05-27-2008 Special School Board Meeting
Agenda Item #17


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 (IBC) 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 will develop an RFP for both 403(b) and 457(b) products and will seek additional vendors who wish to participate in the District’s voluntary retirement program, along with the Model Plan companies described above.  All respondents will be required to agree to the same criteria as is included in the Model Plan.  As a result of the RFP process, District staff will choose a small group of selected vendors (subject to meeting all qualifications) to be added to the five Best in Class vendors listed above. The same transferring rules would apply for employees as referred to in the Model Plan option 1.  All companies will require careful scrutiny by district staff to ensure compliance with new IRS code.

Based on discussion that took place at the May 13, 2008, Board meeting, staff is recommending option #2.  The Board is being asked to approve the Model Plan and the selection of a small group of additional vendors through an RFP process.  All selected vendors will be required to meet the same pricing and quality criteria that have already been approved for the Model Plan providers.  Staff's objective, with this option, is to provide the best products and pricing available for District employees and also to provide the necessary compliance to the IRS regulations.  We expect to complete the RFP process during August, 2008.  At that time, we will begin a communications and educational plan in the fall of calendar year 2008 with the goal for complete implementation by mid-December of calendar year 2008.



 

Recommendation

Adopt the IBC Model Plan and move forward with an RFP for 403(b) and 457(b) products. 



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, ext 660
Judy Preston, ext. 600