By Andrea Shiell, County Times
HOLLYWOOD, Md.—Non-profit employees, including teachers and public school personnel in St. Mary’s County, will see some changes to their retirement accounts after the first of the year. At the most recent Board of Education meeting, chief academic officer Linda Dudderar presented an update on the changes that will affect 403 (b) retirement accounts after the first of the year, in the first major overhaul of the rules governing such accounts since 1964.
Dudderar explained that the changes being implemented are an effort to institute risk management controls and bring a better level of oversight to 403 (b) retirement plans, in effect making them more like 401-K plans. “The government, through the IRS, is really trying to eliminate risk,” she explained, “they’re trying to make it more like a 401-K.”
What this means is that those with money in 403 (b) plans will have fewer investment options and more restrictions to contend with, whereas before they could invest with numerous vendors and take out loans and withdrawals without consulting their employer.
“When you have individual employees working with a myriad of individual companies, there really is no oversight,” said Dudderar, who explained that a symptom of the lack of oversight may very well be the increasing number of employees across the country taking out hardship loans as the economy worsens.
New regulations will require plan sponsors to have several documents and agreements in place, including an approved list of vendors and detailed summaries of their plans, as well as detailed documents outlining eligibility rules, contribution limits, and distribution and withdrawal rules, among other things.
Dudderar said that the St. Mary’s County Public School system has now entered into negotiations to establish MetLife Resources as their vendor, acting on the advice of a Wachovia Securities advisor, but if an agreement is not reached soon, then negotiations will begin with their secondary vendor, ING.
Dudderar said that she expects these changes to ultimately benefit both employees and employers as they are implemented. “I think for the employee there is someone at the school system level who can answer all their questions…who will be ensuring that the plan is viable…this will provide ongoing review of the plan, so if there’s a problem with one of the securities, someone will be available to address that,” she said.
When asked how many employees the new IRS mandates would affect, Dudderar said she expects that as more information and training sessions are held, the school system will see more people enter the program. “It could affect all employees if they choose to invest,” she said, “right now we have a little over 400 employees who take advantage of the pre-tax benefit.”
As for restrictions in investment options, Dudderar said that the school system is negotiating for a large number of options for each plan. “There are 14 different opportunities per plan, but the consulting group will be expanding those…they’re talking about offering a variety of different kinds of funds,” she said.
The school system will be mailing out a letter to employees the last pay period of December explaining how the changes will affect their investment plans, as well as outlining the steps they will need to take to participate. In the meantime, Dudderar said that they are still in the process of scheduling approximately 30 information forums to provide details and answer questions on the new mandates, as well as individual meetings to review employee needs and enrollment into the new program.
The Board of Education voted to approve entering into contract negotiations with MetLife Resources as the single vendor providing 403 (b) services for employees of the school system, but in light of the school system struggling to complete internal and legislative audits, changes to the 403 (b) plans came at an awkward time this year. The original deadline for completion of the new plans was set for Jan. 1, but Dudderar told the County Times that the school system had been given an extension to complete negotiations and complete their plan document for IRS approval.
“Last week, at the end of the day, I found out they’d be giving us some wiggle room,” said Dudderar, “but my expectation is that we’ll in fact follow through with our original deadline.”