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Monroe-Woodbury 403b Plan Review

Monroe-Woodbury CSD 403(b) Plan Review

Before You Sign On The Dotted Line, Do Your Homework

A 403(b) plan can be an excellent way to save money for retirement. It can serve as a supplement to your NYSTRS pension plan. But choosing the right 403(b) retirement plan can be overwhelming especially if you work in a school district.

In this article, we aim to provide a comprehensive overview of Monroe-Woodbury CSD’s 403(b) Plan & Provider options. The article is broken into two parts:

1403(b) BASICS
Click and expand these sections below to learn more about each topic.

2403(b) PLAN REVIEW
Monroe-Woodbury’s 403(b) providers and their products.

Let’s get started!


403(b) BASICS

What is a 403b plan?

A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan provided by certain employers. Employers such as public educational institutions (public schools, colleges and universities), certain non-profits, and churches or church-related organizations may offer 403(b) plans.

Similar to 401(k) plans, 403(b) plans allow you to contribute pre-tax money from your paycheck to your 403(b) plan to invest in certain investment products.

The 403(b) is named after the section of the IRS code governing it.

How does a 403(b) plan work?

School district employees make contributions to a 403(b) on a pre-tax basis through a Salary Reduction Agreement.

This is an arrangement where the participating employee agrees to take a reduction in salary. The amount by which the salary is reduced is directed to investments offered through the employer and selected by the employee. These contributions are called elective deferrals and are excluded from the employee’s taxable income.

These pre-tax contributions and any investment earnings will not be taxed until you withdraw the money, typically after you retire.

What are the benefits to contributing to a 403(b) plan?
There are three main benefits to contributing to a 403(b) plan.

  • The first benefit is that you don’t pay income tax on allowable contributions until you begin making withdrawals from the plan, usually after you retire. Allowable contributions to a 403(b) plan are either excluded or deducted from your income. However, if your contributions are made to a Roth contribution program, 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 any earnings and gains on amounts in your 403(b) account aren’t taxed until you withdraw them. Any earnings and gains 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 a credit for elective deferrals contributed to your 403(b) account.
Contribution & Catchup Limits

Participants may contribute up to $19,000 for 2019.

Participants age 50 and older at any time during the calendar year are permitted to contribute an additional $6,000 in 2019, for a total of $25,000.

Also the plan offers the 15-years of service catch-up provision. Employees with 15 years of service with their current employer and an annual average contribution of less than $5,000 per year are eligible for an additional $3,000 contribution per year up to a lifetime maximum catch up of $15,000. This is known as the 15-year rule.

Source: Omni 403b

Catch-ups under the Plan

  • 15 Years-of-Service Catch-up Elective Deferral Contributions: Yes
  • Age 50 Catch-up Elective Deferral Contributions: Yes

Contributions to the Plan

  • Direct Rollovers Into the Plan: Yes
  • Employer Contributions Allowed: Yes
  • Employer Post Severance Contributions Allowed: Yes
  • Exchanges Within the Plan: Yes
  • Roth Contributions: Yes

Other Plan Transactions

  • Hardship Distributions: Yes
  • In-service Distributions After Age 59-1/2: Yes
  • In-service Distributions From Rollover Accounts: Yes
  • Loans: Yes
  • Permissive Service Credit Transfers: Yes
  • Plan-to-Plan Transfers To the Plan: Yes
  • Plan-to-Plan Transfers From the Plan: Yes
Roth Contributions Available

MWCSD allows Roth 403(b) Contributions. Roth contributions are deferred from paychecks to investment accounts on an after-tax basis, as opposed to Traditional 403(b) which are deferred on a pre-tax basis.
The Roth 403(b) offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Withdrawals prior to age 59 ½ or prior to the
account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth accounts.

For more details read: The Roth 403(b)

Note: Roth 403(b) accounts are not available from all P3 Providers. Please review the information listed on the Monroe-Woodbury CSD 403(b) Providers page for providers that show “403(b) Roth Account Available” after the provider name where applicable, then follow the Enrollment Steps to begin participation.

How do I enroll in the plan and start contributions?
To enroll in a 403(b) Retirement Plan, you must do 3 things:

  1. Select the provider you wish to invest with from the OMNI’s list of approved providers on its Web site.
    Employees should contact each provider for information about the 403(b) products and services it offers. This is often the biggest and most important hurdle!
  2. Establish an account with your chosen provider. Application forms can be obtained from the representative of, or the investment provider you select. The application is submitted to the investment provider for processing.
  3. Make contributions by completing the “OMNI Salary Reduction Agreement” (SRA) form*, which authorizes OMNI to withhold the amount you elect to contribute to your 403(b) via payroll deduction. The Omni SRA
    form is used to establish, change, or cancel salary reductions withheld from your paycheck and contributed to the 403(b). Your employer will forward the contribution to the investment company on your behalf.

*Important- You MUST establish an account with your selected provider prior to the date you begin the Salary Reduction. If the account has not been properly established, your contributions will be returned to you and will be taxable. Verifying that account has been established before submitting the SRA will expedite the process and help to avoid having funds returned to you.

What are the investment options in a 403(b) Plan?

As a participant in a 403(b) plan, you may need to choose among different types of investments. Typically, 403(b) plans offer two types of investment products – annuities and mutual funds.

An annuity is a contract between you and an insurance company that requires the insurer to make payment to you, either immediately or in the future. There are three basic types of annuities:

Fixed annuity.

The insurance company promises you a minimum rate of interest and a fixed amount of periodic payments. Fixed annuities are regulated by state insurance commissions. Please check with your state insurance commission about the risks and benefits of fixed annuities.

Variable annuity.

The insurance company allows you to direct your annuity payments to different investment options, usually mutual funds. Your payout will vary depending on how much you put in, the rate of return on your
investments, and expenses. The SEC regulates variable annuities. For more information about their benefits and risks, please read our Investor Bulletin: Variable Annuities – An Introduction.

Indexed annuity.

This annuity combines features of securities and insurance products. The insurance company credits you with a return that is based on a stock market index, such as the Standard & Poor’s 500 Index. Indexed annuities are regulated by state insurance commissions. Please check with your state insurance commission about the risks and benefits of indexed annuities.

Mutual Fund

A mutual fund is the common name for an open-end investment company. Like other types of investment companies, mutual funds pool money from investors and invests the money in stocks, bonds, short-term debt or money market instruments, or other securities. Mutual funds issue redeemable shares that investors buy directly from the fund or
through a broker for the fund.

IMPORTANT! Vendors may use different names for these investment products. After reviewing the vendor’s plan materials, if you are uncertain about what type of investment product a vendor offers, contact the vendor and ask them to explain it to you.

For more information about annuities and mutual funds, please read our descriptions on Investor.gov (annuities,mutual funds).

Things to consider before selecting a provider
First, do not assume that your employer has endorsed any vendor. Neither your employer nor Omni 403b can offer any investment advice or market investment products.

Determining which investment products best meet your financial objectives and identifying a vendor who sells those products is very important. Different vendors sell different types of products, and some vendors only offer a limited number of choices. Before selecting a vendor you should:

  • Read your employer’s 403(b) documents to learn the basic rules for how your plan operates.
  • Read each vendor’s 403(b) plan materials. A vendor’s plan materials generally may include:
    • A background description of the vendor
    • A description of the vendor’s investment products and services, including information related to product fees and past investment performance
    • Information related to the vendor’s fees for administering and operating the 403(b) plan (“vendor fees”), including: brokerage fees, advisor fees, account transfer or closure fees, record-keeping or custodial fees, and general administrative fees
    • Any additional information the vendor may need to provide as required by applicable federal or state laws.
  • Research each vendor’s background, credentials and experience. For tips on researching a vendor registered with the SEC or state securities regulators, please read the SEC’s Investor Bulletin: Top Tips for Selecting a Financial Professional. Vendors that are insurance companies generally register with your state’s insurance commission. For information on how to research insurance companies in your state contact your state insurance commission.
  • Understand how much you’ll pay for the vendor’s investment products and services, including any fees or commissions. Ask each vendor if it provides this information in a simple form that you can easily compare to similar information from other vendors.

You may want to consult with your own stock broker, tax advisor, financial consultant, or insurance agent before making your decision.


Monroe-Woodbury CSD 403(b) Plan Review

Monroe-Woodbury is part of OMNI’s Preferred Provider Program (P3) which allows you to choose your 403(b) provider from a list of pre-selected Providers / Investment Companies.

Who/what is the Omni Group?
OMNI® is a Third-Party Administrator (TPA) of 403(b) plans. They work with your school districts to help ensure compliance with IRS regulations governing the operation of 403(b) plans. OMNI® also helps your employer remit 403(b) contributions to participating service providers. OMNI® is NOT an investment company/ service provider- they do not offer and cannot recommend any specific investment vehicle.

Monroe-Woodbury currently has 24 different Providers listed at OMNI, each with their own account options, pricing structures, fees and investment products for you to sift through.

Generally, Providers offer access to their investment products in three different ways:

  1. Via In-House Professionals:
    The investment products offered by these Providers are accessed through a financial professional. Typically to access an annuity or mutual fund from these Providers you would work with a financial professional that is an employee of the Provider. Most these companies only offer their proprietary investment products.
  2. Via Independent financial professionals:
    The investment products offered by these Providers are accessed through a financial professional like Warwick Valley Financial Advisors. These Providers typically do not sell through in-house employees but rely on independent financial professionals to market their annuities and/or mutual fund products. Independent financial professionals often have relationships and experience with multiple, but not all, Providers.
  3. Direct to Plan Participants (DIY):
    The investment products offered by these Providers generally are accessed directly by plan participants. Typically, participants work directly with these Providers and do not work through a financial professional.

Below, are Monroe-Woodbury’s 24 Providers with links to provider details. We have tried to provide more informative links about each Provider than is currently available on OMNI’s 403(b) Plan Detail page.


PROVIDERProduct TypesROTH eligibleProvider Details
American CenturyMutual FundsROTH eligible403b provider details
Ameriprise Financial / River Source Annuities
403b provider details
Aspire Financial ServicesMutual FundsROTH eligible403b provider details
403b product review
AXA Equitable 
Life Insurance Company
Annuities
ROTH eligible403b provider details403b product review
Brighthouse Life Ins. / MetLife AnnuitiesROTH eligible403b provider details
Confidential Financial Planning / Multichoice
Mutual Funds
403b provider details
403b product review
Faculty Services Corp
Annuities & Mutual Funds
ROTH eligible403b provider details
Foresters Financial 
(First Investors)

Mutual Funds
ROTH eligible403b provider details
FTJ Fundchoice
Mutual Funds ROTH eligible403b provider details
GWN/Employee Deposit program
Mutual Funds
ROTH eligible403b provider details
Lincoln Investment Planning, Inc. Annuities & Mutual Funds ROTH eligible403b provider details
Mutual Inc/Plan Member Services Corporation Annuities & Mutual Funds ROTH eligible403b provider details
New York Life Ins. & Annuity Corp.
Annuities
403b provider details
Oldham Resource Group
Mutual Funds
ROTH eligible403b provider details
Oppenheimer Funds Distributors, Inc Mutual Funds ROTH eligible403b product details
Primerica Financial Services
Mutual Funds
ROTH eligible403b provider details
Security Benefit Annuities & Mutual Funds ROTH eligible403b provider details
TEG Federal Credit UnionAnnuities & Mutual Funds
403b provider details
The Legend Group, Inc / Adserv
Annuities & Mutual Funds
ROTH eligible403b provider details
Thrivent Financial for LutheransAnnuities & Mutual Funds
403b provider details
VALICAnnuitiesROTH eligible403b provider details
Voya (formerly ING) AnnuitiesROTH eligible403b provider details
Waddell & Reed, IncMutual Funds403b provider details

Effective July 1 2012, the following Service Providers are no longer authorized to establish new 403(b) accounts for this plan. Please note, Employees contributing to one of these service providers as of July 1, 2012 may continue their contributions without interruption:
Cadaret, Grant & Co., Capital Bank & Trust, Diversified Investment Advisors, Fidelity Management Trust Co., Mass Mutual VA, MetLife (FC), Phoenix Home Life Ins. Co., Putnam Investments, T. Rowe Price Trust Company, Vanguard Fiduciary Trust Co., Wilton Reassurance Life Co of NY


So how do you choose a 403(b) Provider that’s right for you?

Comparing 24 Providers, analyzing the pricing structures and finding any hidden fees is no small task. But it is essential to make an informed decision because your selection WILL affect your retirement account in the future.

Our 5-step Teachers Shopping Guide is a user-friendly guide that covers many of these topics. Visit our (b)informed blog for more informative 403(b) articles.

There is no cost or obligation to ask a question about your options. Call 845-981-7300.

We can help.

Warwick Valley Financial Advisors aims to help teachers make the most of their money and utilize their finances to live exceptional lives. We’d love to hear from you and provide more information on how we can help with your financial planning whether it be retirement, insurance, student loans, or other important financial matters.

If you’re suffering from the paradox of too much choice, or if you have questions about your plan and the fees you might be paying, please drop us a note.

If you have recently retired or are terminating employment with the Monroe-Woodbury School District, then you have some important decisions to make about your investment allocations. Contact us today to get started on your complimentary portfolio review.

I am an independent advisor committed to the fiduciary standard, and I don’t earn commissions from the recommendations that I make to clients.

My firm has agreements with FTJ Fundchoice & Aspire financial who are available on the Monroe-Woodbury Omni Provider list and I offer prospective clients a complimentary portfolio review. This is where we look over your plan, discuss your needs, and identify the investments that are the right fit for you.


Investing in mutual funds and variable annuities involves risk, including possible loss of principal.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Warwick Valley Financial Advisors and LPL Financial are not affiliated with or endorsed by the Monroe-Woodbury CSD.