5. how do I get a 403(b) plan

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Information about 5. how do I get a 403(b) plan

Published on March 7, 2014

Author: nebspensions

Source: slideshare.net


The 5th installment of a 6 part series with everything you ever wanted to know about 403(b) plans

5. How Do I Get A 403(b) Plan? Ok, now that we’ve described all the wonderful features and benefits of participating in your organization’s 403(b) plan, how do you join one? The first step is to check with the administrator, human resources department, director, or other person or committee responsible for the plan. Does your organization offer a 403(b) plan? If not, your organization may not be able to offer a 403(b) plan because it is not considered an eligible plan sponsor, but that might not preclude your employer from offering a 401(k) or other similar plan. Your employer may not offer a retirement plan due to budgetary constraints, or lack of interest in participating by eligible employees, or because of a lack of understanding about the benefits of offering a retirement plan or the belief that a plan will increase the workload of an already understaffed operation. All of these reasons can be valid concerns, and many times, depending on your personal income level, you may still be able to start and contribute to an Individual Retirement Account (IRA) if your employer does not have a 403(b) plan at work. IRAs come in many “flavors” – traditional or Roth, or spousal IRAs, to name a few. All have slightly different features, the descriptions of which are beyond the scope of this information. When starting or contributing to an IRA, it’s usually a good idea to check with a qualified advisor, such as an accountant or consultant, who is familiar with your own specific financial situation to avoid potential tax problems, such as over-contributing. But if you are lucky enough to be employed by an organization that offers a 403(b) plan, you should take advantage of this benefit and join the plan as soon as you are able to. Most plans have some sort of eligibility “waiting period.” The most common provision is that an eligible employee must attain age 21 and have worked for the organization for one year on a full time basis in order to join the plan. Enrollment periods may be limited to certain times, such as the first of each month or quarter, after you have met the eligibility requirements. If your employer offers a 403(b) plan, you should receive a periodic notice of your eligibility to make deferrals into the plan, but if you are unsure, again, check the documents you may have received when you were first hired, or ask the person or committee responsible for the plan’s operations. You can generally stop making salary deferrals at any time, although your plan may require another smaller waiting period, such as the next month, or the first day of the next payroll period, in order to restart contributing once you have met the initial eligibility to join the plan. One of the good things about a 403(b) or 401(k) plan is the “automatic” withholding of contributions from your paycheck and depositing those contributions into the plan each payday. In fact, many plans now have an “automatic enrollment” feature, whereby your employer will set up your paycheck with a minimal base amount of 403(b) contribution, such as 3% of pay, from the first day an employee is hired, without any involvement on the part of the employee, and those employees who do not wish to participate must complete a form in order to stop the contributions. The idea behind this “negative enrollment” is that inertia on the part of employees can be utilized to force a certain minimum level of participation in the plan, so that employees who might not otherwise be able to save will do so automatically, because it takes more effort to elect NOT to contribute than it does to simple do nothing and let salary deferrals continue to accumulate in the plan. The automatic amount or percentage is then gradually increased each year, with a maximum cap on contributions, generally 10% of pay. The employee can opt out from making salary deferral contributions at any time during his/her tenure with the organization. NEXT: WHAT HAPPENS TO MY 403(b) PLAN WHEN I LEAVE, RETIRE, OR DIE?

DISCLAIMER: The information expressed herein is for informational purposes only and is not to be construed as tax or legal advice. The opinions expressed are solely those of the author. BIO: Nora Bethman, CEBS, QKA, ERPA President, National Employee Benefit Services, Inc. Ms. Bethman is the owner of National Employee Benefit Services, Inc., a Third Party Retirement Plan Administration firm in Lincolnshire, IL. She has over 20 years of experience as a qualified retirement plan administrator. She has extensive experience in 403(b) plan setup, administration, and problem resolution. Contact 847-808-0940 or info@nebspensions.com for a free retirement plan review to see how your organization can start or improve its retirement program, or visit www.nebspensions.com for more information.

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