Oklahoma City Community College 403b Update

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Oklahoma City Community College 403(b) Update

• J. Dudley Hyde
• McAfee Taft A Professional Corporation
• 211 N. Robinson, Two Leadership Square, 10th
  Floor
• Oklahoma City, OK 73102
• www.mcafeetaft.com
• dudley.hyde_at_mcafeetaft.com
• Direct dial [phone] Direct fax (405)
  228-7429

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Discussion Topics

• Overview of the relevant changes imposed by the
  403(b) Final Regulations
• Explanation of the Proposed Restructuring of the
  Oklahoma City Community College Employees
  Retirement Plan

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Final 403(b) Regulations
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Effective Date

• The final regulations are generally applicable
  for taxable years beginning after December 31,
  2008.

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General Purpose

• To diminish the extent to which 403(b) plans
  differ from other salary reduction arrangements
  such as 401(k) and 457(b) plans.

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Plan Document Requirement

• All 403(b) programs must be maintained pursuant
• to a written plan document that
• Satisfies, in form and operation, the regulatory
  requirements of the 403(b) rules and
• Contains all material terms and conditions for
  eligibility, benefits, applicable limitations,
  the contracts available under the plan, and the
  time and form under which benefit distributions
  will be made.

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Contract Exchanges

• A 403(b) contract may be exchanged for another
• section 403(b) contract under the same 403(b)
• plan if
• The plan provides for the exchange,
• The accumulated benefit immediately after the
  exchange is at least equal to such benefit
  immediately before the exchange,
• The other contracts distribution restrictions
  are not less stringent than the contract being
  exchanged, and
• The employer enters into an information sharing
  agreement with the issuer of the other contract .

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Information Sharing Agreement

• Under this agreement the employer and the issuer
• will from time to time provide each other with
• information necessary for the resulting contract
  to
• satisfy section 403(b) and other tax
  requirements,
• such as information regarding
• The participants employment.
• Whether a severance from employment has occurred.
• Whether hardship withdrawal rules are satisfied.
• Whether a plan loan constitutes a deemed
  distribution.

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Grandfathered Period

• The final regulations provide a
• grandfathered period for contract exchanges
• which
• Satisfied the Rev. Rul. 90-24 rules at the time
  it was exchanged, and
• Occurred on or before September 24, 2007.

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Permissive Service Credit

• A 403(b) plan may transfer assets to a
• qualified defined benefit plan that is a
• governmental plan if it is either
• For the purchase of permissive service credit
  under the receiving defined benefit plan or
• A repayment to which section 415 does not apply
  by reason of section 415(k)(3).

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403(b) and 401(k)

• The final regulations do not fundamentally
  change the current distribution rules, but they
  try to conform the 403(b) distribution events to
  those applicable under section 401(k)

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Failure to Satisfy 403(b)

• If a contract purchased by an employer for an
  employee fails to satisfy 403(b) requirements,
  that contract and any other contract purchased
  for that employee is not a 403(b) contract.
• However, operational failures within one contract
  will not adversely affect any other contracts
  purchased by that employer for other employees.

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Increased Employer Responsibility

• Requirement that written plan comply in both form
  and operation increases administrative and
  compliance oversight responsibilities associated
  with maintaining a 403(b) plan
• Additionally, the IRS is expected to increase its
  scrutiny and auditing of 403(b) plans as part of
  the release of the regulations

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Oklahoma City Community College Employees
Retirement Plan
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The Current 403(b) Plan

• To the extent an employee contributes 1.5 of
  compensation, the College contributes 4.5 into
  an account.
• The 403(b) Plan allows participants to direct
  their accounts into separate 403(b) annuities or
  custodian accounts.
• There are currently about 46 separate vendors
• Approximately 89 of all College employees
  currently participate in 403(b) Plan

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Proposed Changes

• Reduce the number of vendors from 46 to no more
  than 12 to facilitate control and ease of
  administration
• Current accounts in that plan will remain in the
  403(b) plan or can be transferred directly to
  403(b) annuities and custodial accounts offered
  by the 12 remaining vendors

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Purpose of Changes

• Better pricing with regard to investment options
  and additional services, e.g. educational/investme
  nt advice
• Improved ability to monitor the investment
  performance of the options in the 403(b) plan.
• Simplified communications regarding investments

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Additional Recommendations

• Hire an independent investment consultant to
  assist in implementing the RFP process and
  evaluating responses
• Establish a retirement/investment committee to
  provide fiduciary oversight of the plans
• Adopt an investment policy statement to govern
  the types of investments offered under the plans

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Why use a Consultant?

• Plan fiduciaries may not have the expertise to
  adequately analyze investment options
• Have qualifications to be an expert
• Independent of providers of investment options to
  the plan
• May relieve plan fiduciaries of some
  responsibility/liability in selecting and
  monitoring investment options

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Questions?