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Teachers Group Creates 403(b) Plan Blueprint: Toolkit Helps School Administrators Adjust to New Regs

The huge burden of meeting new Internal Revenue Service retirement plan regulations just got a lot easier.

A national education administration group has simplified the pending regulations governing responsibility of tax-sheltered annuity plans by breaking down the long list of compliance requirements into a step-by-step process.

"Blueprints: A Guide to Public School Plans 403(b) and 457(b)" was designed specifically for school superintendents and their staff, and features a wall chart, a glossary of financial and legal terms, and a CD full of every document school administrators will need to meet the new IRS requirements by next January.

"The new regulations require school systems to take on more responsibility for the regulation and implementation than they had in the past," said Claudia Mansfield Sutton, chief communications and marketing officer for the American Association of School Administrators. "It is incumbent on the school superintendent and his staff to understand the new regulations."

As of Jan. 1, 2009, school systems that offer 403(b) and 457(b) plans will be fully responsible for meeting the requirements and could face fines and other penalties if the accounts are mismanaged.

The proposed changes will encourage 403(b) plan providers to consolidate the number of vendors they use and offer a wider selection of investment options, including equity and debt mutual funds, further increasing the similarity of 403(b)s to 401(k)s.

"Many superintendents have limited resources with which to achieve compliance with these new rules," said Paul D. Houston, AASA executive director. "The Blueprints toolkit offers easy-to-use tools to help superintendents meet this challenge."

In late January, the AASA sent a free copy of the toolkit to every school superintendent in the country.

In six steps, the wall chart tells a school system what they need to do, shows them progressive deadlines for meeting these tasks, and puts order to what could be an overwhelming task for some.

"One thing schools know how to do is build buildings and follow time frames," said Cecile Russell, of the Austin, Texas-based Cecile Russell Consulting. "They can look at this and get it right away."

Russell said she designed the wall chart to be like an information booth in the mall that says "You are here" and shows a starting point.

Not every school is where they should be, Russell said, but 11 months should give them plenty of time as long as school administrators pace themselves and don't put the toolkit on the shelf and forget about it.

"In a big school system like New York City or Washington, D.C., they probably have a fairly sophisticated 403(b) plan in place," Sutton said. Smaller, rural school districts are probably in a different situation. "This is to help those others get aligned in time for January 2009."

"Most schools do their budgets between March and the end of June," she said. "These changes may or may not have budget implications."

Sutton said her group had corporate sponsorships from AIG Retirement, AXA Equitable, Horace Mann Companies and ING. The four groups also served in an advisory capacity.

"We wanted to make sure we interpreted the regulations properly," she said.

The new regulations are not as complicated as they may seem, Russell said.

"I've been hearing so much about how these are new rules," she said. "Seventy-five percent of what is in the finalized regulations has always been there. The objective of the Treasury department and the IRS is to have all the salary-deferred programs follow well-written, comprehensive procedures."

The purpose of the toolkit is to create an educational program, complete with follow-through, that takes all the changes and puts them into progressive steps, Russell said.

"We make a real point of distinguishing required provisions from optional provisions," she said. "A school can have a plain-vanilla plan, with no bells and whistles, but the kit also tells them how to handle loans, hardships and optional add-ons."

One of the major flaws in the old system, Russell said, was the lack of a requirement to inform employees about their options.

"It's very important to tell employees that they're eligible to participate in the plan," she said. "You have to tell them at least once a year, how to participate, how to increase, decrease, start or stop and how to change providers."

While the toolkit was designed with school systems in mind, the program can be used by any group that has a 403(b) plan, she said.

The glossary of terms is also important because many school administrators are not familiar with the financial and legal vocabulary, she said.

Employers have the ability to assign certain responsibilities to outside parties and delegate specialized jobs. The toolkit makes no attempt to provide legal or tax advice, but it recommends that administrators seek outside advice.

Russell said many schools are concerned about this new administrative responsibility, but when they see that they are in control and have choices, they may start to see it as an opportunity rather than a burden.

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