2022: Quarter 2 Newsletter
Having multiple retirement investment providers can benefit participants
According to the National Tax-Deferred Savings Association (NTSA) January 2021 newsletter, participants benefit if they can choose between multiple 403/457(b) Providers. With the growing uncertainty about whether pensions can fully cover retirement expenses, 403/457(b) Plans are becoming more important to teachers. Districts who offer a choice of multiple providers, tend to have greater 403/457(b) participation, which could be the result of a higher amount of marketing activity. The American Society of Pension Professionals and Actuaries (ASPPA) performed case studies and found out that reducing the number of Providers can hurt participant rates.1
Benefits to multiplicity:
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Greater familiarity with the plan
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Deeper engagement
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Usually higher satisfaction with the plan
Remember, outside vendors offer support in communications, compliance, financial transactions and recordkeeping. If you would like more information on how to add a new vendor to your 403/457(b) Plans, please contact us.
Did you know?
Based on plan rules, 403/457(b) Plans have options for employees to access funds if they are still employed and have not reached the age of 59 ½. Participants may contact us to verify eligibility.
Share with your employees: What are the benefits of contributing to a 403(b) Plan?
The first benefit is that you don't typically pay income tax on allowable contributions until you begin making withdrawals from the Plan, usually after retirement. Allowable contributions to a 403(b) Plan are deducted from your income on a pre-tax basis. However, if your contributions are made as Roth contributions, this benefit doesn’t apply. Instead, you pay income tax on the contributions to the plan, but distributions from the plan (if certain requirements are met) are tax free.
The second benefit is that earnings on amounts in your 403/457(b) account aren’t taxed until you withdraw them. Earnings on amounts in a Roth contribution program aren’t taxed if your withdrawals are qualified distributions. Otherwise, they are taxed when you withdraw them.
The third benefit is that you may be eligible to take an income tax credit for elective deferrals contributed to your 403/457(b) account.
Do we have a salary reduction agreement?
As the recordkeeper, AFPlanServ retains copies of current salary reduction agreements on file for all participating employees in the 403/457(b) Plan. To ensure you're compliant, you may send a participating employee list to AFPlanServ. The list must include the name of the participant, the investment provider and the amount of the current contribution being deducted. This list will be used to determine if any salary reduction agreements are missing and/or do not match the amount of the current contribution being deducted.
Frequently Asked Questions
Q: How does a participant request a transaction?
A: A participant will need to contact AFPlanServ to verify eligibility and contact their Provider to request the proper forms.
Q: Do all plans allow loans and hardships?
A: No. Availability is based on the Plan rules and the Providers that are approved under the Plan.
Plan Reminders
Each year, AFPlanServ provides a Sample Eligibility Notice to help satisfy the Universal Availability requirements.
You may use it as a template for your custom notification or distribute the sample in its entirety.
Please check the Operational Guidelines to ensure you are adhering to the items listed. If you have any questions, please contact us.
To update the contact information for your Plan, please complete the Employer Contact Form.
If you need more information about your role as the plan sponsor, we're happy to help!