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Your 403b PlanYour 403b Plan

Foothill De-Anza CommunityFoothill De-Anza CommunityCollege DistrictCollege District

David Creech, District ManagerDavid Creech, District Manager

VALICVALIC

March 10 & 12, 2009March 10 & 12, 2009

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AgendaAgenda

• New 403(b) Regulations and Their ImpactNew 403(b) Regulations and Their Impact

• Changes to the FDA 403b PlanChanges to the FDA 403b Plan

• Loans and HardshipsLoans and Hardships

• Retirement Planning TodayRetirement Planning Today

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Is VALIC secure and is my money safe?Is VALIC secure and is my money safe? AIG, the parent company is a separate legal entity distinct from its subsidiaries that make AIG, the parent company is a separate legal entity distinct from its subsidiaries that make

up AIG Retirement. up AIG Retirement.

The Variable Annuity Life Insurance Company (VALIC)The Variable Annuity Life Insurance Company (VALIC) AIG Retirement Advisors, Inc. AIG Retirement Advisors, Inc. AIG Retirement Services CompanyAIG Retirement Services Company

The Fixed-Interest Option provides a The Fixed-Interest Option provides a

fixed earnings rate and guarantee of fixed earnings rate and guarantee of

principal backed by the claims-paying principal backed by the claims-paying

ability of VALIC, and protected by Texasability of VALIC, and protected by Texas

state insurance regulations.state insurance regulations.

Mutual funds or variable account options Mutual funds or variable account options

are invested in mutual funds regulated byare invested in mutual funds regulated by

the SEC and owned by the shareholders.the SEC and owned by the shareholders.

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• Review of New 403(b) RegulationsReview of New 403(b) Regulations

• Preparing for the ChangesPreparing for the Changes

• 403b and 457b highlights403b and 457b highlights

• QuestionsQuestions

OverviewOverview

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403b Regulations and Your Plan403b Regulations and Your Plan

Plan documentsPlan documents Universal availabilityUniversal availability Transfers and rolloversTransfers and rollovers Investment productsInvestment products Contribution limitsContribution limits Roth 403(b) contributionsRoth 403(b) contributions

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403b Regulations and Your Plan403b Regulations and Your Plan

Hardship withdrawalsHardship withdrawals Contribution limitsContribution limits Withdrawal restrictionsWithdrawal restrictions LoansLoans Minimum distributionsMinimum distributions

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Released July 24, 2007Released July 24, 2007 September 25, 2007 – Transfer restrictions imposedSeptember 25, 2007 – Transfer restrictions imposed Effective date: January 1, 2009Effective date: January 1, 2009 Plan Documents must be in effect by December 31, Plan Documents must be in effect by December 31,

20092009

403(b) Regulations:403(b) Regulations:

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Written Plan: Some Key RequirementsWritten Plan: Some Key Requirements

Must have written planMust have written plan Eligible employeesEligible employees How eligible employees participateHow eligible employees participate Distribution issuesDistribution issues Products available under the plan: Products available under the plan:

includes any contract and account that has includes any contract and account that has received contributions in the plan, unless received contributions in the plan, unless grandfathered grandfathered

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Approved Providers and ContractsApproved Providers and Contracts

Information Sharing AgreementsInformation Sharing Agreements All contracts and accounts issued under a All contracts and accounts issued under a

group’s 403b plan are to be governed by a group’s 403b plan are to be governed by a plan document starting no later than 1/1/09 plan document starting no later than 1/1/09 unless grandfathered under the new transfer unless grandfathered under the new transfer and exchange rules.and exchange rules.

If not, could become taxableIf not, could become taxable

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Part of Plan – or Not?Part of Plan – or Not?

Contracts and accounts established on or Contracts and accounts established on or after 1/1/09 – Must be included in planafter 1/1/09 – Must be included in plan

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Part of Plan – or Not?Part of Plan – or Not?

If the individual is a current employee, their If the individual is a current employee, their active account or contract must be included active account or contract must be included under the plan. De-selected accounts or under the plan. De-selected accounts or contracts will not automatically become contracts will not automatically become taxable. taxable.

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TransfersTransfers

• Under new rules: two kinds of transfersUnder new rules: two kinds of transfers• Transfers within plan called “exchanges”Transfers within plan called “exchanges”• Transfers to another plan called “transfers”Transfers to another plan called “transfers”• Subject to permission (from both plans if to another Subject to permission (from both plans if to another

plan)plan)

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Transfers: Information SharingTransfers: Information Sharing

• No information sharing: No transfer No information sharing: No transfer starting September 25, 2007 starting September 25, 2007

• What is an information sharing What is an information sharing agreement? agreement?• Purpose is to facilitate plan-level compliance, Purpose is to facilitate plan-level compliance, i.e.i.e. loan loan

and distribution requirementsand distribution requirements

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Universal Availability: What is it?Universal Availability: What is it?

Annual notice of eligibilityAnnual notice of eligibility

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Distributions and LoansDistributions and Loans

Coordination across multiple providers within Coordination across multiple providers within the plan, and those governed by information the plan, and those governed by information sharing agreementssharing agreements

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Excess ContributionsExcess Contributions

Under the New Regulations:Under the New Regulations: Contract ceases to be a qualifying 403(b) contract Contract ceases to be a qualifying 403(b) contract

unless the excess is either:unless the excess is either: timely corrected, ortimely corrected, or separately accounted for from the outsetseparately accounted for from the outset

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Consequences of DefectsConsequences of Defects

Final regulations provided clarificationFinal regulations provided clarification Individual defects do not infect accounts of Individual defects do not infect accounts of

innocent participants. Individual’s contract can innocent participants. Individual’s contract can cease to be a 403(b) contract.cease to be a 403(b) contract.

Example: single violation of withdrawal restrictionsExample: single violation of withdrawal restrictions Contrast: universal availability applies to allContrast: universal availability applies to all

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What is Happening Today?What is Happening Today?

Current environment is very fluid and Current environment is very fluid and evolving.evolving.

FDA is working with current vendors to FDA is working with current vendors to determine their ability to meet requirements of determine their ability to meet requirements of new regulations.new regulations.

ISA and Hold Harmless in place.ISA and Hold Harmless in place. Some vendors have left the market.Some vendors have left the market. Some vendors are no longer be available.Some vendors are no longer be available.

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What is Happening Today?What is Happening Today?

FDA is working to maintain the greatest FDA is working to maintain the greatest degree of investment options while meeting degree of investment options while meeting obligations posed by new regulations.obligations posed by new regulations.

Check District Payroll web site for “preferred Check District Payroll web site for “preferred and pending” vendorsand pending” vendors

Stay tuned – still evolving!Stay tuned – still evolving!

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Loan & Hardship ProcessLoan & Hardship Process

To obtain a loan or hardship withdrawalTo obtain a loan or hardship withdrawal Must complete a loan or hardship voucher. Must complete a loan or hardship voucher.

Obtain from FDA website.Obtain from FDA website. Complete voucher and loan/hardship Complete voucher and loan/hardship

paperwork from vendor.paperwork from vendor. Provide to FDA for review.Provide to FDA for review. Forward to Vendor.Forward to Vendor.

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403b Accounts403b Accounts

2009 Max is $16,5002009 Max is $16,500 2009 Age Based Catch Up is $5,5002009 Age Based Catch Up is $5,500 Cap Expansion = $3,000/yr. max, $15,000 Cap Expansion = $3,000/yr. max, $15,000

lifetime maxlifetime max Loans are availableLoans are available

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457b Deferred Compensation457b Deferred Compensation

Operate side-by-side with 403bOperate side-by-side with 403b 2009 Max is $16,5002009 Max is $16,500 2009 Age Based Catch Up is $5,5002009 Age Based Catch Up is $5,500 Separate Contribution LimitsSeparate Contribution Limits No Loans AvailableNo Loans Available

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Questions????Questions????

Please ask!Please ask!

THANK YOUTHANK YOU

AIG Retirement AdvisorsAIG Retirement Advisors