TO:           All D97 Staff

FROM:      Don Robinson

                  Asst Supt for Finance & Operations

DATE:      September 14, 2007  

RE:      Important 403(b) Information

The purpose of this memo is to inform you of two provisions that have an effective date of September 24, 2007. 

On July 26, 2007 the Internal Revenue Service (IRS) issued new regulations for Sec 403(b) plans. The effective date for most provisions is the taxable year beginning after December 21, 2008 (January 1, 2009). The new provisions will have an impact on all 403(b) participants. The purpose of these new regulations is to make 403(b) plans as similar as possible to other “elective deferral” plans. IRS scrutiny of these plans (in the form of audits) has also increased in recent years.

All 403(b) plans under the new regulations must satisfy a list of specific qualifications. The District will be initiating contacts with its current plan providers to ensure that all written plan documentation requirements and procedures meet IRS regulations. These new contracts will be in place by January 1, 2009. This will be a tedious and time consuming undertaking and we will keep you informed of the progress we are making toward compliance with these new rules.

1.   New regulations prohibit using separate life insurance contracts in 403(b) plans effective for contracts issued after September 24, 2007.                                        

(What it means: You may not use your 403(b) funds to purchase a separate new life insurance contract as of September 24, 2007, and any separate life insurance contract you may purchase on or before September 23, 2007, under the 403(b) plan must satisfy the limits of the incidental benefit rule.)  

1.   90-24 transfers are permitted under current rules until September 24, 2007.     

(What it means: Under current tax-free transfer rules permitted by Revenue Ruling 90-24, you have generally had the option to transfer from one 403(b) account to another 403(b) account regardless of whether the receiving product provider is offered under the 403(b) plan of the District. Effective September 25, 2007 contract transfers or exchanges are limited to product providers with whom the District enters into an information sharing agreement by January 1, 2009 to ensure compliance with Code section 403(b) and its final regulations.

IF YOU ARE CONTEMPLATING A 90-24 TRANSFER OR THE PURCHASE OF