Townhall.com, Where Your Opinion Counts
Talk Radio:   Bill Bennett   Mike Gallagher   Dennis Prager   Michael Medved   Hugh Hewitt   
BREAKING NEWS  LeftArrow - Townhall.com : Conservative, Political, Republican   RightArrow - Townhall.com : Conservative, Political, Republican  
Columns, funnies & more in your inbox!
Login | What's Hot
  • Check the boxes and send us your email address to receveive your free newsletter
  • Your daily must-read of conservative columns, cartoons and news. Coulter, Sowell, Krauthammer and more.
  • Townhall.com’s weekly inside scoop on what’s happening behind the scenes in the world of politics. When news breaks, we report.
  • Signup to receive the latest daily Townhall cartoons
Tuesday, November 28, 2006
Lynn O'Shaughnessy :: Townhall.com Columnist
Teachers, did you forget to do your homework on 403(b) plans?
by Lynn O'Shaughnessy
Forward Print Share Single Page
Vote on It:
Average Vote:
[+] Text [-]
 
 
Poll
Was the Copenhagen Global Warming Summit Walk-Out a Win for the U.S.?


If you need incentive to pore over your plan's particulars, here it is: The federal government is significantly overhauling its 403(b) regulations for the first time in 40 years. One aim of the regulations, which haven't been finalized yet, is to make the 403(b) look and feel more like 401(k) plans, which have stricter administrative guidelines to protect participants.

That's certainly a good development, but the regulations will unfortunately limit teachers from fleeing a bad plan. Currently, teachers who are saddled with mediocre 403(b) choices can typically move their cash to a 403(b) provider that isn't in a school district's lineup. Suppose, for instance, that a district offers a dozen 403(b) providers, but these firms only market annuities. Today, many teachers can move the money in their 403(b) accounts to one of the low-cost mutual fund companies that I mentioned earlier, through something called a 90-24 transfer. These transfers won't be allowed in the future.

Of course, 90-24 transfers wouldn't be necessary if school districts offered respectable 403(b) choices. But the administrative requirements of the new regulations are going to encourage fewer choices, not more. It's up to teachers to find out what choices are included in the plan and to make sure inexpensive mutual fund options aren't ostracized.

If you are tempted to flee before the new regulations are finalized and the 403(b) escape route is padlocked, you'll want to determine what your price of freedom would be. One of the drawbacks of 403(b) annuities are the surrender charges they assess to deserters. To walk away from an annuity, you may have to pay 7 percent or more of your assets. In contrast, if you dump a 403(b) that contains no-load mutual funds, there is no penalty.

If you want to learn more about 403(b) plans, I'd urge you to spend time atwww.403bwise.com, the brainchild of a couple of educators. Also, you might want to read "Teach and Retire Rich," by Dan Otter, one of the creators of 403bwise.com. You can order the book at www.TeachandRetireRich.com.

I only wish my mom had these kinds of resources when she was teaching.

1 2
| Full Article & Comments | < Previous
Share:
Forward Print Single Page
Vote on It:
Average Vote:
 
About The Author

Lynn O'Shaughnessy is the author of Retirement Bible.

Be the first to read Lynn O'Shaughnessy's column. Sign up today and receive Townhall.com delivered each morning to your inbox.

Join The Debate!

Post Your Comment
(2 comments so Far)
View in ascending order     View in descending order
Reply # 1
Date: Nov 28, 2006 - 9:54 AM EST
403B Plans
One of the biggest problems is that school districts do not inform teachers of their rights, many will say that there are only a few aproved providers, and teachers believe them. Usually these are the worst plans available. If you are a teacher, check around with other companies and you may find that there are way better plans available that what you have been told about.
Flag as Offensive

Reply # 2
Date: Nov 28, 2006 - 3:22 PM EST
Yes but
What if the teacher works for a private school that has a voluntary 403(b) plan and allows only one carrier, an insurance company, and the variable annuity is the only option? My wife's school matches up to 5% of contributions to this plan. Although she is past the surrender charge period, the employer plan forbids rolling any money out as long as she is employed there. What was she supposed to do, turn this down?
Flag as Offensive
Sign Up to Post Your CommentsSign Up to Post Your Comments
If you are already registered, click here to login. Otherwise, please take a few seconds to register with Townhall.com. Once you sign up, you’ll be able to post your comments immediately, use the action center, get podcasts, and more!
Note: Fields marked with a red asterisk (*) are required.
Salutation:
First Name:
*
Last Name:
*
Email:
*
Nickname:
*
Note: Nick name will be shown when you post comments.
Address 1:
*
Address 2:
City:
 *
State:
 *
Zip:
 *
Phone:
       
Your daily must-read of conservative columns, cartoons and news. Coulter, Sowell, Krauthammer and more.
(Bi-Weekly) We highlight the best opportunities from our partners for surveys, action items and more.