The IRS issued significant new regulations effective January 1, 2009 impacting 403(b) tax-sheltered annuity plans and requiring extensive record keeping, administrative oversight and a written plan. In response to these IRS regulations, many Michigan public education employers joined together to bring district programs into compliance in the most efficient and cost-effective manner possible.
Initially, educational seminars were with district business managers and human resources staff to work together with legal counsel to develop starting point plans and other required documents which could be used on a collaborative basis. The districts realized that they lacked the expertise to administer the 403(b) programs under the new regulations. As a result, the districts formed the Michigan Retirement Investment Consortium (MRIC) consisting of more than 25 ISD’s and RESA’s and approximately 260 public school districts and other public education employers.
All Monroe County public school districts have agreed to participate in this consortium.
One purpose of the Consortium was to hire a third party administrator (TPA) to administer the 403(b) Plan and handle the extensive record keeping and administrative duties required by the IRS. The Consortium conducted a search for a TPA through a Request for Proposal process and selected TSA Consulting Group as the TPA. TSA Consulting Group has a web site (www.tsacg.com) and toll-free telephone number (1-888-777-5827) and is ready to assist employees with their 403(b) questions.
The Consortium also recognized that together, the districts have significant “buying power” with the 403(b) investment providers. If employers collaborated, the Consortium understood that they could demand high quality investment offerings with lower participant fees; key benefits for employees. After a significant due diligence process, during which the Consortium worked closely with an outside registered investment adviser, a “core” menu of investment provider options was selected which all districts in the Consortium will be offering to their employees.
The core investment providers are MEA Financial Services, AIG - VALIC, The Legend Group, Waddell & Reed and Plan Member Services. Two of these core investment providers (MEA Financial Services and AIG – VALIC) currently are approved investment providers with Monroe Public Schools. However, what you'll notice is that now through the Consortium, their menu of options and fees will be more favorable to participants than before. In addition, a new “single source” investment provider, Midwest Capital Advisors (MCA), will also be offered. MCA offers hundreds of low cost and no load mutual funds from several different mutual fund families and is a new investment option for employees.
In addition, the Consortium recognized that a one size fits all approach might not work for certain public education employers. Some Michigan public education employers, including Monroe Public Schools, wanted to continue to offer certain existing investment providers to their employees. To accommodate this situation, the Consortium also allows participating public education employers to offer “non-core” investment providers unique to that particular employer. In addition to the Core Investment Providers mentioned above, Monroe Public Schools will continue the following non-core investment providers: ING/GLP, Lincoln Financial Group, Ameriprise Financial, MetLife Investors, AXA Equitable and Aid Association for Lutherans (Thrivent).
The non-core vendors mentioned above will continue to be made available to participants after January 1, 2009.
TSA Consulting will charge an annual administrative fee of about $18 per participant. However, the “core investment providers”, “single source investment provider”, and ING/GLP all have indicated that they will pay this fee for their clients. Alternatively, some “non-core” vendors will pay TSA directly, and then may assess this cost back to their clients. We are currently working with the consortium to understand which of the vendors will assume the cost of TSA’s administrative fees.
If you are currently investing your 403(b) contributions with an investment provider not listed above please understand that we did not choose to eliminate them; those companies decided not to participate in the consortium. Beginning January 1, 2009, you must elect a new investment provider with respect to your future contributions. You will not be able to switch your existing contributions to an investment provider that is not listed above.
With respect to your existing contributions, you have the following options:
1.1 First, you may elect to keep your benefits with your current investment provider if they are listed above, either in the core or non-core group of providers. You are not required to move your money. It can stay where it is.
1.2 Second, if your current investment provider is not listed above, you may elect to transfer your existing contributions to one of the approved investment providers listed. Before doing so, however, you should make sure that you review the rules concerning your existing investment. For example, there may be surrender charges or liquidation fees associated with that investment, some of which may be avoided after the expiration of a certain period of time. Make sure you understand the rules concerning investment changes before you request a switch.