403(b) PLANS OR TAX SHELTERED ANNUITIES (TSA)

These plans are available to nonprofit, tax exempt organizations such as hospitals, schools and foundations that fall under Section 501(c)(3) of the Internal Revenue Code.

Participants may defer an amount up to the IRS maximum of $16,500 per year, Indexed for 2009, on a pre-tax basis. The organization will provide an investment selection. Most plans allow employees to self direct their money into a variety of annuities or mutual funds. The money is not taxed or declared as income until withdrawn. Taxes can be further delayed by rolling the money into an IRA upon termination of employment or retirement.

When the employer makes contributions to the plan, the plan becomes what is known as an ERISA Plan and must make certain governmental filings.

Upcoming Changes

Starting for plan years beginning January 1, 2009, all 403(b) Plans must begin filing a Form 5500 and be properly documented.

The new regulations will present some challenges for organizations that have Non-ERISA & ERISA 403(b) Plans with multiple investment vendors who are presently not sharing information. (The regulation requires investment custodians to share participant and investment data between vendors so that the tax filings can be completed).

Why is this happening?

The government's intention is to more closely relate 403(b)'s to their private sector cousin, the 401(k). Because of the constant scrutiny of 401(k)'s by Congress over the past decade, 401(k) Plans have evolved and grown to meet a very high standard of oversight and compliance. 403(b) Plans have not grown in this way, thus creating a large gap in the way they have been administered.

BEI has specialized in 401(k) Plans since 1989. Our systems are already set up to work with multiple vendors to share information. The transition to manage 403(b) Plans is a natural progression.