Frequently Asked Questions to the Upcoming 403(b) Plan Changes

What is a 403(b) Plan?
403(b) plans are employer sponsored voluntary savings programs that allow employees to save additional money for retirement.   Participants in the 403(b) plan elect to have money deducted from their paychecks a pre-tax basis.  These deductions are then directed to the investment option(s) chosen by the participant with one of the approved 403(b) vendors. No taxes are paid on the contributions or earnings until the employee withdraws the funds.  For 2009, participants in the 403(b) plan may defer up to $16,500 (under age 50), and up to $22,000 if age 50 and above. 

The FCPS 403(b) plan has approximately $400 million assets under management, with nearly 6,000 employees actively participating.  Plans of this size have considerable leverage in the marketplace in ensuring low fees and dedicated customer services. 

What is changing under the plan?
Recent regulatory changes now require employers to ensure the 403(b) plans they sponsor are compliant with federal regulations.  Like most employers, FCPS has undergone an extensive Request for Proposal (RFP) process in order to select vendors who best meet the criteria established in the RFP.  The criteria evaluated included administrative capabilities, financial integrity, investment options, participant servicing, and competitive fees.   As a result of this process, FCPS will enter into contracts with Great West Retirement Services, TIAA-CREF and VALIC effective September 1, 2009.  Existing contracts with ING, Lincoln Financial, MetLife, Financial Directors, USAA and Kaplan Financial will end on December 31, 2009.  No new contributions can be directed to those contracts after that date.

Do I have to do anything right now?
No.  These Frequently Asked Questions are being issued to advise employees of the upcoming changes.  No action is required at this time. 

What action is required by me in the future?
If you are currently participating in the 403(b) plan and you do not wish to contribute in 2010, no action is required.  Your deductions will cease automatically unless you re-enroll this fall. 

If you wish to contribute to the plan for next year, you must re-enroll with an approved vendor in the fall of 2009 in order to continue contributions to the plan in 2010.  Enrollment deadlines and processes will be addressed in future communications.

The Office of Benefits Services is working with the approved vendors to make enrollment accessible via the internet whenever possible.  Employees can take advantage of the new options as early as September 1, 2009.

If you are not currently participating, now is an excellent time to begin thinking about saving for retirement!   We encourage you to take advantage of this opportunity to meet with a plan representative to discuss how you will reach your retirement goals.

What are my new fund choices?
Each approved 403(b) vendor will offer best in class mutual fund, group annuity and/or stable value products.  The array of investment options available will be communicated in the near future as staff transitions from the procurement phase to the implementation phase.  Information on investment options will be communicated via future written communications, vendor and DHR websites, and by vendor representatives for each company.

I have been a participant with my 403(b) vendor for many years.  Why do I have to make changes?
The reason is two-fold.  Simply put, the contracts for the current 403(b) plan expire on June 30, 2009, and new contracts are required to allow employees to continue to participate in the 403(b) program.  Secondly, as indicated previously, FCPS is responsible for compliance with complex federal changes in the oversight and administration of the 403(b) program.  As is the case with employers across the country, this means reducing the number of vendors under contract to assure appropriate plan monitoring and to reduce the investment fees paid by participants. The awarded contracts provide participants with the best combination of investment options, plan servicing and competitive fees.

Do I have to move my 403(b) account balance to another vendor?
No.  You do not have to transfer your current 403(b) savings to a new vendor, as these changes impact only future contributions.  However, contributions that will occur after December 31, 2009 can only be directed to TIAA-CREF, VALIC or Great West.

Some funding assistance is available to compensate for surrender charges that you may incur if you choose to transfer your account balance to a new vendor.  Plan representatives will be able to provide more details on this option.

When will my contributions stop with my current vendor? 
The latest month that contributions can be deferred under the current 403(b) vendor contracts is December 2009.  Employees must choose to enroll in one of the new options this fall to continue contributions in 2010.  These new options will become available on September 1. 

Can I still move my account balance from fund to fund or product to product within my current vendor?
Yes.  Reallocation of existing account balances (within your current vendor) is unaffected by this change.

I have worked with my vendor for many years and I don’t want to change vendors.  What are my options?
The upcoming changes to the 403(b) plan don’t require you to end your relationship with an existing vendor.  All contributions made prior to January 2010 will remain with former vendors under contract unless you elect to move your balances to a new vendor (i.e., execute a contract exchange).   However, no 403(b) contributions can be directed to a former vendor after December 31st. 

Some employees may choose to maintain relationships with former vendors by directing personal savings to an IRA or Roth IRA instead of through the 403(b) plan.  If you decide to pursue this avenue, be sure to discuss any tax implications with your tax advisor.

Employees are strongly encouraged to use this transition as an opportunity to meet with representatives from Great West, TIAA-CREF and/or VALIC to discuss their investment goals and retirement strategies.  If, after speaking with a representative you decide to execute a contract exchange, you will coordinate the transaction with TSACG.

Does this change affect how and when I can take a distribution from my account?
No, this has no effect on employees who are eligible for distributions from their 403(b) accounts.  Employees who terminate employment, retire, become disabled, or attain age 59 1/2 may still choose how to distribute their plan assets, to include a rollover of their 403(b) accounts to an IRA, or to another employer’s plan, regardless of vendor. 

Active employees with existing account balances at a vendor who will no longer be under contract with the FCPS 403(b) plan will continue to have access to loans and hardship withdrawals, subject to Internal Revenue Service (IRS) regulations.  

Does this change affect me if I am an existing client with VALIC?
Yes.  Effective September 1, 2009 VALIC will have new investment offerings to include mutual funds and group annuities.  Existing VALIC participants may continue allocating their contributions to current investment options through December 31.  Beginning January 1, 2010, new contributions will be directed to the investment choices available at that time. 

There has been much negative press about VALIC’s parent company (AIG).  Are my assets protected if I invest with VALIC?
Yes, to the same degree those assets are protected with any vendor.  VALIC is a separate legal entity from its parent company and has excellent financial ratings.  All mutual fund investments are held in a custodial account for the exclusive benefit of participants and are not subject to the creditors of VALIC’s parent company AIG.

What is TSA Consulting Group’s (TSACG) role?
TSACG is FCPS’ third party administrator, providing IRS compliance and remittance services. TSACG will continue to serve as the clearinghouse for all 403(b) transactions.  Their duties include: 

• Acting as a common remitter to handle all correspondence and remittances with vendors.
• Calculating participant maximum allowable contributions and catch-up limits.
• Evaluating and approving distribution transactions and hardship withdrawal distributions.
• Reviewing all salary reduction agreements to ensure forms are legible and complete.

TSACG will continue to be the employee’s point of contact for salary reduction agreement (SRA) questions, distribution requests and hardship withdrawals.

I am a participant in the 457 deferred compensation plan.  Will that be changing?
No.  Great West Retirement Services will continue to provide deferred compensation (Sect. 457) services to plan participants.  The new 403(b) contracts allow for additional synergies between the 403(b) and 457 plans for employees who choose this vendor.  Regardless of vendor choice, employees continue to be eligible to contribute to both the 457 and 403(b) plans, subject to federal limitations on maximum contribution amounts.

How do I get more information?
These FAQs represent the beginning of an extensive communications campaign to keep you apprised of the changes that will be occurring to the plan.  The Office of Benefit Services is coordinating with the selected vendors to deploy a multi-faceted communications plan that ensures employees have ample opportunities to obtain information about the upcoming changes.  Look for more details in future communications.