Terminology

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What is Universal Availability?

Back 1

Universal Availability is the requirement of an employer to ensure that “all
employees of the organization” are permitted to participate in contributing to a
403(b) account provided they contribute at least $200.00 annually.

Front 2

What are the three components to Universal Availability that must be satisfied:

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• Delivery of Meaningful Notice
• Opportunity of Enrollment
• Eligibility to make contributions

Front 3

The Universal Availability rule is designed to ensure that employees understand
their eligibility and are aware of the benefit in a clear and consistent manner.
Note that the Universal Availability rules apply to

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Roth 403(b) contributions (if
available in the plan) in addition to pre-tax 403(b) contributions.

Front 4

The tax deferral status of the employer’s entire 403(b)
plan may be jeopardized if the plan does not comply
with the

Back 4

Universal Availability requirement.

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Regardless of the format the employer chooses, the following points should be
included in the Meaningful Notice notification:

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• Eligibility Requirements – who can (and can’t) participate in the plan
• Enrollment procedures – How and When
• Types of Contributions allowed – Pre-Tax, Catch-up Provisions, Roth (if
allowed)
• How and when contribution amounts can be changed
• Sources for additional information – including information on approved
providers

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CSBA

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California School Boards Association

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The California School Boards Association is

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a collaborative group of virtually all of
the state’s more than 1,000 school districts and county offices of education. It
brings together school governing boards and their districts and county offices on
behalf of California’s children. CSBA is a member-driven association that supports
the governance team — school board members, superintendents and senior
administrative staff — in its complex leadership role.
Tax Deferred Solutions has been a California School Boards Association Business
Service partner since 1995. CSBA proudly works with TDS to provide time saving,
cost effective tax deferred compensation management solutions. These solutions
are easy, efficient and compliant.

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A mistake in this area may lead to the entire 403(b) plan losing its tax-deferred status

Back 8

Universal Availability Rule

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burden of proof for meaningful notice is placed on the

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employer

Front 10

We believe choice improves
employee participation and therefore strive to include all

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investment providers
in the plans that we administer.

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(ERISA)

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Employee Retirement Income Security Act

Front 12

Designated Roth Contributions
IRC 402(g) Limits.
There is a limit on the amount of elective deferrals a plan participant may contribute to a 403(b) plan.

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Elective deferrals are limited to the lesser of $17,000 for 2012, or 100% of the participant’s includible compensation.
•
Designated Roth contributions to a 403(b) plan count toward the $17,000 for 2012 402(g) limit.
•
Any catch-up contributions made are in addition to the 402(g) limit. (See questions 4, 5, & 6 for information on the availability of different catch-up opportunities and associated limits) 2012 “Normal” Contribution Limit $17,000.00
Maximum Contribution Limit.....$25,500.00 *

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This 402(g) limit is a participant limit. If an employee participates in more than one 403(b) plan, all elective deferrals to all 403(b) accounts must be

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combined to determine if the 402(g) limit of $17,000 for 2012 is exceeded.

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INCLUDIBLE COMPENSATION is

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compensation, received from a qualifying employer by an employee, which is includible in the employees gross income for the most recent period which may be counted as 1 year of service.

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If an employee participates in both a 403(b) plan and a 457 plan, up to $17,000 may be contributed to the 403(b) plan and another

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$17,000 to the 457 plan for 20011/2012.

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Several contribution limits apply to a 403(b) plan. A plan that includes both employer contributions and employee elective deferrals is subject to both the limits under

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402(g) and 415(c) of IRS Regulations

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Elective deferrals may not exceed the 402(g) limits and the total of all employer and employee elective deferrals may not exceed the limits under

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415(c)

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15-Years of Service Catch-up
To qualify for a 15-years of service catch-up, the employee must have

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15 years of service with the same employer. the limit on elective deferrals to his or her 403(b) account may be increased by up to $3,000 in any taxable year (lifetime employer by employer limit of $15,000). Sounds simple, but it gets much more complicated. There are several calculations to be dealt with prior to determining a participant’s eligibility to make a $3,000 catch-up contribution.

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To qualify for a 15-year catch-up, the employee must have

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must have 15 years of service with the same employer; although, it doesn’t have to be consecutive.
•
The increased contribution is limited to no more than $3,000 for any year, with a lifetime employer by employer limit of $15,000.
Catch-up ordering - The ordering for participants eligible for both types of catch-up contributions is 15-year catch-up, then age 50+ catch-up.
•
Maximum catch-ups - A participant eligible for both types of catch-ups may contribute up to $3,000 extra for the 15-year catch-up, along with an extra $5,500 for the age 50+ catch-up for 2012.

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Level of Entitlement - This 15-year catch-up is only available to those participants who average less than $5,000 per year in elective deferrals. The basic calculation to determine the level of entitlement is

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(5,000 x Years of Service with the employer) minus (total of all elective deferrals made to a 403(b), 401(k), or SIMPLE IRA plan maintained by the employer – including the 15-year catch-up but excluding the age 50 catch-up) – for all years of service with the employer).

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If an employee works for the same school district, but at different schools within that system, they work for

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The same employer

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Catch-up Contributions: The 50 catch-up Provision limit for 2011/2012 is $

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$5500

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Catch-up contributions are in addition to the maximum 402(g) limits of

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$17,000 for 2011/12 and

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Participants eligible for both types of catch-ups may contribute up to

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$3,000 extra for the 15-year catch-up, along with an extra $5,500 for the age 50 catch-up for 2011/2012

Front 25

Post severance elective deferrals

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are employee deferrals that are based on amounts that represent pay an employee would have received or leave that could have been taken were he or she still employed (such as sick/vacation leave and back pay), but with some limits.

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In order for an employee to defer post severance compensation, the regulations require that:

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The post severance elective deferral must represent pay that employees would have received, or leave that could have been taken, if they had continued to work.
•
The agreement to defer must be initiated prior to this compensation being paid or made available.
•
Post severance elective deferrals must be made by the later of 2½ months following severance from employment or the end of the year in which the severance occurs.
•
The total amount deferred for the calendar year (normal payroll deferrals plus post severance deferral) cannot exceed the annual maximum limit under IRC 402(g) or 415(c) that is in effect for the calendar year the deferral is made into the plan.
•
Elective deferrals are always subject to FICA tax, which must be deducted from these amounts before deferring into the plan.

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5-year post severance contributions are

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employer contributions made to a 403(b) plan after the employee’s severance from employment. Contributions may be made for an employee for up to five years after their employment ends. These contributions are based on includible compensation for that employee’s last year of service.

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In general, 5 year post severance contributions must meet the following:

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Employer contributions may be made for an employee for up to five years after their employment ends.
•
Must be based on includible compensation for that employee’s last year of service.
o Includible compensation does not include amounts contributed by the employer to the employee’s 403(b) account.
o Compensation for an employee working less than full-time should include a time period that would constitute a year of service.
•
Contributions may be made up to the limits under IRC 415

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A loan to a participant in a 403(b) plan is not taxable to the employee if it meets the following criteria:

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•
The loan must be made as part of a written loan program maintained by the employer.
•
A participant may borrow the lesser of 50% of their vested account balance, or $50,000.
•
The loan must be repaid within 5 years, unless the loan is used to purchase the
participant’s main home.
•
Loan repayments must be made in substantially level payments, at least quarterly, over the life of the loan.

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A 403(b) plan may permit employees to receive a hardship distribution because of an

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immediate and heavy financial need.

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Hardship distributions from a 403(b) plan are limited to the amount of the employee’s

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elective deferrals and generally do not include any income earned on the deferred amounts.

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a hardship distribution is made only if the distribution is made to satisfy

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immediate and heavy financial need of the employee and is necessary to satisfy that financial need.

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distributable amount

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The distributable amount is equal to the employee’s total elective contributions as of the date of distribution, reduced by the amount of previous distributions of elective contributions.

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A distribution is deemed to be on account of an immediate and heavy financial need of the employee if the distribution is for:

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Expenses for medical care previously incurred by the employee, the employee’s spouse, or any dependents of the employee or necessary for these persons to obtain medical care;
•
Costs directly related to the purchase of a principal residence for the employee
(excluding mortgage payments);
•
Payment of tuition, related educational fees, and room and board expenses, for the next 12 months of postsecondary education for the employee, or the employee’s spouse, children, or dependents;
•
Payments necessary to prevent the eviction of the employee from the employee’s principal residence or foreclosure on the mortgage on that residence;
•
Funeral expenses; or
•
Certain expenses relating to the repair of damage to the employee’s principal residence.

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Hardship distributions are subject to the

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10% early distribution penalty on distributions made prior to reaching age 59 ½.

Front 36

The Pension Protection Act of 2006 provides that for distributions made after September 11, 2001, the 10% early withdrawal penalty does not apply to

Back 36

qualified reservist distributions. A qualified reservist distribution is:
•
One made to a reservist called to active duty for a period of at least 180 days or for an indefinite period.
•
Made beginning on the date of such order calling to active duty and ending on the close of the active duty period.
•
Made from an IRA or from amounts attributable to elective deferrals under a 403(b) plan, 401(k) plan, or certain similar arrangements.

Front 37

List positives of opening up our 457(b) Platform

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*Allow EE to work with their long time trusted advisor or an advisor in the community vs former way of having to work with an unknown advisor
*Opening up the plan to additional vendors will increase choices, thereby increasing participation rates

Front 38

New 457(b) Vendors: Prior to bing accepted into an employers plan must:

Back 38

Enter into contract with TDS which includes:
*Vendors are responsible for recordkeeping of accounts
*ISA: Share information with TDS
*supply admin services and
* adhere to plan doc. If vendor unable to do so, we cannot add to plan for compliance reasons
Vendor provides an establishment kit with all above references for ER to sign. They provide us with a plan ID, process may take up to a month.

Front 39

Can an ER lock down their 457(b) plan?

Back 39

Yes. It's not required to be open access so we are able to keep their plan restricted if they wish to do so

Front 40

why was 457(b) press released?

Back 40

It was distributed to our clients and vendors to let them know that TDS no longer places restrictions on the advisors that work in the plans we administer. It is not that we are approving any advisors for the plan, but opening the plan up to advisors the employer wishes to allow. Employers may still only permit certain advisors within the plan-that is the employers option. We will still uphold any soliciatation guidelines the employer has in place, to prevent advisors from showing up on school sites without an invitation.

Front 41

List Transaction Request we receive

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*years of service purchase
*403(b) Distributions
*Loans
*Hardships

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List Hardships

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*Funeral expenses
*Repair of Property Damage to Primary Residence
*Unreimbursed Medical Expenses
*Education Expenses
*Preventing Eviction or Foreclosure
*Purchase of Principle Residence

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Individual Agreement

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an agreement between a vendor and the employer and or participant that constitutes or governs a custodian or annuity contract

Front 44

List counties handled by Brittany

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Butte, Napa, Marin, San Benito, Monterey, Santa Barbara, Ventura, tulare, shasta

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Hardship distribution definition

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a distribution of funds requested to alleviate an immediate and heavy financial need. Subject to taxation and may be subject to early withdrawal penalties. Can only be made from EE contributions; after a hardship is approved, the participant cannot contribute to any and all retirment accounts for 6 months;

Front 46

CalSTRS

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California State Teachers Retirement System

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CalPERS

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California Public Employees Retirment System

Front 48

Years of Service

Back 48

The more years of service an EE has earned or purchased, the greater their CalSTRS/CalPERS retirement benefits will be; The Years of Service Credit amount purchased is credited to the employee's CasTrs or CalPERS account and used as part of the formula to determine their retirement benefits. Can be purchased from 403(b) or 457(b) account

Front 49

ISA

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Information Sharing Authorization Document/agreement

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SAA

Back 50

SALARY AMENDMENT AGREEMENT previously salary reduction agreement

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SAA

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used to establish, change, or cancel salary reductions withheld from EE's paycheck and contributed to an account within 403(b) plan on behalf of EE. School/District specific

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SAA

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*Agreement between EE and ER
*Automatically terminate if employment is terminated

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Adoption Agreement

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Modifies Plan Document; provides provisions to be incorporated as part of employer's 403(b) plan and plan document.

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Roth 403(b) Contributions

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After-tax Employee Contributions

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Exchanges

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Changing allocation of funds from one vendor to another approved vendor

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Transfers

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From one employer's plan to another employer's plan of like-kind

Front 57

Omitted processing fee

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When a participant contributes to a vendor for which the plan requires a payroll deducted fee, payment for these participant(s) was not included in the admin fee payment for this payroll cycle. Please update your records to deduct this fee for future payrolls only - this correction does not need to be retroactive

Front 58

How do I open a new 403b account?

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First need to select an investment provider (vendor). 403bcompare.com, find your employer and view the list of vendors available within their plan. Request a new account enrollment form. Return this form to your provider. When your 403b account has been opened, obtain a Salary Reduction Authorization form from your employer, complete with contribution info, and return to your employer.

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TSA code

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is

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457(B) plan

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Deferred compensation plan, employer sponsored plan that allows EE's to deduct pretax dollars from their paychecks and contribute the monies into a retirement savings plan

Front 61

Per an IRS official speaking at the ASPPA/NTSAA Compliance Resolution Summit in Dallas in May, 2011,

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if a district’s compliance efforts are called into question, an IRS determination of whether meaningful notice has been provided will depend on “all the relevant facts and circumstances.” This indicates that the determining factors will include outcomes, such as overall participation rate or whether a greater proportion of high-compensation compared to lower-compensation employees are participants.

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“meaningful notice” is required to ensure the plan offers

Back 62

“universal availability” to all employees eligible to participate.

Front 63

IRS Audit Red Flags:

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- Written Plan Document
- Excess Contributions
- Universal Availability
- Operational Failures

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Even if the IRS says it’s OK to exclude a certain group, if you do not list the specific group(s) in your Plan Document, that qualifies as an operational failure. How can you prevent this Operational error?

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•Include everyone.
•Maintain exclusions.

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Universal Availability Errors

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1.The Notice is not meaningful.
2.Excluding employees.
3.Tracking the Meaningful Notice

Front 66

Note that each exclusion is optional and can create future compliance issues if an
employee’s status changes to eligible. The employer must be able to track the
‘movement’ of employees from one status to the other. Also, if an exclusion is
used, it must be applied uniformly to all similar employees. For example, a nonuniform
exclusion would be permitting all part-time employees, but excluding
substitute teachers. To prevent this operational breakdown,

Back 66

For ease of ongoing compliance, an employer may elect
to allow all employees to participate in the 403(b) plan.

Front 67

The audit of a 403(b) plan which does not meet the Universal
Availability requirement could result in

Back 67

the loss of tax-favored status of ALL funds
in the plan.

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If you are eligible for both the 15-year rule increase in elective deferrals and the age 50 catch-up, allocate amounts first under the

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15-year rule and next as an age 50 catch-up.

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Butte, Napa, Marin, San Benito, Monterey, Santa Barbara, Ventura list their area codes:

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Butte: 530
Napa: 707
Marin: 415
San Benito & Monterey: 831
Santa Barbara & Ventura: 805

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How many districts do we have in Butte?

Back 70

18 Clients
Bangor Union Elementary School District
Biggs Unified School District
Butte County Office of Education

Butte Schools Self Funded Program**JPA**
Butte-Glenn Community College District

Chico Country Day Charter School
Chico Unified School District
Durham Unified School District
Feather Falls Union Elementary School
Golden Feather Union Elementary School District
Gridley Unified School District
Manzanita Elementary School District
Oroville City Elementary School District

Oroville Union High School District
Palermo Union School District

Paradise Unified School District
Pioneer Union Elementary School District
Thermalito Union School District

Front 71

How many districts do we have in Marin County?

Back 71

19 clients:
Bolinas-Stinson Union School District
Dixie School District
Kentfield School District
Laguna Joint School District

Lincoln ESD

Union Joint ESD

Lagunitas School District
Larkspur School District
Marin Community College District


Marin County Office Of Education
Nicasio School District
Shoreline Unified School District
Reed Union School District
Ross School District
Ross Valley Elementary School District

San Rafael City Elementary School District
San Rafael High School District
Sausalito Marin City School District
Tamalpais Union High School District

Front 72

How many clients do we have in Monterey?

Back 72

14 Clients
Alisal Union School District
Carmel Unified School District
Gonzales Unified School District

Greenfield Union ESD
International School of Monterey

King City Union School District
Monterey County Office of Education
Monterey Peninsula Unified School District
Salinas City Elementary
Salinas Union High School District

San Lucas Union ESD
Santa Rita Union School District
Soledad USD

Spreckels Union School District

Front 73

How many clients in Napa?

Back 73

One.
St. Helena Unified School District

Front 74

How many clients in Pocatello, Idaho?

Back 74

One.
Pocatello School District #25

Front 75

How many clients in San Benito?

Back 75

11 Clients.
Aromas-San Juan Unified School District
Hollister School District
North County Joint Union School District
San Benito High School District
Bitterwater-Tully Union ESD
Cienega Union Elementary School District
Jefferson ESD
Panoche ESD
San Benito County Office of Education
Southside Elementary School District
Tres Pinos Union Elementary School District

Front 76

How many clients in Santa Barbara County?

Back 76

4 Clients.
Cuyama Joint Unified School District
Lompoc Unified School District
Orcutt Union School District
Santa Maria-Bonita School District

Front 77

How many clients in Tulare County?

Back 77

1 client.
Visalia Unified School District

Front 78

How many clients in Ventura County?

Back 78

30 Clients.
Briggs School District

Mupu Elementary School District

Santa Clara Elementary SD

Ventura County Business Services Authority**JPA**

Golden Valley Charter School

Meadow Arts & Technology Elementary School

Mesa Union School District

Somis Union School District

Ventura Charter School

ACE Charter School

BRIDGES Charter School

Camarillo Academy of Progressive Education
Conejo Valley Unified School District

Fillmore Unified School District
Hueneme Elementary School District
IvyTech Charter School
Moorpark Unified School District
Oak Park Unified School District

Ocean View School District
Ojai Unified School District
Oxnard School District

Oxnard Union High School District

Pleasant Valley School District
Rio Elementary School District
Santa Paula Elementary School District

Santa Paula Union High School District
Simi Valley Unified School District
Valley Oak Charter School (Ojai)
Ventura County Office of Education

Ventura Unified

Front 79

What county do we have the most clients under?

Back 79

Ventura County with 30 clients.