have posted related information on TexasISD occasionally.  I have also attempted to gain an understanding of the basics of what a district needs to do to address the issue.   I had the good fortune along the way to meet two very knowledgeable and experienced people. Their names may be the most important item in today’s commentary.  They are Cecile Russell, an independent consultant, and Bob Architect, with the IRS.    I observed early on that finding objective sources of information was going to be difficult as I have sat through at least 10 presentations on the subject and I was not able to fully grasp the scope of the districts' responsibility.  I know numerous knowledgeable and reputable vendors that serve school districts and will continue to do so in the future as these vendors are very important. But there are now other issues to be considered such as policy making and risk management for the district.

In my discussion with Cecile Russell and Bob Architect ,senior tax law specialist and the resident expert on 403 (b) plans, I left knowing that the first issues that should concern you is not which vendors you are going to use or what TPA you will choose, but whether or not you have a plan document that is IRS compliant.  The pending Attorney General’s opinion would not interfere with your beginning these tasks now.

I have talked with Cecile Russell a number of times since I met her in February.  In a recent conversation she told me that meeting these challenges imposed by the final 403(b) rules could be confusing and frightening. I thought, yes, that describes the look on the administrators faces when I bring this topic up.

She continued, “Meeting the challenges imposed by the final 403(b) rules can be confusing and frightening and these decisions should not be taken lightly. The consequences of noncompliance can be severe and costly to school districts, tax payers and participating employees.” This comment got my attention and I hope it gets yours as well.    The rules give increased new responsibility and grant significant authority to schools:

·         Plans can be very simple “no frills”

·         Plans can be very complex

·         Schools can design  a plan that meets the districts' needs

·         Schools can delegate plan compliance responsibilities to a TPA, product providers or designated employee

·         Schools have the authority to hold all delegated parties accountable for the  services they perform

Important considerations that you should consider:

·         Contract with a qualified professional to assist in plan design

·         Join a pooling group – it would be wise to have the services evaluated by a qualified professional

·         Continue using the services of current TPA – it would be wise to have the services evaluated by a qualified professional

·         Issue an RFP to hire a TPA –use the services of  a qualified  professional for both the design  and evaluation of the proposal 

The IRS and Bob Architect offer frequently asked questions that are very helpful at this link.  Let me conclude with a quote from Mr. Architect  about the written plan, “All provisions of the way a plan works has to be spelled out in the plan and the plan has to operate in accordance with these terms that are spelled out in it”.  If you look at the back of the tool kit provided you by AASA you will see both Cecile Russell and Bob Architect were involved in the development of this resource.  Cecile Russell’s contact information is as follows: Cecile Russell, Consulting, 11501 Century Oaks Terrace #333 – Austin, Texas 78758 – Office phone 512-795-0677 – cecileirussell@aol.com.  (This is not a paid ad nor legal advice - just sharing my observations and resources I have discovered)

I think with a little information and seeing that once you have a plan and do an RFP for a TPA, everything will fall in place.  You will have covered the risk management concerns and your employees and school district will benefit from improved compliant retirement plans.

I am going to be traveling tomorrow. This commentary will be up until Monday – I am open to your feedback on this important topic. And I may refresh this article over the next few days. – js webmaster@texasisd.com