Recent legislation (Senate Bill 1162 and House Bill 2178) allows school divisions to elect to allow eligible employees to use an employer-sponsored hybrid 403(b) plan for employee voluntary contributions to the Hybrid Retirement Plan. The employer match on these contributions may go into the 403(b) or the employer’s cash match plan pursuant to the Internal Revenue Code 401(a).
Next month, school divisions will receive a packet containing two resolutions. Local school boards must elect by October 30 to:
• Allow eligible employees the option to elect to direct voluntary contributions to an employer-sponsored hybrid 403(b) plan; or
• Not to offer this option, so that voluntary contributions will continue to be directed into the Hybrid 457 Deferred Compensation Plan only.
If a school division elects to allow employees the option to direct voluntary contribution to an employer-sponsored 403(b) plan, they may incur significant administrative costs. County finance and human resource staff members are encouraged to review the potential impact on your locality if your school board opts to make this change.
Under the Code of Virginia, elections must be made on or before November 1. Because this falls on a Sunday in 2015, your school board must make an election by Friday, October 30. The formal signed resolution must be submitted to VRS by November 10. This is an annual election.
Employers have a number of considerations before electing to offer an employer-sponsored hybrid 403(b) plan, including fiduciary and administrative responsibilities, as well as payroll system changes, accounting and reporting requirements. The resolution packet will contain resources to explain these considerations.
If school boards elect to offer this option, their Hybrid Retirement Plan employees will have until November 30 to elect to direct their voluntary contributions to the employer-sponsored hybrid 403(b) plan that you offer. Employee elections made on or before November 30 will be effective January 1, 2016.
VACo Contact: Erik Johnston, CAE