05-13-2008 Regular School Board Meeting
Agenda Item #53


Title
Employee Voluntary Retirement Plans/Tax Sheltered Annuities

Discussion

Revised  tax regulations pertaining to tax sheltered annuities for sections 403(b) for the Internal Revenue Code will be effective for taxable years after December 31, 2008.

 

District staff has been preparing for compliance with the new IRS regulations pertaining to the 403(b) products.  During recent weeks, staff learned that the Independent Benefits Council had been re-established through the joint efforts of four Florida educational associations around the state (the Florida School Boards Association, the Florida Association of School Superintendents, the Florida Association of School Administrators and the Florida Education Association) to assist in providing guidance for compliance.  The purpose of the IBC was to develop criteria for an RFP and evaluate proposals submitted by 403(b) providers within the state of Florida. All current 403(b) providers within the state were invited to participate in the RFP process.  Thirty responses were provided to the RFP and the IBC recommended five companies to be included in Florida’s Model Plan.  The purpose of creating a Model Plan with only five providers was to help combine purchasing power to negotiate the best combination of price and quality of products for the district employees.  The companies chosen are considered the “Best in Class” companies.  They are:

  1. AIG Retirement (annuities)
  2.  AXA (annuities)
  3. American Century Investments (mutual funds)
  4.  Plan Member Financial Corporation (multi-products custodial accounts)
  5. Waddell & Reed (mutual funds)

 

The following two options are available to the District: 

  1. Move forward with the Model Plan using the five “Best in Class” Companies that were chosen by the IBC through an RFP process.  These companies have already been scrutinized by the IBC for compliance to IRS regulations and they have offered the best price and quality available for voluntary retirement products.  This option would require employees to make decisions about transferring their funds from existing accounts with 403(b) vendors to one of the five approved vendors.  These five vendors offer both the 403(b) and the 457(b) products; therefore, employees’ investment options will expand.
  2. District staff would move forward with an RFP or Request for Information (RFI) to the current 403(b) providers that are utilized by the District.  The RFP or RFI will be expanded to include 457(b)products with the same pricing and quality requirements as the 403(b) product.  Respondents will be required to agree to the same criteria as is included in the Model Plan that has already been agreed to by the five vendors listed above.  District staff would add a small group of selected vendors to the five “Best In Class” vendors listed above, based on responses to the RFP or RFI.  The same transferring rules would apply for employees as referred to in the Model Plan option 1 above.  Each company would also require careful scrutiny by the district staff to ensure that they comply with the new IRS code.

 In order to achieve the best products for District employees and to provide the necessary compliance to the IRS regulations, staff is recommending option 1 above.  Staff will proceed with a communications and education plan to employees about the 403(b) and the 457(b) plans and their tax advantages.  The goal is to complete the implementation of these changes by the fall of calendar year 2008. 



Recommendation

 

Adopt option 1 and move forward with the implementation of the Model Plan for district employees.

 



Meeting Date(s)
Information - 5/13/2008
Consent after Information5/27/2008

Authority for Action
IRS Tax Regulations effective after December 31, 2008 for 403(b)

Involves Expenditure of Funds Directly in the Classroom
No

Source of Funding
Agenda Item will not Require the Expenditure of Funds

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Contact

Jo Ann Clark x660

Judy Preston x600