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403b-vs-457-comparison

The 403b and 457 Plan Comparison for Public School Employees

As a public school employee, pension plans are an important component of retirement planning. However, your pension alone may not provide enough retirement income to support your desired future lifestyle.

Fortunately, there are additional options available to help you achieve your retirement savings objectives. Contributing to 403b and/or 457 plan offered by your school district affords you the opportunity to supplement your defined benefit pension plan.

HOW ARE THE 403B AND 457 PLAN SIMILAR?

403b and 457b plans are both retirement plans offered to public school employees and certain 501(c)(3) tax-exempt organizations. Employees save for retirement by contributing to individual accounts. Employers may also contribute to employees’ accounts. Both plans have the following in common:

Tax-deferred Contributions
Both employer sponsored plans allow you make contributions on a pre-tax basis via a Salary Reduction Agreement. Contributions to qualified savings plans, are made on a pre-tax basis, reducing taxable income received by the employee, which typically equates to a keeping you in or lowering you to a lesser tax bracket. For the past 3 years, contribution limits have been the same for both plans.

Tax-deferred growth on earnings
Your taxes are paid at a future date which allows your investment to grow without current tax implications. The use of a tax-deferred investment account is most often a wise decision when you are in a higher tax bracket now compared to the income tax bracket you anticipate to be taxed at in the future when you will be taking withdrawals. This can help you to build wealth quicker because you are reinvesting all growth in your account rather than paying a chunk each year to Uncle Sam.

Portability
If you leave your job, your plan contributions and earnings can be exchanged into your new employer’s plan without tax implications if done properly.

Investment Options
Both plans allow you to select from various investment options like mutual funds and annuities.

ROTH option available
Both plans may have a ROTH option available where you pay income tax on the contributions to the plan, while distributions from the plan (if certain requirements are met) are tax-free. Choosing whether to use the ROTH option is a decision based on your age and when you need access to the funds.


DIFFERENCES BETWEEN THE 403B AND 457 PLANS

While the plans have much in common, they do have a few key differences that may affect your decision to invest in one or the other. The main differences between 403(b) and 457 plans center on how and when you can access the funds.

Early/premature withdrawals

  • 403bs are subject to possible 10% penalty (link: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions) (if under age 59-1/2.
  • 457b does NOT have early withdrawal penalties.

Catchup provisions*

We recommend you speak to a professional when deciphering which catchup rules may apply to you. Below is a brief summary of the differences in catch up provisions.

403(b) Catchup Provisions:

  • 50 years or older rule. If permitted by the 403(b) plan, employees who are age 50 or over at the end of the calendar year can also make catch-up contributions of $6,000 in 2015 – 2019 beyond the basic limit on elective deferrals.
  • 15-year rule. 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.
  • When both catch-up opportunities are available, the law requires deferrals exceeding the standard limit ($19,000 in 2019 and $18,500 in 2018) to be first applied to the 15-year catch-up (to the extent permitted), and then to the age 50 catch-up.

457 Catchup Provisions: The 457 plan has special catch-up contributions that may be allowed.

  • If permitted by the plan, this allows a participant for three years prior to the normal retirement age (as specified in the plan) to contribute the lesser of:
    • Twice the annual limit of $38,000 in 2019 and $37,000 in 2018, or
    • The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions)

Fees and Expenses

Whether you ultimately choose a 403(b) or 457(b) you will also need to make important decisions regarding the investments within those accounts. Be sure to compare the fees associated with mutual funds and annuities before jumping into either plan. Choosing a plan with even a 1% higher fee could affect your retirement savings nest egg.


WHICH PLAN SHOULD I CHOOSE?

DID YOU KNOW? If eligible, you could contribute to a pension, a 403(b) AND a 457 plan at the same time.

Contact Us to find out if you qualify for this savings strategy.

There are many factors to consider when you decide which plan to enroll into, how much to contribute, and how to invest your money. Many of these decisions will also be based on your age, your personal goals for the future, and when you will need to access the money.

Warwick Valley Financial Advisors specializes in helping teachers and school district personnel understand the issues they face. We have become seasoned industry advisors on the 403(b) and 457 plans and can help you make informed decisions early in your financial planning journey.

If you have not yet signed up for a 403(b) or 457 plan, consider doing so as soon as possible. The sooner you begin saving, the more substantial the sum of retirement funds you can potentially save, and the better your chances to be able to afford to live the retirement lifestyle you want to live.

If the idea of picking the right plan intimidates you, contact a financial advisor who specializes in working with teachers and school district personnel to help you make an informed decision.

*Catchup Provision – Source: https://www.irs.gov/retirement-plans/cola-increases-for-dollar-limitations-on-benefits-and-contributions

Free Guide: What Every K-12 Employee Should Know About Their 403B Plan

Retirement investing for teachers can be confusing. This guide is an excellent source of information about the various options available to you as a school district employee answering important questions.

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.

omni 403b preferred provider program

Understanding the OMNI 403b P3 Plan Providers

In this post we aim to provide objective, trustworthy information about OMNI® and their 403(b) P3 Providers. As of this publish date, there are 35 providers available for school districts to add to their retirement plans.

Who is OMNI?

OMNI® is a Third-Party Administrator (TPA) of 403(b) plans. They work with 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.

If your TPA is OMNI, then your school district may offer any of the 35 OMNI P3 Preferred Providers, each with their own account options, pricing structures, fees and investment products for you to choose from.

If you see an OMNI P3 provider that is not currently available to your school district, go ahead and contact your HR department and request to add that provider. Most times it’s just a flip of a switch. Many of these providers also offer a ROTH 403b option that you can request to ‘turn on’ as well.

What is 403bCompare?

Where possible, we have linked to vendor details on 403bcompare.com. The 403bCompare web site is a database of free, objective information about 403(b) vendors and the products they offer. The site was created to help employees of California’s local school districts, community college districts or county offices of education make better-informed investment decisions.

Suprisingly, neither NY (nor Omni 403b) have a comparable, objective resource but the vendor information is still relevant and accurate for NY’s K-12 school employees.

We hope the below links will serve as a great resource when making your initial 403(b) selection or if you are trying to make a change.


PROVIDERProduct TypesROTH eligibleProvider Details
American CenturyMutual FundsROTH eligible403b provider details
American Fidelity* Mutual Funds403b provider details
Ameriprise Financial / River Source Annuities
403b provider details
Aspire Financial ServicesMutual FundsROTH eligible403b provider details
AXA Equitable 
Life Insurance Company
Annuities
ROTH eligible403b provider details
axa annuity review
Brighthouse Life Ins. / MetLife AnnuitiesROTH eligible403b provider details
metlife annuity review

Chemung Canal Trust Co.403b provider details
Confidential Financial Planning / Multichoice
Mutual Funds
403b provider details
confidential planning 403b 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
Global Atlantic Financial Group
403b provider details
GLP & Associates
Mutual FundsProvider details
Great American Insurance Group
Annuities403b provider details
GWN/Employee Deposit program
Mutual Funds
ROTH eligible403b provider details
Horace Mann Life
AnnuitiesProvider details
Kades Margolis
Provider details
The Legend Group, Inc / Adserv
Annuities & Mutual Funds
ROTH eligible403b provider details
Lincoln FinancialAnnuities403b product details
Lincoln Investment Planning, Inc. Annuities & Mutual Funds ROTH eligible403b provider details
Mass MutualAnnuities & Mutual Funds 403b provider details
Mutual Inc/Plan Member Services Corporation Annuities & Mutual Funds ROTH eligible403b provider details
National Life Group (LSW)
Annuities
403b 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
Sgroi Financial403b product details
TEG Federal Credit UnionAnnuities & Mutual Funds
403b provider details
Thrivent Financial for LutheransAnnuities & Mutual Funds
403b provider details
TIAA-CREFAnnuities / Mutual Funds
403b provider details
VALICAnnuitiesROTH eligible403b provider details
Voya (formerly ING) AnnuitiesROTH eligible403b provider details
Waddell & Reed, IncMutual Funds403b provider details

How do you narrow down a list of 403(b) Providers?

Comparing providers, analyzing the pricing structures and finding hidden fees is no small task…and neither your school district, nor OMNI® can recommend any specific provider.

But is essential to make an informed decision about 403(b) providers because your selection WILL affect your retirement account in the future.

We can help.

Free Guide: What Every K-12 Employee Should Know About Their 403B Plan

Retirement investing for teachers can be confusing. This guide is an excellent source of information about the various options available to you as a school district employee answering important questions.

  • Read our recent post on How to Select a Suitable 403(b) Vendor
  • Download our user-friendly 5-step Teachers Shopping Guide that covers the basics of narrowing down your Provider options.
  • Check out our (b)informed blog dedicated entirely to K-12 teacher retirement plan topics.
  • Ask us to host an informative school seminar for your district employees.
  • Schedule a complimentary portfolio review at school friendly hours. This is where we look over your plan, discuss your needs, and identify the investments that are suitable for you.

If you’re still suffering from the paradox of too much choice, or if you have specific questions about your plan or the fees you might be paying, please get in touch.

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.

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


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 OMNI 403b.

1-830185

Warwick Valley 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 Warwick Valley 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
Warwick Valley CSD’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 Warwick Valley 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.


Warwick Valley CSD 403(b) Plan Review

Warwick Valley CSD 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.

Warwick Valley CSD currently has 15 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 Warwick Valley’s 15 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
Ameriprise Financial / River Source Annuities
403b provider details
Aspire Financial ServicesMutual FundsROTH eligible403b provider details
AXA Equitable 
Life Insurance Company
Annuities
ROTH eligible403b provider details
axa annuity review
Brighthouse Life Ins. / MetLife AnnuitiesROTH eligible403b provider details
metlife annuity review

Confidential Financial Planning / Multichoice
Mutual Funds
403b provider details
confidential planning 403b review
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
The Legend Group, Inc / Adserv
Annuities & Mutual Funds
ROTH eligible403b provider details
Lincoln Investment Planning, Inc. Annuities & Mutual Funds ROTH eligible403b provider details
New York Life Ins. & Annuity Corp.
Annuities
403b provider details
Oppenheimer Funds Distributors, Inc Mutual Funds ROTH eligible403b product details
VALICAnnuitiesROTH eligible403b provider details
Voya (formerly ING) AnnuitiesROTH eligible403b provider details

Effective July 1 2014, 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, 2014 may continue their contributions without interruption:
Fidelity Management Trust Co.,   Mass Mutual VA,   MetLife (FC), Paul Revere Insurance Group, Putnam Investments,   T. Rowe Price Trust Co., Vanguard Fiduciary Trust Co.


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

Comparing 15 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 Warwick Valley Central 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 Warwick Valley CSD 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.

Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.

Equity Indexed Annuities (EIAs) are not suitable for all investors. EIAs permit investors to participate in only a stated percentage of an increase in an index (participation rate) and may impose a maximum annual account value percentage increase. EIAs typically do not allow for participation in dividends accumulated on the securities represented by the index. Annuities are long-term, tax-deferred investment vehicles designed for retirement purposes. Withdrawals prior to 59 ½ may result in an IRS penalty, and surrender charges may apply. Guarantees are based on the claims paying ability of the issuing insurance company.

None of the third party service providers mentioned are affiliated with Private Advisor Group, Warwick Valley Financial Advisors or LPL Financial.

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

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.

choose 403b

How to Select a Suitable 403b Vendor

Teachers have a lot going on. On top of their all-encompassing job, many have families, children and other personal obligations that they must juggle along with everyday activities and tasks around the home. So, when it comes to choosing a 403b vendor to work with, many teachers choose blindly, simply following the course that their colleagues or friends have taken. They trust the professional who came to their classroom, and, from a 10,000-foot glance, thought the plan summary sounded good – “There’s no time to read all the fine print.” But this can be a very costly mistake!

Not all school district employees have the same situation or needs. And more importantly, the vendor that “your friend/colleague” selected, may not have been researched. For example, did you know that some charge fees that are avoidable and could stunt the growth of your retirement nest egg?

Below are some guidelines to help you choose a 403b vendor.

Check the 403b Vendor Fees

Fees may have the biggest impact on the return of your 403(b) plan because they cut directly into your rate of return.

For a mutual fund held in a retirement plan, these fees can include:

  • Expense Ratio: It costs money to run a mutual fund, sometimes more than others. This expense, also known as a management fee or operating expense, is typically deducted from the fund’s total assets before your share price is determined.
  • Sales fees or Commissions: On certain mutual funds, you will pay an upfront fee sometimes called a “front-end load”. Depending on the amount of your investment, you could qualify for a lower upfront fee called a “breakpoint”.
  • Redemption or surrender fees: On certain mutual funds,, you pay a “back-end or deferred load”. These fees will apply if you sell the mutual fund within a certain period of time.
  • Short Term Trading fees: Mutual funds are designed to be long-term investments, so trading fees were created for some funds to discourage short-term trading.
  • 12(b)1 Service fees: Many funds have an ongoing service fee that is paid to a financial advisor or the firm he or she works for as compensation for marketing the fund. Just like the expense ratio, this service fee will be deducted out of the total fund assets before your share price is determined.

For an annuity within a 403(b) plan, fees can include the following:

  • Mortality and expense risk fees: Also known as the Death Benefit. Participants pay the mortality and expense (M&E) fee each year to an insurer to offset the risk of investment loss, plus fees involved to pay annuity provider expenses. According to the Securities and Exchange Commission, that generally means an average of 1.25 percent annually, which equates to $250 a year on a $20,000 account. (Read our recent blog post for more on this).
  • Administrative fees: These can be flat fees or a percentage of an account (typically, 0.15 percent, or $30 for a $20,000 account).
  • Sales loads: These are sales commissions an investor typically pays up-front when buying an annuity. These costs cut directly into the actual amount available to invest. For example, a 7 percent fee on a $10,000 investment will cost $700, meaning you’ve effectively only invested $9,300. These are common in 403(b) plans.
  • Investment Expense Ratio: Inside a variable annuity, the underlying stock and bond investment choices, called sub-accounts, will have an investment management fee which can range from .25 – 2.00% of the value in that account per year.
  • Surrender charges: These will apply if you sell an annuity within a certain period of time, known as the surrender period, which can last up to 15 years after purchase. This charge, also called a Contingent Deferred Sales Charge (CDSC), is a percentage of the asset balance at the time a person withdraws or transfers and depends on how long the money has been in place.
  • Fees for Optional Features:  Special features offered by some variable annuities, such as a stepped-up death benefit, a guaranteed minimum income benefit, or long-term care insurance, often carry additional fees and expenses.

Ask for a Fee Disclosure

To evaluate the fees of an investment product you’re considering, ask about them.

If you’re working with a financial advisor,

  • Ask if he or she receives a commission based on the sale of the product, and if so, the amount of this commission
  • Ask if the advisor will receive any additional compensation (including any bonuses or incentive gifts) associated with selling this product
  • Ask if the advisor will receive a greater sales commission by recommending a particular product over another, and whether your needs would be equally served by the lower-priced product

Performance Information

Fees can dramatically impact an investment’s potential performance, so, when evaluating investments, it is also useful to review, compare and contrast their previous performance. However, keep in mind that past performance is not necessarily an indicator of future returns.

A good way to assess past performance is to compare a product’s performance to a comparable benchmark index. This information can be found in a fund’s investment prospectus. And can be done for you if working with a financial advisor.

For example, if you’re considering a large-cap growth fund, how does its performance compare with the S&P 500 benchmark? If the fund has come close to matching or exceeded the performance of the index, it may be worth considering. On the other hand, if the fund has significantly underperformed the index, you may wish to look elsewhere.

If you’re considering an insurance company as your 403(b) plan vendor, it is prudent to review and compare its financial strength and stability before purchasing a product from that company. Because these companies sell insurance products that obligate the insurer to pay a benefit/return at some point in the future, it is important to verify that the insurer is in good financial health so it can make good on this obligation.

The Benefits of a ‘Financial Tutor’

Choosing a suitable 403(b) vendor takes time. That’s why more and more education professionals are turning to advisors who act as  fiduciaries  for help and expertise with their financial and retirement planning. The right financial advisor can take on this task for them and aim to help ensure they’re on the right track toward reaching their retirement goals.

But beware: Just like 403b vendors, not all financial advisors are created equal. Choosing a financial professional is an important decision. It can take a little time to research a financial advisor, but time spent now can save you time and money in the long-run.

Hiring a financial advisor to help you make informed financial decisions can be extremely beneficial. But choosing a professional to work with is one of the biggest decisions you will make. This person can determine when you can retire, how you’re able to spend that retirement and what you’re able to leave behind when you’re gone, if anything.

Don’t follow the herd. Instead, start a new trend that includes research, insight and smart decisions. It may take some time, but it’s time well spent for sure!

Warwick Valley Financial Advisors works specifically with teachers and school district employees and is familiar with the needs and issues these hard-working professionals face. Contact us to find out how we can help, or schedule an appointment now to discuss your personal situation in more detail.


*Investing in mutual funds involves risk, including possible loss of principal.

Variable annuities are suitable for long-term investing, such as retirement investing. Withdrawals prior to age 59-½ may be subject to tax penalties and surrender charges may apply. Variable annuities are subject to market risk and may lose value.

Free Guide: What Every K-12 Employee Should Know About Their 403B Plan

Retirement investing for teachers can be confusing. This guide is an excellent source of information about the various options available to you as a school district employee answering important questions.

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 403b 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 403b 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 403b 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 24 Monroe-Woodbury 403b 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
AXA Equitable 
Life Insurance Company
Annuities
ROTH eligible403b provider details
axa annuity review
Brighthouse Life Ins. / MetLife AnnuitiesROTH eligible403b provider details
metlife annuity review

Confidential Financial Planning / Multichoice
Mutual Funds
403b provider details
confidential planning 403b 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 Monroe-Woodbury 403b 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 Central 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 403b 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.