School District 403(b) Plans and Participant-Directed Investments

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This post addresses the availability of participant-directed investments in practically all California public school district 403(b)s and why the special rules mentioned in California Government Code section 53213.5 must apply if the 403(b) plan is employer-sponsored.

In an earlier post, we discussed the difference between “non-employer-sponsored 403(b) arrangements” (NFAs) and “employer-sponsored 403(b) plans” (EFPs). In a typical EFP, the sponsoring school district is taking control of the plan by designing it, administering it (often with the help of a third party administrator or recordkeeper) and accepting fiduciary responsibility for the investments.

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Posted in 403(b), Fiduciary Duties, Fiduciary Responsibilities, Plan Administration, record-keeping | Tagged , , , , | Leave a comment

School District 403(b) Plans and Recordkeeper Selection

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Continuing our commentary on California public school and charter school 403(b)s, we shift focus from the ability of a 403(b) employer to limit investment selection to a discussion of the California law on the selection by public school districts and charter schools of third party administrators or recordkeepers (collectively, Recordkeepers) for their 403(b) plans.

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Posted in 403(b), Fiduciary Responsibilities, Plan Administration, record-keeping | Tagged , , , | Leave a comment

School District 403(b) Plans and Investment Selection

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When it comes to 403(b) plans of California school districts or charter schools, there is confusion about the ability of the sponsoring district or charter school to limit the participant’s ability to select a particular insurance provider for their tax-sheltered annuity (TSA). On the one hand, there is a provision of the California Insurance Code which provides that if a TSA “is to be placed or purchased for an employee, the employee shall have the right to pick the insurance agent, broker or company through whom… the… annuity [will be placed].” On the other hand, you have employers and plan fiduciaries who are trying to provide more competitive benefits, while controlling fiduciary liability and plan administrative burden. The bottom line is that many public school district and charter school employees in California mistakenly believe that they are entitled to select the TSA provider of their choice simply because they are allowed to direct the investment of their plan account.

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What Is a Section 415(m) Plan, and When Might You Need One?

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Because both the Internal Revenue Code (Code) and PEPRA sometimes “conspire” to limit the retirement benefits of public agency employees in ways that make it harder for affected agencies to hire and retain certain individuals, it may become necessary for those agencies to consider the use of a section 415(m) plan.

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Posted in 401(a), Governmental Benefits, PEPRA | Tagged , | Leave a comment

What Happens to Participants’ 457(b) Deferral Elections When they Pass Away?

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Just the other day, a public agency client contacted us to find out what to do with a participant’s 457(b) plan deferral election following the participant’s untimely death due to COVID. As with most cases, cities and special districts would owe the former employee (or the employee’s estate) significant amounts of unpaid wages, overtime, or unused PTO. And, although the W-2 reporting and FICA/Medicare tax withholding are discussed in the W-2 Form instructions, it isn’t always clear whether to withhold 457(b) deferral elections based on the form currently on file.

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Posted in 457(b) Plans, Fiduciary Responsibilities, Income Tax, Plan Administration, record-keeping, Uncategorized | Tagged , , | Leave a comment