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Dear Colleague:

The American Association of School Administrators, through the AASA Center for System Leadership™,

is pleased to provide to every superintendent in America this highly anticipated Blueprints: A Guide to Public

School Plans 403(b) and 457(b) toolkit. The toolkit, which includes materials from the Internal Revenue Service,

is designed as an information “blueprint” for constructing a compliant 403(b) plan in accordance with new

IRS requirements.

The opportunity to provide this toolkit to all superintendents is made possible only through hours of advice

and support from key IRS officials and 403(b) experts, plus the generosity of four leading companies in financial

services. In particular, I am pleased to thank AIG Retirement, AXA Equitable, Horace Mann and ING for their

outstanding support and commitment to public education.

AASA cannot give tax advice. Although the toolkit may not answer all of your questions, it is an objective

approach to helping you feel confident about your school’s new responsibilities beginning Jan.1, 2009.

Because the plan you create for your school system will reflect the needs of your district, we recommend that

you use this toolkit in addition to seeking the advice of a tax attorney. The goal of Blueprints is to provide public

information in a way that supports your discussion among the school system, its employees and the plan’s

product providers.

I personally believe the Blueprints toolkit represents a significant resource for your efforts to become compliant

with the new requirements. The AASA Center for System Leadership placed an evaluation card in the right pocket

of the toolkit. We would appreciate your thoughts about the value of the Blueprints toolkit.

If you are a member of AASA, you will recognize this toolkit as another leading-edge member benefit. Other

benefits include The School Administrator magazine, electronic publications, unique professional development

opportunities, member discounts, advocacy, and member access to current, compelling information on the

AASA website.

If you are not a member of AASA, I invite you to join AASA for everyday access to our many professional

resources and to help make AASA a stronger voice in Washington. More information about 403(b) administration

will be forthcoming from AASA to our members. The best way for you to stay atop this information and other

critical issues is to take advantage of AASA’s news services and other member benefits. As your national resource

and federal advocate for public schools and our profession, we invite you to join us. A brochure on the opposite

panel in your toolkit offers more information about AASA membership.

We wish you well with your construction project and hope the Blueprints help.

Sincerely,

Paul D. Houston

Executive Director

American Association of School Administrators

Introduction to

A Guide to Public School Plans 403(b) and 457(b)

AmericAn AssociAtion of school AdministrAtors

Your guide to using the Blueprints Toolkit and Wall Chart

including

Blueprints Glossaryand General Provisions

2

Public school systems have been providing 403(b)

tax-sheltered annuity plans to their employees for

almost 50 years.

Congress enacted legislation that established 403(b)

annuity plans as a benefit to employees working for

non-profit establishments. This includes employees

performing services in education, health care,

and religious and charitable organizations.

As public service employees, these groups of workers

were not afforded the higher salaries, stock awards and

profit-sharing plans that were available to workers in

private industry. Congress provided this benefit to allow

an advantage for non-profit employees to prepare for

their retirement, allowing them to save money earned

before employment taxes were applied.

Today, the opportunity to set aside pre-taxed dollars

for retirement is still a recruitment tool and leading

benefit to employees in our school systems. It is with

these intentions that we strive to continue offering

this valuable benefit.

Originally, these plans were governed by relatively

few regulations. Through the years, there has been

a growing need for the U.S. Treasury and the

Internal Revenue Service to provide and update

403(b) plan guidance.

Compliance with 403(b) tax regulations now varies

greatly among the nation’s public school systems.

Many school systems have implemented procedures

that require plan providers to accept responsibility

for the proper administration of their accounts;

others have had little, if any, involvement with their

plans, hoping that plan providers have compliance

procedures in place.

The final IRS regulations for 403(b) plans, issued

on July 26, 2007, constitute the first comprehensive

guidance issued in more than four decades. They

include significant changes, including accountability

measures that school system leaders must know

about in order to properly administer their 403(b) plans.

The IRS previously has released regulations for 457(b)

plans that are also offered by many public school

systems. Both plan types are very similar. Public

schools are required to administer both types

of plans for compliance.

Background

Introduction to


Introduction

3

About Blueprints: A Guide to Public School Plans 403(b) and 457(b)

Blueprints is a toolkit designed for school system

leaders by the American Association of School

Administrators through the Center for System

Leadership™. The Center is a learning organization

that fosters, develops and supports superintendents

of schools and other school system leaders who are

leading the transformation of public education.

First and foremost, it is important to remember that

these plans provide an excellent opportunity for your

employees to save for retirement with contributions to

a 403(b) plan. The 403(b) regulations allow for some

flexibility in plan design, so it is a good idea to become

familiar with all the materials in the toolkit.

The purpose of the toolkit is not to provide tax

or legal advice, but rather to provide information

to facilitate discussion among school system

administrators, product providers and employees

that leads to having tax-compliant retirement plans

by the Jan. 1, 2009, IRS deadline. School system

officials should consult an independent tax advisor

to obtain tax advice. A Blueprints toolkit is provided

to every public school system superintendent in

the United States. The Blueprints project is made

possible with generous grants from four leaders

in the financial services industry: AIG Retirement,

AXA Equitable, Horace Mann and ING.

About

4


The enclosed 1. Blueprints wall chart (top right

pocket) provides a visual step-by-step guide

to becoming 403(b) compliant. Along with the

Glossary and General Provisions section of this

booklet, the Blueprints wall chart begins and

ends with the relationships and responsibilities

of three subgroups:

school system, which the IRS considers to be

the 403(b) plan sponsor (and superintendents

who typically are the point persons for the

403(b) program decisions and structure)

employee participants

plan providers

The wall chart allows superintendents to easily

see the responsibilities of each subgroup as

the current 403(b) program progresses toward

the new IRS requirements for a compliant

403(b) plan.

The 2. Glossary and General Provisions section of

this booklet contains explanations and descriptions

of terms found on the Blueprints wall chart. Though

it can be used as a resource for understanding

terms in the entire toolkit, the Glossary and General

Provisions booklet is designed as a supporting

document for the Blueprints wall chart. These

two tools should be used together.

3. Tools-You-Can-Use CD-ROM (inner right panel)

provides tools to help develop and maintain 403(b)

plans, as well as sample letters to communicate to

employees and providers, sample service provider

agreements, and IRS web links.

Records Retention

and Maintenance Checklist:

Records are vital for retirement plan compliance.

This tool identifies the records a school system

must retain and maintain for compliance.

Request for Information Form (RFI):

This assessment tool is designed to screen the

level of compliance services provided by prod-

uct providers. When used with the wall chart

(step 2), completed RFI forms help determine

which contracts may be available under the

plan. Product providers complete this form.

Two samples of RFI are included.

403(b) Employee Notice of Eligibility:

This form provides the required notice

to eligible employees about their rights to

participate in 403(b) plans and outlines

enrollment procedures. This notice is required

in order to meet the school system’s compliance

responsibility for universal availability.

Introduction

A Guide to Public School Plans

How to use the Blueprints tools:

5

Certified Service Provider Agreements:

Two sample service provider agreements are

provided as examples of agreements that

delineate shared plan responsibilities for the

school system and product providers. The

school system has certain responsibilities and

the product providers may be assigned to share

certain responsibilities. This type of agreement is

necessary to operate the plan under the terms

and conditions of the written plan.

Hot IRS Audit Issues:

This side-by-side comparison of 403(b) and

457(b) plans provides a quick way to view the

general elements of both plan types. The IRS

provides school systems an annual report that

identifies problem areas discovered during its

audits. This tool is a good resource to review

plan areas that may be out of compliance.

The highlighted areas in red are key areas

that have been identified by the IRS as

common audit concerns.

Employee Notification Letters:

Two sample employee letters are provided

notifying employees of changes in the school

system’s 403(b) plan.

Product Provider Letter:

This is a sample letter to provide notice to

product provider companies that their contracts

have been approved. This means they can offer

their contracts under the school system plan.

IRS Model Plan Language:

This Internal Revenue Service document offers

model language for a 403(b) plan and includes

rules for its plan language use. While parts of

the document do not apply to public school

systems, the model plan language can be used

in the adoption of an acceptable 403(b) plan.

Resources from the Internal Revenue Service:

This section provides links to relevant informa-

tion resources on the IRS website, including the

new 180-page set of IRS 403(b) regulations.

The powerful combination of tools in this toolkit

provides school system leaders with a blueprint for

building a compliant 403(b) employee retirement plan.

During construction of the written plan, the maximum

value of Blueprints may be realized in the combined,

simultaneous use of these three tools:

Blueprints wall chart –

Follow the step-by-step process

Glossary and General Provisions

section of this booklet – Apply terms,

general rules and conditions

Tools-You-Can-Use CD-ROM –

Connect Blueprints tools and link to

IRS resources

Blueprints tools

403(b) and 457(b)

6

Required Plan Provisions (See Blueprints wall chart.)

These six provisions are required in the employee retirement 403(b) plan: eligibility, contracts, benefits, nondiscrimination/universal availability, contribution limits and distributions.

Eligibility

Eligibility defines employees who can participate in the 403(b) plan.

Includes employees working directly or indirectly for the school system.

May not include independent contractors.

May not refer to employees by job classification.

May exclude employees who are eligible to participate in other plans that the school system offers, including 401(a), 401(k), 403(b) and/or government 457(b) plans.

May exclude nonresident alien employees.

May exclude student employees.

May exclude those who normally work fewer than 20 hours a week. Under the 403(b) rules, “normally less than 20 hours a week” is interpreted as performing fewer than 1,000 hours per year. Allows for annual “look back” for existing employees. Newly hired employees may be excluded if in the year of hire it is reasonably believed the employee will work fewer than 1,000 hours per year. Under the “look back” rule, if the employee has worked at least 1,000 hours in the previous year, he/she must be allowed to participate in the 403(b) plan in the current year.

Glossary and General Provisions

Glossary

The recently released Internal Revenue Service 403(b) regulations apply to any payroll-deducted elective deferrals, 403(b) Roth contributions, non-elective employer contributions, and employer-matched contribu-tions permitted under a school system’s 403(b) plan.

In the event that an employee has more than one 403(b) contract through the school system’s 403(b) program, the contracts will be aggregated as one 403(b) contract issued to the participant. The aggregated contracts are treated as if the employee has only one contract.

Loan aggregation rules apply to contracts and accounts to all plans of the school system including the 403(b) and other plans of the school system. A school system may have multiple plans, such as a 403(b) and a 457(b).

If the employee participates in both plans and if both plans offer a loan, both account values and outstanding loan amounts under each plan must be aggregated for purposes of qualifying the participant for a loan. School system plans may include plans offered by the state, county or city that are payroll-deducted by the school system. Examples of these would be a 401(a), 401(k), 403(b) and/or a 457(b).

For more detail, see Glossary, Loans, page 10.

7

Contracts

Two types of contracts meet the requirements for 403(b): annuity contracts issued by an insurance company and mutual fund custodial accounts (i.e., invested solely in mutual fund shares).

Multiple 403(b) contracts issued to a participant are required by the IRS to be aggregated as one 403(b) contract.

The school system’s written 403(b) plan may reference an external list of multiple contracts to satisfy the requirement that “contracts available under the plan” be identified in the written plan.

Benefits

The IRS Section Code 403(b) provides two types of benefits.

Elective salary deferrals and Roth 403(b) contributions are non-forfeitable (fully vested).

The participant’s contract may not be assigned to another party unless subject to a qualified domestic relations order.

Nondiscrimination/Universal Availability

All eligible employees must be given an opportunity to participate.

If any one eligible employee has the ability to contribute elective salary deferrals and/or Roth 403(b) contributions in the amount of at least $200 per year, then each eligible employee must have the opportunity to participate.

In accordance with anti-conditioning requirements, a plan may not set entry requirements or annual dollar amounts for elective salary deferrals or Roth 403(b) contributions.

Anti-conditioning means that a plan cannot place conditions on an eligible employee that would set »requirements for entry.

Meaningful Communication

At the point of hire, and at least annually, each eligible employee must be notified of his or her right to participate in the school system’s 403(b) plan. This notice must be written and include the products available under the plan. The written notice must also include a list of actions the employee may take with regard to enrolling in and contributing to the plan, including how to:

stop contributions »

start contributions »

increase contributions »

decrease contributions »

change providers. »

If the plan permits a Designated 403(b) Roth Account contribution [see Glossary and General Provisions, page 8], the opportunity to make these Roth 403(b) contributions must be included in the notice. See the sample Employee Notice of Eligibility on the Blueprints Tools-You-Can-Use CD-ROM.

All eligible employees must receive, by direct delivery, a written annual notification of the school system’s 403(b) plans that are available.

8

General Provisions

Contribution Limits

The general limitation under Internal Revenue Code Section 415: 100 percent of compensation not to exceed the dollar amount established annually by the IRS (currently $45,000 in 2007, increasing to $46,000 in 2008). The Section 415 limit is 100 percent of income or the sum of employee elective deferrals and the employer contributions (annual additions).

General Limitation under Internal Revenue Code Section 402(g): The total of elective deferrals (including the 403(b) special catch-up amount) and Roth 403(b) contributions made in a year cannot exceed the dollar amount established annually by the IRS (currently $15,500 in 2007 and 2008).

This limit does » not include any age 50+ catch-up contributions.

Any elective deferrals or designated Roth contributions that a participant has made to any 401(k) or 403(b) »plan and any elective deferrals that a participant has made toward a SIMPLE plan or a salary-reduction simplified employee pension plan in the same year (regardless of the employer) counts toward this general limit.

Ordering of Catch-up Contributions: The 403(b) regulations provide that catch-up contributions must be made first to the 403(b) special catch-up amount (expansion of contribution limit) and then to the age-based catch up available to participants age 50 or older.

Excess Contributions: These must be corrected by April 15 of the year following the year of the deferral.

Timely Remittances: These contributions from the employer to the product provider are to be received within a reasonable time, but no later than 15 business days after the close of the month of the salary deduction.

See worksheet provided in IRS Publication No. 571 (Link to IRS on the Blueprints Tools-You-Can-Use CD-ROM.)

[For example, a teacher who has her own business and has a simplified employer plan (SEP) might be making contributions to it. The contributions to her SEP plan must be counted first against her contributions to her 403(b) plan to ensure she does not exceed the contribution limit.]

Post-severance employee contributions may be made up to 2½ months after the severance or the end of the year, whichever comes first. These contributions can be made if they would have been paid to the employee, had the employee not severed employment. This includes payments for accrued bona fide sick, vacation or other leave, but only if the employee would have been able to use the leave if employment had continued.

Post-retirement employer contributions, if available under the 403(b) plan, may be made up to 5 years after separation from service if they are employer non-elective contributions and are subject to the general limitation under Internal Revenue Code Section 415.

Glossary

9

Distributions (Benefits)

The following are all distributable events or allowable reasons to withdraw or distribute funds.

Severance of employment »

Attainment of age 59½ »

Death »

Disability »

Financial hardship contributions made after 1988. Both the value of the contributions and earnings »attributable to amounts as of Dec. 31, 1988, can be withdrawn if the product provider can track that value.

» Rollover Availability: Upon separation of service, a participant must be allowed to roll over his or her 403(b) account to an IRA or other eligible retirement plan in which the individual participates. Participants must receive advance notice of the opportunity to roll over amounts to preserve tax-deferred status.

» Required Minimum Distributions: When the participant reaches age 70½ or upon separation from service from the employer sponsoring the plan, whichever is later, the participant must take an annual Required Minimum Distribution.

» Distributions from Roth 403(b) Accounts: When Roth 403(b) funds can be distributed as described above, they will be considered Qualified Distributions, with earnings free from federal income tax. To qualify, the Roth 403(b) account must be at least five years old and the funds distributed are due to the participant reaching 59½ years of age, disability or death.

» Exceptions: School system contributions to annuity contracts, prior to the new IRS rules, are unrestricted unless the plan or the contract restricts them. After the regulations go into effect, Jan. 1, 2009, school system contributions into new accounts and contracts are restricted to: severance of employment, death, occurrence of a prior event (such as disability or reaching a stated age under the 403(b) plan), and financial hardship (to the extent permitted under the 403(b) plan).

Special rules for annuity contracts and custodial accounts:

Pre-1989 employee elective deferrals to annuity contracts do not require a distributable event »under the IRS rule. However, the plan or the contract may have restrictions.

Earnings attributable to pre-1989 employer contributions to custodial accounts may be distributed »for a financial hardship.

Optional Plan ProvisionsSchool systems should give careful consideration when selecting optional provisions to be included in the written plan. These provisions represent certain benefits that enhance the employee retirement 403(b) plan and are transactional in nature.

The IRS regulations permit a school system to delegate some or all of its administrative responsibilities to service providers. The IRS will not allow these tasks to be delegated to the employee participant.

The IRS regulations anticipate that schools may not wish to handle the day-to-day administration of its 403(b) program. As a result, a school may delegate some or all of its administrative responsibilities to service providers. Keep in mind that the IRS will not allow these tasks to be delegated to the employee participant.

10

Transfers

Under the regulations, transfers will be one of three types: (1) contract exchanges; (2) plan-to-plan transfers; or (3) transfers to purchase service credit.

1. Contract Exchanges: Transfers between approved contracts under the same 403(b) plan are called “contract exchanges.” The IRS requires that the school system and the product provider receiving the contract exchange agree to ongoing information-sharing beginning Sept. 25, 2007, which must be reduced to writing (whether as a part of a written plan or as a separate agreement) no later than Jan. 1, 2009. In addition, the contract receiving the exchange must ensure that the accumulated benefit remains unchanged (net of applicable contractual charges).

Amounts transferred prior to Sept. 25, 2007, are grandfathered from the contract exchange rules, provided that these contracts do not receive any subsequent contributions, transfers or rollovers.

Such exchanges may occur only if the plan permits. The new rules require that the contract receiving the exchange must impose withdrawal restrictions that are equal to or less than the contract being exchanged. They must satisfy an “accumulated benefit” test. This category of exchanges includes exchanges between contracts approved by the school system to receive ongoing contributions, as well those contracts that may receive exchanges but are not currently authorized by the school system to receive ongoing contributions to the 403(b) plan.

2. Plan-to-Plan Transfers: Under a plan-to-plan transfer, an employee may transfer an account from one 403(b) plan to a new or former employer’s 403(b) plan. The transferring 403(b) plan must permit the transfer out and the receiving 403(b) plan must permit the transfer in. In addition, the contract receiving the exchange must ensure that the accumulated benefit remains unchanged (net of applicable contractual charges).

3. Transfers to Purchase Service Credit: If permitted under both the 403(b) plan and the retirement system, a participant may transfer a 403(b) account to purchase service credit in the state retirement system.

QDRO (Qualified Domestic Relations Order)

The segregation of all or part of a participant account to satisfy a court-ordered divorce settlement is called a qualified domestic relations order.

Loans

If loans are permitted, plan provisions should detail loan conditions and terms and incorporate the IRS rules for determining the maximum amount available for a loan.

Specifically, the IRS requires that a participant’s account under all plans of the employer (including 401(a), 401(k), and/or 457(b)) be aggregated as a single participant account and that 50 percent of that vested participant account (up to $50,000) less any outstanding loan balance of the participant across all plans over the past 12 months be available for a loan.

If the loan amount is less than $10,000, the participant may borrow up to 100 percent of the account balance.

Financial Hardship Withdrawals

If permitted under the plan, a participant who has an immediate and heavy financial need may take a hardship withdrawal.

Financial hardship withdrawals are allowable provided that appropriate documentation of the hardship and the inability to meet that hardship from other financial resources is confirmed to the school system and/or product provider.

The 403(b) plan may require the participant to cease contributions to the 403(b) (and other voluntary contributions to other plans of the school system) for six months following the date of hardship.

GlossaryGeneral Provisions

11

Other Related Terms

Consequences of Failure To Comply with IRS RulesA failure to comply with IRS rules can result in disqualification of the contracts issued.All 403(b) contracts issued to participants under the school system’s 403(b) plan are disqualified if:

the school system fails to maintain a written plan

the school system fails to meet the universal availability/nondiscrimination requirements

the problem is not an “operational” problem.

An operational problem is one that arises because the plan did not follow the terms of the school system’s »written plan. If an operational defect occurs within one 403(b) contract, the result will be disqualification of all 403(b) contracts held for that employee. This is because multiple 403(b) contracts issued to a participant are required by the IRS to be aggregated as one 403(b) contract.

Accumulated Benefit The aggregated total benefit (meaning contributions and attributable earnings) to which a participant

or beneficiary is entitled to under the contract.

Annuity Contract A contract that is issued by an insurance company qualified to issue annuity contracts in a state

and that includes a provision to provide for a payment in the form of an annuity.

Beneficiary A person who is entitled to benefits in respect of a participant following the participant’s death

or an alternate payee pursuant to a qualified domestic relations order.

Designated Roth Account A post-tax elective deferral made to a 403(b) plan whose earnings may be distributed free

from federal income tax if the distribution meets the criteria for a qualified distribution.

Elective Deferral A contribution arrangement where employees can set aside part of their compensation as

a contribution to the 403(b) plan subject to certain limits in Internal Revenue Code Section 402(g).

Eligible Employee An employee performing services for a public school system who does not fit into a classification

that is specifically excluded by the Internal Revenue Code.

Includable Compensation The employee’s compensation received from an eligible employer that is includable in the participant’s

gross income for federal income tax purposes for the most recent period that is a year of service.

Information-Sharing Agreement An optional provision that allows participants to exchange all or a portion of their account balance with

product providers under certain IRS conditions. In the Blueprints CD-ROM document called IRS Model Plan Language, see pages 25-26, under “Contract and Custodial Account Exchanges.”

Participant An employee for whom a section 403(b) contract is currently being purchased, or an employee

or former employee for whom a section 403(b) contract has previously been purchased and who has not received a distribution of his or her entire accumulated benefit under the contract.

Plan Sponsor The school system building the plan.

Product Provider A company that creates and delivers 403(b) products.

QDRO (Qualified Domestic Relations Order) Segregation of all or part of a participant account to satisfy a court-ordered divorce settlement.

Rollover A required procedure in which an employee must be allowed, after separation of service, to move his/her 403(b) account balance out of the school system’s plan to another retirement plan. Allowing accounts to “roll over” into a school system 403(b) plan is an optional provision of the school system’s 403(b) plan.

American Association of School Administrators 801 N. Quincy St., 700 • Arlington, VA 22203

703-528-0700 www.aasa.org

Copyright © 2008 by the American Association of School Administrators. All rights reserved. More information is available at the AASA website.

Disclosure: This information is provided as information only and is not intended to be used to avoid tax penalties or to render tax or legal advice. The taxpayer should seek advice from an independent tax advisor. Neither the American Association of School Administrators nor AASA employees, contractors or sponsors offer legal or tax advice.

Wa

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A Guide to Public School Plans 403(b)

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(b)

WAll ChART

On July 23, 2007, the Internal Revenue Service and the U.S. Treasury

Department published final regulations for public school 403(b) plans.

The general effective date for the regulations is no later than January 1,

2009. School systems with union collective bargaining contracts may

have different effective dates.

School systems will need to take certain steps to comply with the

new regulations. For example, the new regulations require public school

systems to adopt a written plan that meets the IRS rules for form and

operation. The plan document must include provisions regarding such

issues as eligibility, benefits and limits, and must outline allocation of

responsibilities for the school system employee and plan provider.

In addition, special rules apply to certain types of transfers previously

referred to as 90–24 transfers. All 90–24 transfers made before

September 24, 2007 were grandfathered; those made after

Sept. 24, 2007, must adhere to new rules.

This chart outlines the major changes and what steps school systems

can take to ensure compliance by the deadline. A glossary of terms,

included in the toolkit’s right-hand pocket, helps explain the new

regulations and their implementation.

A Guide to Public School Plans 403(b)

Final 403(b) RegulationsOn July 26, 2007, the Internal Revenue Service/Treasury Department published final regulations for 403(b) plans, including public school system 403(b) plans and the annuity contracts and custodial accounts offered under those plans (collectively referred to here as “contracts”). The general effective date for the regulations is no later than Jan. 1, 2009. School systems can elect to implement the regulations sooner, but they are not required to do so. School systems whose 403(b) plans are a subject of their union collec-tive bargaining contracts may have different effective dates. The regulations include many provisions. The most significant provisions include:

Written plan. The regulations require a public school system to adopt a written plan. This plan must meet IRS rules for form and operation; this means it is not sufficient for a school system to adopt a written plan. The school system must correctly administer all of the terms and conditions contained in the written plan. The operation of the plan must likewise satisfy applicable requirements.

New rules for transfers. Special rules apply to certain types of contract transfers previously referred to as 90-24 transfers. These rules for transfers apply to intra-plan transfers (now referred to as “exchanges”) and inter-plan transfers made after Sept. 24, 2007 (see Glossary, under Transfers and Contract Exchanges, page 10). If the plan permits transfers to product providers outside of any plan, the new rules also require an agreement between the school system and the receiving product provider to share infor-mation that can be used to facilitate plan compliance. This agree-ment, however, is not required to be in place until Jan. 1, 2009.

Description of early effective date for 90-24 transfers:

A 90-24 transfer is a transfer that moves a 403(b) account value from one product provider to another, subject to any restrictions imposed by the school system’s plan.

Transfers that took place before Sept. 25, 2007, generally are grandfathered, as long as no contributions have ever been made to the contract and no transfers (or rollovers) were made to the contract after that date.

After Sept. 24, 2007, moving some or all of the account value from one contract to another under the school system’s plan is now called a contract “exchange” with special compliance rules.

(For a complete description of contract exchanges and grandfathered 90-24 transfers,

see Glossary, under Optional Provisions, page 10.)

A 6-Step Approach to Building a 403(b) PlanStep 1 Immediate Concerns — Create a set of best practices for contract exchanges

Establish a procedure for approved product providers that meets the school system’s requirements Develop employee communications on contract exchange Create a list of contracts considered to be under the plan

(generally, these would be from all current approved and previously approved companies, absent further IRS guidance) Request product providers identify all active contracts with employees Communicate best practices to product providers Document all communications Decide whether to allow transfers pursuant to information-sharing agreements If the school system decides to allow information-sharing agreements, review them for compliance with IRS rule for 403(b)

Step 2 Assess compliance capabilities of 403(b) product provider’s contracts

Seek detailed information about compliance capabilities from existing and prospective product by using a tool on the Blueprints Tools-You-Can-Use CD, “Sample Request for Information”

Screen current product providers for compliance capabilities for written plan Help determine contracts under the plan

Step 3 Complete written 403(b) plan development The plan can be a single document or a collection of documents. The 403(b) regulations describe three components for a written plan:

Step 4 Finalize plan for board adoption, ensuring the plan does the following:

Contains required and optional provisions Contains all plan terms and conditions (internally or by reference to contracts, other documents) Identifies external contracts authorized for contributions Designates assigned roles and responsibilities for plan administration Restricts contract exchanges following IRS rules, subject to information-sharing agreements where applicable

Step 5 Oversee school system responsibilities

Provide continuous oversight of each function for IRS compliance Confirm and check each function of assigned responsibilities to other parties Follow IRS rules on information-sharing agreements

Step 6 Plan implementation and the ongoing review of plan

Communicate to employees about new 403(b) rules and impact on their plan Check each function for compliance with IRS rules Review union bargaining agreements for updating changes in 403(b) IRS rules

Transition period beginning July 26, 2007

By Jan.1, 2009

Public School 403(b) Plans

Today

1 • Required provisions: (Refer to the Glossary page indicated below for complete descriptions)

Eligibility .......................... page 6 of Glossary Contracts ...........................................page 7 Benefits..............................................page 7 Nondiscrimination /

Universal Availability ...........................page 7 Contribution Limits .............................page 8 Distributions (Benefits) ........................page 9

2 • Optional provisions selected from a menu: (Refer to the Glossary page indicated below for complete descriptions)

Transfers ....................... page 10 of Glossary » Contract Exchanges .......................page 10 » Plan-to-Plan Transfers .....................page 10 » Transfers to Purchase Service Credit ..page 10 QDRO (Qualified Domestic

Relations Order) ................................page 10 Loans ...............................................page 10 Financial Hardship Withdrawals .........page 10 Rollovers into a qualified plan ............page 11

3 • Delegation of administrative responsibilities to facilitate compliance:

The plan may delegate plan operations under the plan’s terms and conditions and IRS rules.

The function delegated can be referenced in the plan and might delegate one or more functions to these parties.

A designated employee Investment product provider – provided the product provider is secure and vendor neutral

Third party administrator for full-service 403(b)/457(b) administrative services

(Many of the required or optional provisions can be incorporated by reference to the underlying contracts.)

School System Responsibilities Provide eligible employees the opportunity to contribute

to a tax-deferred 403(b) contract

Permit these contributions to contracts that meet the applicable requirements of IRS Code section 403(b) and applicable state laws

Monitor contribution limitations or rely on product providers and/or additional parties to do so

Apply uniform employee exclusions, to the extent desired, consistent with applicable rules (universal availability)

Administer distribution and loan rules or rely on product providers and/or additional parties to do so

School System (Plan Sponsor) Responsibilities

Maintain plan under terms and conditions of the written plan

Purchase 403(b) tax-qualified contracts under applicable laws

Verify employee information: years of service and prior contributions

Determine eligibility of employees to participate under the plan

Notify all eligible employees (universal availability)

Approve loans, contract exchanges, hardship withdrawals, and transfers, or delegate these operational functions to designated party/parties

Employee Responsibilities Provide accurate information on years of service

and prior contributions

Certify accuracy of information when requesting loans, withdrawals, etc.

Employee Responsibilities Provide certain employee information,

including Social Security number, date of birth, beneficiary for account

Provide additional information as allowed by the IRS

Product Provider Responsibilities Provide tax-qualified 403(b) contracts to meet applicable law

Abide by terms of school system hold-harmless agreement

Calculate contribution limits

Process transfers, 90-24 transfers, loans, distributions (including hardship withdrawals), qualified domestic relations orders (QDROs) and rollovers in and out of plan

Product Provider Responsibilities Provide 403(b) contracts available under the plan

Provide operational functions as delegated under the terms and conditions of the plan

Meet the standards agreed to in the service provider agreement

A Public School Systems - adopted

403(b) Plan

AmericAn AssociAtion of school AdministrAtors

Disclosure: This information is provided as information only and is not intended to be used to avoid tax penalties or to render tax

or legal advice. The taxpayer should seek advice from an independent tax or legal advisor. Neither the American Association

of School Administrators nor its employees, contractors or sponsors offer legal or tax advice.

Copyright © 2008 by the American Association of School Administrators. All rights reserved. More information is available at the AASA website, www.aasa.org.

Blueprints: Tools You Can Use CD-ROM: Request for Information Survey A

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Blueprints: A Guide to School System Plans 403(b) and 457(b) 403(b) Product Provider Compliance Questionnaire

Request for Information - Survey A

— For use as a sample only — Final 403(b) regulations were issued in July 2007, and will become effective Jan. 1, 2009. (Insert school system name here) ("Employer") is reviewing its 403(b) program to ensure compliance with existing and expected IRS rules for 403(b) plans and programs. This questionnaire is being sent to all product providers in Employer's 403(b) program. If multiple contracts or accounts are offered to the school system, a single questionnaire may be completed for all contracts for which the answers are identical. Otherwise, separate questionnaires should be completed and appropriately identified. Please respond to the questions below and return the completed questionnaire to (Insert name of business manager and address here) not later than (Insert deadline here).

1. Is your 403(b) contract or account an annuity contract that meets relevant

form requirements under Code Section 403(b)(1) or a custodial account that meets relevant form requirements under Code Section 403(b)(7), including: • deferral, distribution and loan limitations, • nontransferability (annuities only), and • direct rollover and minimum distribution requirements? Yes No

2. Is your 403(b) contract or account available to any employee who is

otherwise eligible to participate? For example, if it imposes a minimum annual contribution, is that minimum less than or equal to $200? Yes No

3. Are contribution limits monitored by your company for each employee who

participates in your 403(b) contract or account? Yes No


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4. Does the monitoring referenced in question 3 include age 50 catch-ups under Code Section 414(v) and additional deferrals permitted under Code Section 402(g)(7)?

Yes No 5. When is the monitoring in questions 3 and 4 performed? (Check all that apply.)

At the initial contribution or start up Non-automatic changes in deferral amount or percentage When contributions exceed a specified percentage of salary

and/or fixed dollar amount Every year As requested by the employee or employer Other (please describe)_________________________________

6. If you learn that contributions are made in excess of contribution limits,

what steps does your company take to correct the excess? (Check all that apply.) No action is taken. The employee is notified of the excess contribution. The employer is notified of the excess contribution. The excess is returned to the employee and reported

as taxable income. The excess is returned to the employer. Other (please describe)_________________________________

7. Are after-tax Roth contributions permitted under your 403(b) contract or

account? Yes No

8. If you answered “yes” to question 7, does your company establish a separate

account for monitoring Roth deferrals and distributions? Yes No

9. Does your contract permit transfers/rollovers to or from other plan types?

For example, 403(b), 401(k), etc.? Yes No

10. If you answered “yes” to question 9, does your program track such amounts

separately for distribution reporting purposes? Yes No


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11. Are loans permitted, or are they expected to be permitted, under an

employee’s 403(b) account? Yes No If you answered “yes” to question 11, please answer “a” and “b” below. If you answered “no” to question 11, please proceed to question 12.

(a) Are loans restricted to amounts that do not exceed the lesser of (i) $50,000 minus the highest outstanding loan balance during the preceding 12-month period, or (ii) 50% of the vested account balance or 100% of the vested account balance up to $10,000, whichever is greater?

Yes No (b) Is a default deemed to have occurred no later than the last day of the calendar quarter following the quarter in which a loan payment is missed?

Yes No

12. Generally, assets contributed to your 403(b) program may not be distributed to an employee, absent a distributable event such as death, disability, separation from service, attainment of age 59½, or hardship (if the contract permits). Please indicate below how your organization monitors the distribution of contributions made to the 403(b) program. Check all that apply.

No monitoring of distributions: the employee self-certifies all distribution

requests including hardship withdrawals. Separation of service is confirmed before processing post-separation

distributions. The employee must provide information regarding the amount and the

reason for the hardship distribution on the appropriate distribution form.

The employer is responsible for approving hardship withdrawals. The employer is responsible for approving all withdrawals. Hardship withdrawals are not permitted. Other (please describe)_____________________________

13. In accordance with Section 401(a)(9) of the Internal Revenue Code, are

distributions under the program required to begin the later of (i) April 1st of the calendar year following the calendar year in which an employee attains the age of 70½, or (ii) April 1st of the calendar year following the calendar year in which the employee terminates employment? Yes No


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14. Do you notify contract holders of the requirement for distributions prior to

when your records indicate they will attain age 70½ , assuming that they are not still employed by the plan sponsor maintaining the plan? Yes No

15. Does your contract permit distributions required by a Domestic Relations

Order? Yes No

16. Does your record-keeping system include functions that can assist with

compliance among multiple vendors (i.e., for purposes of monitoring contribution limits, loans, if applicable, and hardship withdrawals, if applicable)? Yes No

17. Is your company’s cross-vendor compliance and/or common remitting system

vendor-neutral? (Vendor-neutrality should include not providing preferential access or preferential marketing treatment to an affiliated provider or other business partner or associate.) Yes No

18. Does your company provide access, at the school system’s level, to view single product provider data? Yes No

19. Does your company provide access, at the school system’s level, to view aggregate vendor data? Yes No

20. If your contract permits hardship withdrawals (referenced in question 12), is your program capable of reviewing and making determinations regarding hardship distributions and making available information on such withdrawals to the school system or another party? Yes No N/A Hardships not permitted under the contract.

If you answered “yes” to question 20, please answer “a” and “b” below. If you answered “no” or “N/A” to question 20, please skip to question 21.

(a) Does your system facilitate automatic cessation of deferrals

for a period of six months for any employee who received a hardship distribution? Yes No


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(b) Does your system assist the sponsor by facilitating automatic

recommencement of deferrals for any participant who received a hardship distribution upon the satisfaction of the six-month suspension period? Yes No

21. Are your company’s participant records maintained at the school system group level?

Yes No 22. Is your company able to provide plan-level reports?

Yes No If you answered “yes” to question 22 please answer “a,” “b,” “c” and “d” below. If you answered “no” to question 22, please skip to question 23.

(a) Are these plan-level reports automated and available

online? Yes No

(b) Do these plan-level reports include information

reflecting participant hardship withdrawals? Yes No

(c) Do these plan-level reports contain plan-level

information reflecting participant loan activity? Yes No

(d) Can you provide plan-level reports upon request

(within a reasonable timeframe)? Yes No

Please attach a sample of your company’s plan-level report to your completed questionnaire. 23. Does your company maintain detailed procedures to protect the

confidentiality of all records maintained on your cross-vendor compliance and common remitter system? Yes No

24. Will your company agree to both enter into the attached product provider

agreement and, as referenced in that agreement, provide reasonable support to the school system in the event of an IRS audit of the 403(b) plan? Yes No


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INFORMATION REGARDING REPRESENTATIVES AND PRODUCTS

Please list the managing representative or company officer and all local representatives who will be assigned to the school system’s 403(b) plan. ________________________ ___________________ __________________ Name of Manager or Officer STATE Insurance License # NASD Series License Please list up to five local representatives providing services to the plan:

Name State Insurance License # NASD Registrations CRD # _______________________ ______________________ __________________ _______________________ ______________________ __________________ _______________________ ______________________ __________________ _______________________ ______________________ __________________ _______________________ ______________________ __________________ Are the representatives, listed above, employees or independent contractors? ___________________________ __________________________________________ ___________________________ __________________________________________ ___________________________ __________________________________________ ___________________________ __________________________________________ ___________________________ __________________________________________ ___________________________ __________________________________________ ___________________________ __________________________________________


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PRODUCT PROVIDER IDENTIFICATION ________________________________________________________________________ Company Name ________________________________________________________________________ Addresss ________________________________________________________________________ City, State, Zip

________________________________________________________________________ Web Address ________________________________________________________________________ Type of Company (i.e., insurance company, third-party administrator, brokerage, agency)

List each product to which the certification applies, by product name: Customer service phone number for employee account information. Please provide toll-free telephone number to the organization’s corporate office, if available: ( ) Telephone The undersigned officer of the company referenced above hereby certifies that information provided is correct and complete to the best of his or her knowledge and belief upon reasonable inquiry and review. The undersigned officer also agrees to cooperate with the school system in coordinating plan compliance across multiple providers.

________________________________________________________________________ Name (please print) _____________________________________ ________________________________ Signature Date Completed (_____)________________________ (_____)__________________________ Telephone FAX ________________________________________________________________________ E-mail Address

Blueprints: Tools You Can Use CD-ROM: Request for Information Survey B

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Blueprints: A Guide to School System Plans 403(b) and 457(b) 403(b) Product Provider Compliance Questionnaire

Request for Information - Survey B

— For use as a sample only —

Background

The (School System), located at (Address, City, State, ZIP) is conducting this survey to obtain the level of 403(b) compliance services offered by our current providers. In addition, we are updating our contact records on individuals within your company that may provide assistance to school system personnel. This information will assist the school system as it begins developing a 403(b) written defined contribution plan that meets 403(b) requirements for both form and operation. Decisions regarding decentralized or centralized compliance procedures may depend, at least in part, on responses from current or prospective providers and outside administrators. Your assistance is greatly appreciated.

Instructions:

We are sending this request to our last known contact within your company. If this is no longer correct, please forward to the correct responsible party, individual or division.

Three Steps:

1. Upon receipt of this inquiry please e-mail to (name and title) (school system) ________________ that you will or will not be completing the request. If we do not receive a response from your company within 30 days, we will assume that your company is unable to provide the requested information.


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2. Please complete the survey within 15 business days after your acknowledgement.

3. The compliance survey questions need to be answered with yes or no. This is not a product survey. However, you will be asked to send a sample contract for all products currently offered to ________________ school system. Please do not include sales literature or any information not requested by the school system.

Product (Contract) Issuer Contact Information:

This information should be completed and signed by an officer of the company issuing the contract or the custodian of the custodial account. If you have received this survey as a broker, agent, agency or brokerage firm, please forward to the appropriate investment provider. If you are a third party administrator please fill out Section 1: Company Contacts and Section 3: Third Party Administrators.

Section 1: Company Contacts

_________________________________________________________________________Company Name

_________________________________________________________________________Headquarters: Officer in Charge

_________________________________________________________________________E-mail Address

_________________________________________________________________________Address

(_____)______________________________(_____)______________________________Telephone Fax

Regional Manager of Company :

________________________________________________________________________________Name of Regional Manager of Company NASD Registrations CRD #

________________________________________________________________________________Email Address

________________________________________________________________________________Address

________________________________________________________________________________City, State, Zip

(______)____________________________________(_____)_____________________________ Telephone Fax


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Company representatives continued:

Please list all sales representatives that provide service to the school system. Please indicate whether the representatives are currently listed as representatives with the school system.

______________________________________________________________________Name

____________________________________________________________________________________ State Insurance License # NASD CRD Registration #

____________________________________________________________________________________Address

____________________________________________________________________________________Telephone Fax

Currently Listed as Representative with the School System? Yes No

______________________________________________________________________Name


____________________________________________________________________________________Address

____________________________________________________________________________________Telephone Fax


______________________________________________________________________Name


____________________________________________________________________________________Address

____________________________________________________________________________________Telephone Fax



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SECTION 2: Contract Information. Applies to all 403(b) annuity contracts and 403(b)(7) custodial accounts.

All annuity contracts or custodial accounts offered meet the definition of an “annuity contract” or a “custodial account” pursuant to the provisions of Section 403(b) of the Internal Revenue Code and underlying regulations. Yes No

Circle all contract features available that apply to your contracts:

Loans Hardship withdrawals QDRO Contract exchanges

Transfers to purchase service credit Roth 403(b) Plan-to-plan transfers

Compliance Administrative Support:

1. Company has the ability to accept contributions in an electronic format. Yes No

2. Company will credit participant contributions into accounts, with investment directions on file, within the next business day, provided that contributions and associated paperwork is received by the company in good order.

Yes No

3. Company maintains historical information on participant accounts for a minimum of seven (7) years. Yes No

4. Company will calculate maximum allowable contributions for participants that exceed

402(g) and/or 415 limits annually, based upon information provided by the participant, the school system, and, if applicable, the designated administrator.

Yes No

5. Company will distribute all identified excess contributions as described in the school system’s written plan /or designated plan administrator in accordance with IRS regulations.

Yes No

6. Company maintains a school system website that allows the school system to have access to relevant participant information that is updated on a regular basis, determined either by the company or the school system, or both together.

Yes No


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7. Company can separately track school system contributions. Yes No

8. Company can separately track non-vested school system contributions.

Yes No

9. Company can restrict distributions from participant accounts in accordance with reasonable terms and conditions of a written plan, if disclosed to company, and IRS requirements.

Yes No

10. Company will provide at least quarterly reports to the school system that aggregate

contracts at plan level on participant accounts to enable the company to operate the contract under the terms and conditions of the school system’s written plan.

Yes No

11. Company will provide reasonable support and assistance to the school system in the

event that the school system and/or the plan is audited by the IRS. Yes No

12. As an approved company, would you provide a copy of all contracts offered to school system participants?

Yes No

13. As an approved company, would you restrict incoming and outgoing transfers/exchanges

to those permitted under the final 403(b) regulations, based on information provided to you by the school system and by other product providers (if applicable)?

Yes No

14. Company will agree to enter into a reasonable information-sharing agreement and a

Service Provider Agreement with the school system to facilitate compliance with the requirements final IRS regulations, either as a product provider under the plan (current or deselected) or a provider of contracts outside the plan receiving transfers.

Yes No


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The undersigned officer certifies that to the best of his or her knowledge and, upon reasonable inquiry and review, the information affirmed is correct. The undersigned also agrees to cooperate with the school system in coordinating plan compliance across multiple contract issuers. _________________________________________________________________________Name Title _________________________________________________________________________Signature Date _________________________________________________________________________Telephone, Fax, E-mail


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SECTION 3: Third Party Administrators: Scope of Service. This section of the survey is designed to review the level of service provided by the school system’s third party administrator. Prospective providers of third party administrative services, including: o product providers (under this plan or another plan of the school system) with adequate insulation of plan services from marketing and sales forces; and o independent administrators, should complete this section.

Does your system have the capability to:

1. Aggregate plan information across multiple issuers? Yes No

2. Aggregate and monitor 402(g) and 415 contribution limits? Yes No

3. Ensure excess contributions are corrected by the applicable statutory correction date, or

consistent with IRS guidance regarding self-correction, and provide corresponding tax reporting?

Yes No

4. Determine maximum loan across multiple provider accounts, aggregating information provided regarding any outstanding loans the participant has taken from any plan of the employer on all funds available for participant loans including amounts available from all plans of the employer? Yes No

5. Monitor all loan limits and defaults based upon the terms and conditions of the written plan and IRS requirements? Yes No

6. Review and approve or reject hardship withdrawal requests consistent with applicable

regulations under Code Section 401(k), as adopted under the plan, or assist with coordination of information regarding hardship withdrawals, with such determinations remaining subject to additional approval from the underlying product provider according to the terms of their contracts and accounts?

Yes No

7. Notify all product providers that participant contributions will cease for a period of (6) six months if the plan operates under the IRS safe harbor for hardships, and also notify the school system to suspend contributions for a period of six months?

Yes No

8. Ensure that the delegation of roles and responsibilities provided in the written plan is incorporated either directly or by reference?

Yes No 9. Provide a web-based platform that allows participants to enroll online with the

capability of providing periodic reports to the school system? Yes No


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Third Party Administrator Information: This information is provided by

_________________________________________________________________________Name Title _________________________________________________________________________Signature Date _________________________________________________________________________Telephone, Fax, Email

The undersigned officer for the organization: Certifies that the above information is correct and complete to the best of his or her knowledge and belief upon reasonable inquiry and review.

_________________________________________________________________________Name Title _________________________________________________________________________Signature Date _________________________________________________________________________Telephone, Fax, E-mail

© 2008 American Association of School Administrators, Arlington, Va., www.aasa.org Blueprints: Tools You Can Use CD-ROM: Records Retention and Maintenance Checklist

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Blueprints: A Guide to School System Plans 403(b) and 457(b) Records Retention and Maintenance Checklist

Documentation and records are an important part of 403(b) /457(b) plan compliance. The checklist below identifies some good places to start to:

• review existing records retention or • implement a retention policy.

Policies and Procedures:

Copies of 403(b) communication policies, requests for information, requests for proposals, employee handbooks, collective bargaining agreements

Process for plan enrollment, with vendors and subsequent payroll changes

Hold harmless agreements, service contractor provider agreements, service provider agreements

Information-sharing policy and agreements

Delegation of roles and responsibilities, if applicable, under the written plan

Standard forms including salary reduction agreement

Contribution worksheets (school system, product provider or both)

Contribution-limit monitoring policy

Updated Plan Documents for 403(b) Plans and Related Plans:

403(b) plan documents offered by the school system and/or state

457(b) plan documents offered by the school system and/or state

Grandfathered 401(k) offered by local and/or state government

FICA alternative plan documents (plan type may vary) and other 401(a) plans

© 2008 American Association of School Administrators, Arlington, Va., www.aasa.org Blueprints: Tools You Can Use CD-ROM: Records Retention and Maintenance Checklist

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Employee Records:

Employee service records from date of original hire, including partial years

Contracts with independent contractors and/or contracts with employee leasing firms

Prior contribution history in all plans of the school system

Completed salary reduction agreements between the employee and the school system, including subsequent changes

Maximum allowable contribution worksheets

Product Providers:

Current hold harmless agreements and/or product provider agreements

Sales representative’s name/contact information/insurance license number and NASD CRD # ________________________________________________

E&O (Errors and Omissions) insurance on sales representatives (whether or not school system is listed as additional insured)

List of all investment contract providers and participants

Tax Reporting:

W-2 forms for all employees/Quarterly 751 reports (FICA/FUTA)

Copies of Form 1099R (product providers should retain)

Blueprints: A Guide to School System Plans 403(b) and 457(b) IRS Hot Issues:

403(b) and 457(b) Comparison Chart

1 of 8 1 of 7Disclosure: This information is provided as information only and is not intended to be used to avoid tax penalties or to render tax or legal advice. The taxpayer should seek

advice from an independent tax advisor. Neither the American Association of School Administrators nor AASA employees or contractors offer legal or tax advice. © 2008 American Association of School Administrators, Arlington, Va., www.aasa.org

Blueprints: Tools You Can Use CD-ROM: IRS Hot Issues 403(b) and 457(b) Comparison Chart

This chart offers a side-by-side comparison of some important 403(b) plan and 457(b) plan and audit issues. It identifies all of the required and optional requirements of a 403(b) plan. The sections in red lettering highlight key areas that have been identified by the Internal Revenue Service as common audit concerns.

Category 403(b) Plan 457(b) Plan

General Description A tax-deferred annuity program that permits employees (on a voluntary basis) to reduce their salary by an amount not previously available and have that amount contributed to the program on their behalf, subject to certain IRS contribution limits. A plan may also permit a Designated Roth 403(b), employer contributions and matching contributions.

A deferred compensation plan that allows employees and/or independent contractors performing services for the employer to defer a portion of employees’ salary to the plan, subject to certain IRS contribution limits.

Subject to the Requirements of Title 1 of ERISA

No. Public school plans are not subject to Title 1 of ERISA

No. Public school plans are not subject to Title 1 of ERISA.

Eligible Participants Employees only are eligible. In general, independent contractors and leased employees may not be covered under a 403(b) plan. An employee is considered to be eligible to participate if performing services directly or indirectly for a public school system. School board members are not eligible to participate except in limited circumstances.

Participants may include employees/and or independent contractors.

Funding Vehicles Assets are held in a trust (custodial account) or in an annuity for the exclusive benefit of the participants.

Assets must be held in either a trust, a custodial account or an annuity account for the exclusive benefit of the participants or their beneficiaries. Assets are not subject to claims of the employer’s general creditors.

403(b) Plan 457(b) Plan






Contribution Limits

Employee voluntary deferrals are limited to an elective deferral limit under Code Section 402(g) (2007 and 2008: $15,500); subject to annual cost- of-living adjustments). An increase is available for employees with at least 15 years of service with the employer, provided that other requirements are satisfied. The maximum increase is $3,000 per year and $15,000 over a lifetime. The total of employee voluntary deferrals, non-elective employee contributions, and employer contributions is limited to dollar and percentage limits under Code Section 415(c):

• 100% of participant compensation up to

• $45,000 (2007) and $46,000 (2008) (subject to annual cost-of-living adjustments)

Age 50 catch-up provisions:

For an employee age 50 and older, once the employee has reached these contribution limits, he can contribute up to an additional $5,000 per year (in 2007 and 2008), subject to annual cost-of-living adjustments. This contribution does not count toward either the 402(g) or 415(c) contribution limit.

Total of employer and employee contributions is limited to 100% of includible compensation to $15,500 (for 2007 and 2008): subject to annual cost-of-living adjustment. An employee within 3 years of the year in which he reaches Normal Retirement Age, as defined in the 457 plan document, may be eligible to contribute a total of up to twice the basic limit. Use of this catch-up is limited to the amount of unused contributions in prior years that the 457(b) plan was available. For an employee age 50 and older, once the employee has reached these contribution limits, he can contribute up to an additional $5,000 per year (in 2007 and 2008), subject to annual cost-of-living adjustments, or the amount of the employee’s deferrals, whichever is less. An employee who is eligible for both the 457 special catch-up and the age 50+ catch-up in a 457(b) plan may only use the catch-up that yields the greatest amount.






Contribution Limits

General Rule: The annual total of employee deferrals (other than the age 50+ catch-up contribution), Roth 403(b), and any employer contributions cannot exceed the lesser of:

1. The section 415(c) limit on annual additions is, generally, the lesser amount of 100% includible compensation” up to $45,000 (2007) or $46,000 (2008) (subject to annual cost-of- living adjustments).

2. Section 402(g) limit on salary reduction contributions ($15,500 for 2007 and 2008, subject to annual cost-of-living adjustments). This limit takes into consideration all employee elective deferrals and Roth 403(b) contributions (other than the age 50+ catch-up contribution) of an individual.

In the special catch–up provision for employees who have completed at least 15 years of service with their current school employer, the annual deferral is increased by the lesser of:

o $3,000

o $15,000, reduced by amounts not included in gross income for prior years due to the catch-up election

o $5,000 times years of service with the employer, minus all amounts of prior years’ contributions attributable to elective deferrals made to the current employer’s plans

General Rule: Deferrals, including salary reduction contributions (other than the age 50+ catch-up contribution) and any employer contribution, cannot exceed the lesser of $15,500 (for 2007 and 2008) or 100 % of includible compensation. Subsequent annual cost-of-living adjustments are made in $500 increments The special catch-up provision may, generally, defer up to twice the general deferral limit for the three-year period prior to the year in which the participant attains the elected normal retirement age under the plan. In the age 50-and-over catch-up provision, participants who are at least age 50 may make an additional $5,000 (for 2007 and 2008) annual contributions. Subsequent annual cost-of-living adjustments are made in $500 increments. A participant is not allowed to use the special catch-up and the 50-and-over catch-up in the same year.






Nondiscrimination Requirements

Employee deferrals are subject to the universal availability rule. Generally, if any employee may defer compensation, all employees must be permitted to likewise defer compensation, subject to certain permitted exclusions described in the Internal Revenue Code. If an employer is using one of those permitted exclusions, the exclusion must be applied consistently. Employees normally working less than 20 hours per week can be excluded as a group. To determine what is “less than 20 hours per week,” the regulations provide a 1,000 hour test. Generally, this rule looks forward for newly hired employees (Are they expected to work at least 1,000 hours in their first year?), and backward for existing employees (Did they work at least 1,000 hours last year?) If the Roth 403(b) option is offered to any employee, it must be offered to all eligible employees, following the same eligibility rules as pre-tax deferrals. An employer cannot elect to offer only the after-tax Roth 403(b) alternative. Nondiscrimination rules generally do not apply to employer contributions to plans of public employers, although the IRS does limit the amount of compensation that can be taken into account for purposes of determining the amount of the employer contribution.

Nondiscrimination rules do not apply.






Withdrawal Limits

Distributions of employee deferrals and earnings on those deferrals, whether from an annuity contract or a custodial account, are available:

• at age 59½ • upon severance from employment • upon death or disability • upon financial hardship (note that only

earnings as of 12/31/88 can be withdrawn, but contributions are accessible regardless of when contributed)

• upon qualifying plan termination (effective with the new regulations)

Distributions of employer contributions:

• if made to a custodial account are the same as above

• if made to an annuity contract, new restrictions in the final regulations provide that employer contributions and earnings may be distributed upon include severance from employment, death or occurrence of stated event

Distributions of participant deferrals, employer contributions, and attributable earnings may be further limited by the employer’s plan and/or products funding the plan.

Distributions available:

• upon severance from employment • upon death • upon unforeseeable emergency • at age 70½ • if eligible for a one-time in service

withdrawal of up to $5,000 Distributions of contributions and attributable earnings on those deferrals may be further limited by the employer’s plan and/or products funding the plan.






Optional Provisions Types of Transfers Permitted

Transfers within the same 403(b) plan (contract exchanges) to providers under the plan which have entered into information sharing with the employer plan-to-plan transfers. A participant may purchase service credit in a qualified government retirement plan, if permitted by both the 403 (b) 457 plan and the retirement system. Distributions: QDRO (Qualified Domestic Relations Order) is a court-ordered divorce settlement. Permitted subject to terms of the plan. Financial hardship – an immediate and heavy financial need that cannot be satisfied by other financial resources of the participant. A 403(b) plan may decide to determine what is a hardship based on the IRS 401(k) safe harbor provisions (which would require the participant to cease making any voluntary contributions to all plans of the school for 6 months from the date of the hardship) or meet facts and circumstance test.

Transfers within the same 457 plan to approved providers under the 457plan.

Plan-to-plan transfers: A participant may purchase service credit in a qualified government retirement plan, if permitted by both the 457 plan and the retirement system. Same as 403(b) Same as 403(b) Unforeseeable emergency withdrawal is a severe financial hardship of the participant, the participant’s spouse or the participant’s dependents resulting from an illness or accident, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant.






Distributions can be made:

• at age 59½ • upon severance from employment, • upon death or disability • upon financial hardship (note that only

earnings as of 12/31/88 can be withdrawn, but contributions are accessible regardless of when contributed)

• upon qualifying plan termination (effective with the new regulations)

Distributions of employer contributions:

• if made to a custodial account, are the: same as above

• if made to an annuity contract, there are new restrictions in final regulations

o can include severance from employment

o death o occurrence of stated event

Distributions may be further limited by the employer’s plan and/or products funding the plan.

Distributions are made:

• upon severance from employment • death • upon unforeseeable emergency • at age 70½ • if eligible for a one-time in service

withdrawal of up to $5,000

Distributions may be further limited by the employer’s plan and/or products funding the plan.

Blueprints: Tools You Can Use CD-ROM: Plan Services Provider Agreement A

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Blueprints: A Guide to School System Plans 403(b) and 457(b) (Company name) §403(b)1 and 403(b)(7)

Plan Service Provider Agreement A


THIS AGREEMENT is made and entered into this ______ day of _________, 20__, by and between or its authorized representative (“Plan Sponsor”), and ( company name ) and their successors (“Provider”). This Agreement amends and replaces any predecessor agreement between the parties governing the same matters, including but not limited to any indemnification or hold harmless agreement, but in all other respects is separate and apart from any other contract issued to the Plan, including any annuity contract issued to the Plan Sponsor by Provider.

RECITALS WHEREAS, the Plan Sponsor wishes to make available to its employees a program (the “Plan”) in accordance with Section 403(b) of the Internal Revenue Code (“IRC”); and WHEREAS, the Plan Sponsor has selected certain investment products offered or otherwise made available by or through Provider for the investment of Plan assets (the “Program”); and WHEREAS, the Plan Sponsor wishes to engage Provider (including, as appropriate one or more corporate affiliates of Provider as determined by Provider) to facilitate the administration of the Plan by providing services that shall include without limitation, accounting for deferrals, disbursement of funds, withholding of taxes, investment of assets in the appropriate Plan investment options and proper recordkeeping of participant accounts; and WHEREAS, Provider wishes to provide administrative services to the Plan Sponsor in connection with the Plan. NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties do hereby agree as follows:


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Section 1. Responsibilities 1.01 Provision of Contract: Provider shall provide for purchase by the Plan Sponsor

one or more annuity contracts satisfying the form requirements for “annuity contract” pursuant to the provisions of Section 403(b)(1) of the IRC, and/or one or more custodial accounts meeting the relevant form requirements of Section 403(b)(7) of the IRC. Either or both such 403(b) products shall meet the requirements of Section 403(b) of the Code and any pertinent federal or state laws relating to such purchase. Such 403(b) products shall be available for purchase by the Plan Sponsor for any legally eligible employee electing to participate in the Plan.

1.02 Allocation of Responsibilities: Provider shall service or perform all marketing

communications, enrollment and securities transactions settlement and processing functions and all other functions assigned to Provider with respect to Provider’s products described in Section 1.01, including participant and Plan recordkeeping.

1.03 Meetings: The Plan Sponsor shall provide Provider with timetables, procedures

and facilities for group employee meetings for distributing information about the PLAN, including investment options thereunder; counseling and enrollment of employees and completion of enrollment materials.

1.04 Payroll Reduction: The Plan Sponsor shall provide payroll reduction procedures

and facilities and agrees to remit all salary reduction contribution amounts electronically to Provider in a timely manner.

1.05 Provision of Certain Information: The Plan Sponsor shall transmit the information

relating to each eligible employee participating in the Plan (“Participant”) and agrees to remit such information electronically to Provider in a timely manner consistent with federal, state, and/or local rules governing the timing of such remittances, including salary reduction contribution amounts and any changes thereto. The Plan Sponsor shall provide other necessary information requested by Provider on a timely basis and use its best efforts to assure the accuracy and completeness of all information provided.

1.06 Enrollment Services by Provider: Provider shall participate in and conduct group

and individual meetings to provide information on IRC §403(b) tax sheltered annuities and/or the custodial account and the Plan. Provider shall be responsible for enrolling participants in the Plan. Provider agrees to abide by the marketing guidelines established by the Plan Sponsor.

1.07 Marketing Materials. Provider shall create and distribute all communication and

promotional materials that describe the Provider’s products under the Plan. The Plan Sponsor shall approve any such Plan specific marketing materials customized for the Plan Sponsor prior to distribution to employees. In addition,


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prior to distribution, Provider shall review and approve any materials created by the Plan Sponsor that describe or relate to Provider’s product(s) under the Plan.

1.08 Collection of Investment Contributions: Provider agrees to accept all payments

received in good order for deposit into the Plan and allocate such contributions in accordance with the Participant’s investment selections as directed by Plan Sponsor in accordance with applicable rules governing such products.

1.08 Limitation Testing: Provider shall perform contribution limit testing applying the

limits of Code Section 415(c) and 402(g) taking into consideration all other plans maintained by the Plan Sponsor, for each Participant allocating contributions to Provider’s product(s) under the Plan, and shall be permitted to rely upon information provided by the Plan Sponsor, other providers, and Participants, in performing such testing. Amounts contributed in excess of the limits under the Code or the Plan shall be distributed to the Participant by the Provider, along with associated earnings, to the extent permitted under the Code, underlying regulations, and such guidance as may be issued by the IRS from time to time.

1.09 Transfers, Distributions and Loans:

If the Plan provides for administration by the Plan Sponsor of transfers, distributions and loans, the Plan Sponsor shall notify Provider in writing of transfers, distributions, or loans to be made to participants or beneficiaries under the terms of the Plan, provided however that any such transfer, distribution or loan complies with the provisions of the applicable investment product. The Plan Sponsor shall determine if a transfer, distribution, loan or account segregation request may be made under the Plan. Provider will process transfers, distributions, or loans from a Participant’s or alternate payee’s account only if authorized to do so by Plan Sponsor and in accordance with the terms of the Plan. If the Plan provides for administration by the Provider of transfers, distributions and loans, Provider will process transfers, distributions and loans from a Participant’s or alternate payee’s account in accordance with the terms of the Plan and reasonable administrative procedures intended to facilitate compliance with the requirements of the Code. Provider may accept Employee certification of information necessary to process the disbursement or loan, to the extent consistent with such administrative procedures, including but not limited to the reason for the distribution. Provider may rely upon the information received from the Employee, Plan Sponsor or other provider (including a prior service provider) in discharging its obligations under this Section 1.09. If the Plan provides for sharing of responsibilities for transfers, distributions, and/or loans by Plan Sponsor and Provider, then the above paragraphs of this Section 1.09 shall apply to the appropriate responsibilities as designated under the Plan.


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1.10 Tax Reporting: Provider shall compute and withhold federal and state income taxes, as required by law, for disbursements paid directly to participants, alternate payees or beneficiaries from the Program. Provider will forward, within the applicable time limit, the appropriate report reflecting the amount of the disbursement and taxes withheld to the appropriate taxing authority and to the participants or beneficiaries.

1.11 Licenses: Provider represents that its personnel involved in performing services

under this Agreement with respect to its Program are appropriately licensed as required by applicable law.

Section 2 Participant Information 2.01 Participant Records: The Plan Sponsor agrees to furnish Provider sufficient

information to enable Provider to allocate contributions to a Participant’s account or accounts, including such identifying information as may be mutually agreed by Plan Sponsor from time to time.

Over the term of this Agreement, the Plan Sponsor will notify Provider of changes

in employment status and, to the extent the Plan Sponsor has knowledge of the death of any Participant, the Plan Sponsor will notify the Provider of such death.

The Provider shall maintain Participant account records for Participants maintaining an account under one or more of Provider’s products, including but not limited to records of investment allocations and beneficiary designations.

The Provider shall maintain such forms as participants complete upon enrollment into the contract(s) issued by the Provider to fund benefits under the Plan. Participant account information shall be retained, and use by Plan Sponsor, Provider or a third party of such information shall be limited, in conformity with the Provider’s privacy procedures and applicable state and federal privacy laws.

2.02 Reports to Plan Sponsor: Provider shall furnish or make available to the Plan

Sponsor, either electronically or in writing, not less frequently than monthly one or more reports detailing the distributions and loans under the Plan.

2.03 Reports to Participants: Except as otherwise authorized under applicable law,

Provider will provide Participants with quarterly statements of their accounts. Statements will reflect Participant account activity since the prior statement date.

Section 3. Fees 3.01 Provider’s Compensation: Plan Sponsor understands and agrees that in addition to

any separate compensation that may now or in the future be provided for services


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hereunder, Provider shall receive such fees or other compensation as are described in the documents governing the approved products and other documents associated with the products, including but not limited to contracts, prospectuses, and additional disclosures.

3.02 Fee and Commission Disclosure: Provider shall disclose to Participants the fees

and charges assessed to the Participant’s accounts, under the product or in addition to the product, relating to the provision of administrative services for such accounts, and shall disclose to Participants that the Provider and its sales personnel may be directly compensated by the investment products utilized under the Program.

Section 4. General 4.01 Term: This Agreement shall remain in effect for a period of _____ ( ) years from

the date of execution, unless the Plan is earlier terminated. It shall be automatically renewed for additional one (1)-year terms thereafter unless terminated by either party upon ninety (90) days written notice prior to the expiration date. Obligations to periodically provide information regarding contracts and accounts established during the term of this Agreement shall survive the termination of the Agreement. Such obligations may not be modified, during the term of this Agreement or thereafter, as mutually agreed by Plan Sponsor and Provider.

4.02 Amendment: This Agreement may be amended in writing if agreed to by both

parties. 4.03 Circumstances Excusing Performance: Neither the Plan Sponsor nor Provider

shall be liable to the other for any delays or damages or any failure to act due, occasioned, or caused by reason of restrictions imposed by any government or government agency, acts of God, strikes, labor disputes, action of the elements, or causes beyond the control of the parties affected thereby.

4.04 Ownership of Records: The Plan Sponsor agrees that all computer tapes, discs,

programs and any records generated by Provider under this Agreement shall be the property of the Provider.

4.05 Confidentiality: All Plan information supplied to, and all Plan work processed or

completed by Provider with respect to this Agreement will be subject to applicable federal and state laws governing the privacy of such information. Plan data shall not be disclosed to anyone other than the Plan Sponsor without the Plan Sponsor’s written permission except as may be required for a Plan audit, in response to such routine credit inquiries as may be authorized by Participants, to comply with any applicable federal or state law or to obey court orders. Plan data provided to Plan Sponsor by Provider shall continue to be subject to applicable


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privacy limitations while in the custody of Plan Sponsor or another party acting on behalf of Plan Sponsor.

4.06 Parties Bound: This Agreement and the provisions thereof shall be binding upon

the respective parties and is binding upon the parties, successors, and assigns. 4.07 Applicable Law: Except as otherwise agreed by Provider and Plan Sponsor, this

Agreement shall be construed in accordance with the laws of the State in which the Plan Sponsor is located. Provider and the Plan Sponsor shall comply with all state and federal laws and regulations applicable to the services to be performed.

4.08 Severability: If any provision of this Agreement shall be found to be illegal or

invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Agreement and the remainder of this Agreement shall be construed and enforced as if said illegal or invalid provision had never been inserted herein. Neither party shall be required to perform any services under this Agreement that would violate any law, regulation or ruling.

4.09 Acknowledgment: In connection with our services, Plan Sponsor acknowledges

that In performing its services under this Agreement, Provider is entitled to rely on any information the Plan Sponsor or Participant provides. Provider is not obligated to inquire into and is not responsible for the authenticity or accuracy of such information or the actual authority of such person to provide it.

4.10 Hold Harmless: Provider agrees to indemnify and hold the Plan Sponsor, its

officers, employees and agents harmless from any loss, liability, claim, suit or judgment resulting from work or acts done or omitted by Provider’s officers, employees or agents in carrying out Provider’s responsibilities as set forth in this Agreement to the proportionate extent that it results from the negligence or wrongdoing of Provider or any of its officers, employees or agents. Provider’s agreements to indemnify shall not extend to any injury or damage that results from Provider’s reliance on information transmitted by the Plan Sponsor, a Participant, or another provider. The preceding indemnification may include interest and penalties, and shall not include income taxes, associated with such claims.

The Plan Sponsor agrees, to the extent permitted under applicable law, to indemnify and hold Provider, its officers, employees and agents harmless from any loss, liability, claim, suit or judgment resulting from work or acts done or omitted by the Plan Sponsor’s officers, employees or agents in carrying out the Plan Sponsor’s responsibilities as set forth in this Agreement to the proportionate extent that it results from the negligence or wrongdoing of the Plan Sponsor or any of its officers, employees or agents.

4.11 Notice: Each party will promptly provide the other with notice and copy of any

attempts to levy or attach amounts held under the Plan and/or any litigation


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affecting the Plan of which it becomes aware and/or any notices or demands to be given under this Agreement. All such notices, demands or other communications hereunder shall be in writing and duly provided if sent certified mail, return receipt requested, addressed to the party to be notified or upon whom a demand is being made, at the addresses set forth in this Agreement or such other place as either party shall from time to time designate in writing. The date of service of a notice or demand shall be the receipt date on any certified mail receipt.

Notices to Provider shall be sent to: Notices to the Plan Sponsor shall be sent to: [Insert Name and Address of Plan Sponsor] 4.12 Copies of Agreement: This Agreement may be executed in any number of

counterpart copies, each of which when fully executed shall be considered as an original.

4.13 Headings: Headings are for convenience of reference only. Headings do not limit

or expand the scope of the text and are not intended to emphasize any portion thereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. (Plan Sponsor Name) By:_______________________________________ Printed Name: ______________________________ Title: _____________________________________ Date: _____________________________________


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By:_______________________________________ Printed Name: _____________________________ Title:_____________________________________ Date: _____________________________________

Blueprints: A Guide to School System Plans 403(b) and 457(b) Plan Service Provider Agreement B


Blueprints: Tools You Can Use CD-ROM: Plan Service Provider Agreement B

SECTION 403(b) PROGRAM

QUALIFIED SERVICE PROVIDER AGREEMENT

(HOLD HARMLESS AGREEMENT)

WHEREAS, the governing board of _________________________ (the “Employer”) wishes to make available to its employees

tax-deferred annuities and/or custodial accounts pursuant to the provisions of Section 403(b) of the Internal Revenue Code of 1986,

as amended (hereinafter called the “Code”); and

WHEREAS, _________________________ (the “Company”) is authorized pursuant to State and Federal law to offer and has

offered to provide tax-deferred annuity contracts or custodial accounts for eligible employees of the Employer;

NOW, THEREFORE, IT IS AGREED AS FOLLOWS:

1. The Employer shall make available tax-deferred annuities and/or custodial accounts to all of its

employees, except those permitted to be excluded under Code Section 403(b)(12), subject to an

annual minimum contribution of no more than $200, as set forth in Code Section 403(b)(12).

2. In connection with the annuities or custodial accounts, the Company shall provide the following

administrative services. The Company agrees to:

A. Calculate the maximum annual contribution permitted by law under the 403(b) program for employees contributing

to a 403(b) program product offered by the Company, upon: (i) enrollment, (ii) non-automatic increases in deferrals,

if the Company is notifi ed in advance thereof, or (iii) request by the Employer or employee. This calculation shall

include calculation of the limits under Code Sections 415(c), 402(g) and 414(v), as applicable to 403(b) programs.

In performing the calculation, the Company is entitled to rely on information provided by the participant and/or

the Employer.

B. Review salary reduction contributions, as identifi ed to the Company by the Employer, for each employee directing

contributions to a Company annuity or custodial account, at the end of each year, and notify the Employer within a

reasonable time thereafter if any employee has contributed in excess of the elective deferral limit of Code Section 402(g),

as applicable to 403(b) programs and as set forth in the Company’s annuity contract or custodial account. In calculating

the Code Section 402(g) limit, the Company is entitled to rely on information provided by the participant and/or the

Employer concerning qualifi cation for and the calculation of the elective cap expansion under Code Section 402(g)(7).

C. Notify participants of the minimum distribution requirements under Code Sections 403(b)(10) and 401(a)(9) and

the regulations promulgated thereunder. Required minimum distributions will be calculated in a manner consistent

with the methodology set forth under the Code and underlying Treasury regulations.

D. Based upon information provided by the Employer and/or the employee, limit distributions to those events described

in Section 403(b)(11), or Section 403(b)(7) and the regulations promulgated thereunder as applicable, and as set forth

in the Company’s annuity contract or custodial account. Any additional plan restrictions, where appropriate, will be

applied, provided that they are communicated to the Company in advance and in writing.

E. Report benefi t distributions and deemed distributions on IRS Form 1099-R, and withhold Federal income taxes on

distributions meeting the requirements of Paragraph 2(D) of this Agreement, as requested by the participant or the

participant’s benefi ciary, or as required by law.

F. Provide employees with notice of their rights to elect a direct rollover or to receive the distribution directly, within a

reasonable time and prior to making an eligible rollover distribution, consistent with Section 403(b)(8), Section 402(f)

and regulations promulgated thereunder.

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G. To the extent loans are available under the terms of the Employer’s 403(b) program, offer nontaxable loans that are

consistent with the requirements of Section 72(p) and the regulations thereunder. The Employer and the Company shall

agree upon procedures for confi rming that the loan being requested, when added to any other loans under the plans of

the Employer, will not cause the participant to exceed the maximum nontaxable loan amounts available under the Code

or the terms of the Employer’s plan, and/or that the participant has no loan defaults with another account under the plan

or under another plan which is required to be aggregated with the plan for purposes of applying this limitation.

H. Furnish to employees upon request information concerning the terms and provisions of the annuity or custodial account

purchased, including any distribution options available at the time of retirement or distributions other than at retirement.

I. For any qualifying insurance product offered under the Employer’s 403(b) plan or program, verify that the premiums paid

for any qualifi ed incidental insurance offered by the Company through the allocation of contributions or other amounts

held under the plan or program are within the limits specifi ed by law, and report the appropriate costs incurred by

employees who participate in the Company’s qualifi ed incidental insurance, if any. Such reporting will comply with

the reporting requirements promulgated by the Internal Revenue Service.

J. Extend its full and complete cooperation in providing data to the Employer, including any and all necessary documents

required in the event of an audit by the Internal Revenue Service, as such data and/or documents are requested by the

Employer for the sole purpose of administering the plan in conformity with requirements of the Code. The data and/or

documents provided will refl ect information as identifi ed to the Company by the Employer, and will be provided to the

extent reasonably available from records maintained by the Company in the ordinary course of business. The Employer

acknowledges that its release of such data or documents may be subject to applicable federal and/or state privacy

limitations, and that release by the Company of certain information may be subject to participant consent.

K. Cooperate in the correction of any defects in the Employer’s 403(b) program under applicable Internal Revenue Service

guidance regarding correction and self-correction of applicable defects to the extent those defects relate to annuity

contracts issued by or custodial accounts maintained by the Company. In the event that the Company identifi es any

operational defects in the ordinary course of business, the Employer hereby authorizes the Company to correct any

such operational defects in the 403(b) program in a manner consistent with applicable guidance.

The Company also agrees to cooperate in the correction of any defects in the Employer’s 403(b) program which the

Employer submits to the IRS or addresses under applicable self-correction or audit programs, pursuant to applicable

IRS guidance for such correction to the extent those defects relate to annuity contracts issued by or custodial accounts

maintained by the Company, provided that: (i) the Employer notifi es the Company within a reasonable time in advance

of a submission in accordance with the Employee Plans Compliance Resolutions System (EPCRS) program , and (ii)

the Employer and the Company agree in advance as to the scope of the potential correction the Company will

undertake, as it relates to annuity contracts or custodial accounts issued by the Company.

L. Comply, and to direct its agents and representatives to comply, with all pertinent written directives regarding the

solicitation of employees of the Employer and the purchase of annuities or custodial accounts, to the extent that such

directions are consistent with applicable law and are provided to the Company within a reasonable time in advance of

the enforcement of any such directives.

3. The Company shall maintain errors and omissions insurance for each of its agents, or shall require each of its agents to

maintain errors and omissions insurance. The Company shall also maintain general corporate liability and fi delity coverage

and provide proof thereof to the Employer upon request. All such insurance coverage shall be maintained while this

Agreement remains in effect. The Company shall notify the Employer in writing within thirty (30) days of a termination

of such coverage which occurs while this Agreement remains in effect, where the coverage is not replaced by similar

coverage from another insurer.

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4. The Company shall hold harmless and indemnify the Employer, its offi cers and employees from any statutory tax penalties,

and/or interest on tax defi ciencies or on statutory tax penalties, that may be lawfully imposed by any governmental authority

by reason of: (i) the making of contributions to tax-sheltered annuity contracts or custodial accounts sold by the Company

in excess of the limits on tax-deferred contributions imposed by the Code, if such excess contributions arise from an

erroneous calculation of such contribution limits by the Company or a representative thereof; or (ii) any challenge to

the tax-qualifi ed status of the form of any annuity contracts or custodial accounts purchased from the Company on behalf

of employees of the Employer.

A. The paragraph directly above shall not apply if the event giving rise to the imposition of statutory tax penalties or

interest: (i) is directly attributable to erroneous information furnished to the Company by the Employer or any employee

thereof, or (ii) occurs after the Company has notifi ed the Employer or the affected employee in writing of an error and

either or both has failed or refused to take appropriate corrective action, or (iii) is directly attributable to the failure of

the Employer to follow a legal requirement for the 403(b) program if the Employer had been duly notifi ed in writing of

such requirement and compliance therewith was beyond the control of the Company.

B. In the event that the Internal Revenue Service or other governmental authority notifi es the Employer of any proposed

action that could give rise to any claim against the Company under the Agreement, the Employer shall promptly notify

the Company in writing of such proposed action. Following the Company’s receipt of notifi cation in writing of such

proposed governmental action, the Company may discharge its liability under this Agreement by making appropriate

payment to the Employer or affected employee at any time prior to the fi nal disposition of the proposed governmental

action; in such event, the Company shall not be liable for additional interest which may accrue with respect to the

amount of the payment after the date thereof. If the Company concludes that the proposed governmental action is

erroneous or unwarranted, it may request that the Employer or affected employee pursue available legal remedies to

contest the proposed governmental action, in which case the Company shall offer to bear all reasonable fees and costs

associated with the pursuit of such legal remedies. If the Company makes such request and offer and the Employer or

affected employee declines to pursue the available legal remedies, or if the Employer fails to notify the Company of the

pendency of the proposed governmental action within a reasonable time after the Employer has been notifi ed of the

proposed action, the Company shall have no liability under this Agreement in connection with that governmental action.

5. The Company and the Employer reserve the right, upon thirty (30) days written notice to the Employer or the Company,

respectively, by Registered or Certifi ed mail, to terminate this Agreement, but such termination shall in no manner affect any

liability incurred under this Agreement prior to the effective date of such termination.

6. Notice under this Agreement shall be sent to the parties at the address listed below:

Company:

______________________________________________________________________________________________________________

______________________________________________________________________________________________________________

______________________________________________________________________________________________________________

______________________________________________________________________________________________________________

______________________________________________________________________________________________________________

______________________________________________________________________________________________________________

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Employer:

______________________________________________________________________________________________________________

______________________________________________________________________________________________________________

______________________________________________________________________________________________________________

______________________________________________________________________________________________________________

7. Premiums shall be sent to the Company at:

______________________________________________________________________________________________________________

______________________________________________________________________________________________________________

______________________________________________________________________________________________________________

______________________________________________________________________________________________________________

8. This Agreement supersedes and replaces any and all prior written or oral agreements of the Company regarding the purchase

of annuities or custodial accounts by the Employer for its employees.

9. This Agreement may be modifi ed by either party to the Agreement in writing and by signature of

both parties.

COMPANY: EMPLOYER:

______________________________ _______________________________

Name of Company Name of Employer

______________________________ ______________________________

Signature Signature

______________________________ ______________________________

Name (Printed or Typed) Name (Printed or Typed)

______________________________ ______________________________

Title Title

______________________________ ______________________________

Date Date

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© 2008 American Association of School Administrators, Arlington, Va., www.aasa.org Blueprints: Tools You Can Use CD-ROM: 403(b) Employee Notice of Eligibility

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Blueprints: A Guide to School System Plans 403(b) and 457(b) (School System Name)

403(b) Employee Notice of Eligibility — For use as a sample only —

(The school system name) offers all eligible employees the opportunity to

participate in a 403(b) retirement plan. A 403(b) plan is a tax-deferred retirement

program made available to school system employees pursuant to Section 403(b) of the

Internal Revenue Code of 1986, as amended (the “Code”). The school system maintains a

list of approved providers. This list is located at ______________. Each product

provider has information on its website about the products and services it offers. You

may also contact the product provider’s representatives directly. All of the necessary

paperwork is located in _____________.

You will need to complete a Salary Reduction Agreement (SRA) and other

required paperwork. The SRA applies to amounts you will earn after you elect to

participate in the plan. This deduction will continue until you change it. The district has

established policies that enable you to increase or decrease your contribution, stop your

contribution or change from one authorized product provider to another.

© 2008 American Association of School Administrators, Arlington, Va., www.aasa.org Blueprints: Tools You Can Use CD-ROM: 403(b) Employee Notice of Eligibility

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The Code has limits on the total contributions you may make in a year. For 2007

and 2008, the limit is $15,500. The Code also has special catch-up elections. These may

apply to you. If you wish to take advantage of a catch-up election, which will enable you

to contribute more than the annual basic limit, you will need to have the school system

complete a Maximum Contribution Sheet to determine whether you qualify for a catch-up

contribution.

How To Enroll:

1. Select a product provider from the approved list.

2. Complete the required paperwork. It is located at

(____________________________________________).

3. All paperwork must be submitted to (location)

____________________________________________________________ by

(_____date_________).

4. You may make changes (__how and when_____________________).

Disclosure to employees: The _____________________school system has no liability for the employees’ selection of product providers. The _______________________school system does not warrant any special tax consequences to the employee. The __________ school system does not give tax, legal or investment advice. The school system recommends that employees seek the advice from professionals who specialize in these areas.

© 2008 American Association of School Administrators, Arlington, Va., www.aasa.org Blueprints: Tools You Can Use CD-ROM: Sample Employee Letter A

Blueprints: A Guide to School System Plans 403(b) and 457(b) Sample Employee Letter A

(Initial Letter)

Dear Employee: You may not be aware, but the Internal Revenue Services is in the process of revising the regulations for 403(b) Plans, and this will have an impact on our policies and procedures in the future. Currently we are reviewing our procedures and developing a plan of action to comply with the new regulations. Due to the complex nature of the current and new regulations we cannot predict the timeframe within which our new processes will be implemented. It is our intent to make the transition to the new 403(b) regulations as seamless as possible for our employees, and we appreciate your cooperation as we move through the process of maintaining IRS compliance for our plan. Sincerely, Jane Smith Business Manager Name of School System

© 2008 American Association of School Administrators, Arlington, Va., www.aasa.org Blueprints: Tools You Can Use CD-ROM: Sample Employee Letter B

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Blueprints: A Guide to School System Plans 403(b) and 457(b) Sample Employee Letter B

(Follow-up Letter)

Dear Employee: As you may recall earlier in the year we notified all employees that the Internal Revenue Service was revising the 403(b) regulations. To ensure compliance with the new regulations we performed a thorough review of our plan, vendors, policies and procedures. As a result of our review and the necessity to comply with IRS 403(b) regulations, effective [DATE] our plan will undergo certain modifications. These changes may have an impact on some employees and require modifications to certain 403(b) Salary Reduction Agreements currently in place. To effectively monitor our plan we will be limiting the approved vendors to the list below: Vendor A Vendor B Vendor C Vendor D If your current vendor is not on the new approved list and you wish to continue your savings through the XYZ School System 403(b) Plan, we suggest you contact one of the selected vendors. Vendor contact information is included in this correspondence. Remember, effective [DATE] we will no longer be able to accept salary reductions from any vendor not on the approved list.

Be advised, you do not have to transfer your current 403(b) funds to a new vendor; these changes only impact your future contributions.

© 2008 American Association of School Administrators, Arlington, Va., www.aasa.org Blueprints: Tools You Can Use CD-ROM: Sample Employee Letter B

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In the coming weeks we will provide additional information regarding the 403(b) Plan policies and procedures. As soon as administratively possible a plan document will be available for review in each school district building. We appreciate your patience and cooperation as we work to comply with IRS regulations. Our goal is to continue to provide this excellent benefit to help you save for your retirement in the most cost effective manner for you and the school system. Sincerely, Jane Smith Business Manager Name of School System

© 2008 American Association of School Administrators, Arlington, Va., www.aasa.org Blueprints: Tools You Can Use CD-ROM: Sample Thank You Letter to Product Providers

Blueprints: A Guide to School System Plans 403(b) and 457(b)

Sample Letter to Product Providers

Dear Product Provider: We have concluded the review of our 403(b) Plan along with the associated product providers and are pleased to announce that you will be retained as a product provider for our school system. In the coming weeks we will have a product provider meeting to outline the 403(b) Plan and the expectations going forward. At the meeting we will provide a copy of our plan document and any applicable forms to be used with our new procedures. We have included in this mailing a copy for your files of the Section 403(b) Program Administrative Services and Hold Harmless Agreement that has been duly executed by our school system. We appreciate your patience and cooperation in assisting us to comply with the new IRS Regulations. We look forward to our partnership and hope it will ultimately enhance the benefits offered to our employees and your clients. Sincerely, Jane Smith Business Manager Name of School System

Blueprints: Tools You Can Use CD-ROM: Links to IRS Resources 1 of 3

Blueprints: A Guide to School System Plans 403(b) and 457(b) Links to Internal Revenue Service Resources for

School Administrators and Employees

Questions for the Internal Revenue Service on 403(b) Plans IRC 403(b) Tax-Sheltered Annuity Plans - Ask Bob Architect

Bob Architect, senior tax law specialist and the resident expert on 403(b) plans, receives many questions while presenting the latest 403(b) information to organizations.

See the most frequently asked questions and his answers here. http://www.irs.gov/retirement/article/0,,id=172433,00.html

IRS Publication 571: A print resource for 403(b) contribution worksheets and

more. http://www.irs.gov/pub/irs-pdf/p571.pdf

Comprehensive resource for retirement plans

http://www.irs.gov/pub/irs-tege/online_navigator.pdf

A resource to help you decide which retirement plan is right for you http://www.irs.gov/pub/irs-pdf/p4484.pdf

Plan sponsor information for school administrators http://www.irs.gov/pub/irs-pdf/p4483.pdf

403(b) tax information for plan participants/employees http://www.irs.gov/pub/irs-tege/pub4482.pdf


Compliance for School Plans: Have You Had Your Retirement Plan Check-Up?

"Check-Ups" are three-step approaches to help employers that sponsor retirement plans develop a better understanding of the requirements for their plans and point them to additional information and services.

After reviewing the plan and completing the appropriate check-up, employers may find an error in the plan's operation and may want to correct the error using one of the IRS Correction Programs.

Check-Up for Your 403(b) Plan

Retirement Plan Audits, Abusive Tax Transactions and Correcting Plan Errors

With benefits come responsibilities. The Internal Revenue Service has an examination program to make sure retirement plans are operated in compliance with the tax law. Below are topics that will help you keep your plan running smoothly.

Employee Plans Compliance Unit (EPCU) Featured Project - 403(b) Universal Availability


Timing is Everything newsletter

Timing is Everything is a one-page flyer designed for employers to share with their employees. It provides plain-language, bullet-point information about retirement.

Employers may want to print the Timing is Everything flyer and include it in their employees’ pay envelopes or post it on a bulletin board. Or, employers can use the flyer in company e-mails or newsletters.

Each flyer is part of the Retirement News for Employers electronic newsletter designed primarily for small business owners

The following Timing flyers have linked items for further details on the tips.

Subject Issued

How Much Can You Contribute to Your Retirement Plan? Fall 2007

Taking Stock of Your Retirement Goals Summer 2007

Save Now, You’ll be Glad Now and Later Spring 2007

Information on IRA Contributions Winter 2007

Plan Information for Participants Summer 2006

Future issues of Timing is Everything can be found at

http://www.irs.gov/retirement/article/0,,id=151170,00.html

“What Educational Employers Need to Know to Do Their Jobs” – An IRS Video on 403(b) Annuities This one-hour video program from the Internal Revenue Service features IRS Senior Tax Law Specialist, Bob Architect, a 403(b) expert. It provides comprehensive explanations and graphics on 403(b) annuities. The video program is available for download from the Blueprints 403(b) Toolkit section of AASA’s website. http://www.aasa.org/leadership/Blueprints403bToolkit.cfm

Blueprints: A Guide to School System Plans 403(b) and 457(b) IRS Model Plan Language

— For reference purposes —

In this document the Internal Revenue Service offers model languagefor a 403(b) plan and includes rules for its plan language use.

While parts of the document do not apply to public school systems, the model plan language can be used in the adoption of an acceptable 403(b) plan.

Blueprints: Tools You Can Use CD-ROM: IRS Model Plan Language

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Part III --Administrative, Procedural, and Miscellaneous 26 CFR 601.201: Rulings and determination letters. (Also, Part I, § 403; § 1.403(b)-3.) Rev. Proc. 2007-71

SECTION 1. PURPOSE

This revenue procedure provides model plan language that may be used by public schools

either to adopt a written plan to reflect the requirements of § 403(b) and the regulations

thereunder or to amend its § 403(b) plan to reflect the requirements of § 403(b) and the

regulations thereunder. This revenue procedure also provides rules for when plan amendments

or a written plan are required to be adopted by public schools or other eligible employers to

comply with the recently published final regulations under § 403(b) (72 FR 41128; TD 9340).

This revenue procedure also provides guidance relating to the application of § 403(b) to certain

contracts issued before 2009.

SECTION 2. BACKGROUND AND GENERAL INFORMATION

.01 Section 403(b) applies to contributions made for employees who are performing

services for a public school of a State or a local government or for employees of employers that

are tax-exempt organizations under § 501(c)(3). Section 403(b) also applies to contributions

made for certain ministers. Under § 403(b), contributions are excluded from gross income only

if made to certain funding arrangements: (1) contracts issued by an insurance company qualified

to issue annuities in a State that includes payment in the form of an annuity; (2) custodial

accounts that are exclusively invested in stock of a regulated investment company (as defined in

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§ 851(a) relating to mutual funds); or (3) a retirement income account for employees of a

church-related organization (as defined in §1.403(b)-2 of the Income Tax Regulations).

.02 Final regulations under § 403(b) (TD 9340) were published in the Federal

Register (72 FR 41128) on July 26, 2007 (2007 regulations). The 2007 regulations

replaced existing regulations that were published in the Federal Register (29 FR 18356)

on December 24, 1964,1965-1 C.B. 180, that provided guidance for complying with

§ 403(b), as well as certain provisions of regulations that were published in the Federal

Register (60 FR 49199) on September 22, 1995, relating to eligible rollover distributions

and regulations that were that were published in the Federal Register (67 FR 18987) on

April 17, 2002, relating to minimum distributions under § 401(a)(9). The 2007

regulations reflected the numerous amendments made to § 403(b) by legislation enacted

since 1964. Subject to a number of special effective date rules, the 2007 regulations are

generally effective for taxable years beginning after December 31, 2008.

.03 The 2007 regulations include comprehensive guidance relating to § 403(b),

including the requirement that § 403(b) contracts must be maintained pursuant to a

written plan. (References in this revenue procedure to a contract or an issuer include a

custodial account under § 403(b)(7) and an issuer of such an account, respectively.) As

indicated in the preamble to the regulations, while § 403(b) contracts that are subject to

the Employee Retirement Income Security Act of 1974 (ERISA) are already maintained

pursuant to written plans, there may be a potential cost associated with satisfying the

written plan requirement for those employers that do not have existing plan documents,

such as public schools. This revenue procedure is intended to address this concern by

providing model plan language that may be used for this purpose by public schools.

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.04 Section 1.403(b)-3(b)(3) of the 2007 regulations requires that contracts be

issued under a plan, which, in both form and operation, satisfies the requirements of the

2007 regulations and which contains all the material terms and conditions for eligibility,

benefits, applicable limitations, the contracts available under the plan, and the time and

form under which benefit distributions would be made. Section 1.403(b)-10(b) of the

2007 regulations includes a special rule for situations in which a contract has been

exchanged for another contract, under which the successor contract (an “exchange

contract”) is treated as part of the plan if certain conditions are satisfied, including an

information sharing agreement between the employer and the issuer. Section 1.403(b)-

11(g) of the 2007 regulations provides that those conditions are not imposed with respect

to a contract if the exchange occurred before September 25, 2007, and the exchange

satisfied applicable requirements at that time (a “grandfathered exchange contract”).

SECTION 3. USE OF MODEL PLAN LANGUAGE BY PUBLIC SCHOOLS

.01 Any public school employer with respect to its employees performing services

for it, to the extent provided, may comply with the written plan requirements of the 2007

regulations by adopting the model provision(s) contained in the Appendix to this revenue

procedure. The model language has been prepared to take into account the general

requirement that a § 403(b) plan include all the material terms and conditions for benefits

under the plan. For example, the model language does not incorporate the applicable

legal requirements by reference, but instead describes them in a manner intended to

enable the plan administrator to implement the plan provisions on the basis of the model

language to the extent feasible.

.02 The 2007 regulations provide that a § 403(b) plan, including one established

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by a public school employer, may contain certain optional features not required to satisfy

§ 403(b), such as in-service distributions from rollover accounts, distributions for

financial hardships, loans, contract exchanges, and plan to plan transfers. If optional

provisions are used, the optional provisions must meet, in both form and operation, the

relevant requirements under the Code and the 2007 regulations, as well as operate in

accordance with the terms of the plan. If a public school employer adopts one or more of

these optional model plan language provisions for its § 403(b) plan, the form of the plan

will be treated as meeting the requirements under § 403(b) with respect to those

provisions.

SECTION 4. RELIANCE BY PUBLIC SCHOOL EMPLOYERS ON MODEL PLAN LANGUAGE .01 Amendments. (a) Reliance. If a public school employer amends its plan

language to include any portion of the model language, the form of the written plan will

be treated as meeting the requirements of § 403(b), to the extent covered by the model

plan language that is adopted. This reliance applies only if the employer adopts the

model language on a word-for-word basis or adopts an amendment that is substantially

similar in all material respects.

(b) Effect on public schools. If a public school employer adopts any portion of

the model plan language, the written plan must also be operated in accordance with the

amendment, from and after the effective date of the amendment, and the § 403(b) plan

must continue to satisfy, in both form and operation, all other requirements of § 403(b) in

order to maintain § 403(b) status. To the extent a public school employer’s § 403(b) plan

does not include the model plan language or an amendment that is substantially similar in

all respects, a public school that requests a private letter ruling from the Internal Revenue

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Service (IRS) with respect to the qualification of its § 403(b) written plan must clearly

highlight and describe in the written request how its plan provisions differ from the

model language.

.02 Adoption of written plan. The model language is also designed for use by a

public school that does not have a written § 403(b) plan. Thus, adoption of the entire

model language (on a word-for-word basis or using language that is substantially similar

in all material respects) by a public school has the same status as a private letter ruling

which provides that the written form of the plan satisfies § 403(b). However, if a public

school employer adopts the entire model plan language, the § 403(b) written plan must

also be operated in accordance with that language, from and after the effective date of

adoption, and must continue to satisfy in both form and operation all other requirements

of § 403(b) in order for the plan to maintain its § 403(b) status.

SECTION 5. USE OF THE MODEL PLAN LANGUAGE BY EMPLOYERS THAT ARE NOT PUBLIC SCHOOLS

.01 The model plan language in the Appendix to this revenue procedure is

designed for use by a public school employer with respect to its employees. The model

language is intended for a basic plan under which contributions are limited to pre-tax

elective deferrals (without any designated Roth, employer matching, or other employer

nonelective contributions). An eligible employer that is not a public school may use the

provisions of the Appendix as sample language to comply with one or more of the

requirements imposed by the 2007 regulations issued under § 403(b).

.02 Because the model plan language in the Appendix has been designed for a

State or local government with respect to its employees performing services for a public

school, a § 501(c)(3) organization must determine the extent to which the model

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language is appropriate for use in connection with its § 403(b) plan to comply with one or

more of the requirements imposed by the regulations issued under § 403(b). Notes in the

Appendix identify the principal provisions which require modification for use by an

eligible employer that is not a public school maintaining a § 403(b) arrangement.

Moreover, if an eligible employer that is not a public school uses the model language in

the Appendix, additional or revised provisions may be necessary or appropriate in order

to comply with the 2007 regulations and, if applicable, ERISA, especially if either (i) the

plan is not limited to elective deferrals, (ii) the plan is designed to not be an employee

pension benefit plan under ERISA in accordance with 29 CFR 2510.3-2(f) of the

Department of Labor Regulations, or (iii) the plan is maintained by a church (or a church-

related organization described in § 414(e)(3)(A) or a qualified church-controlled

organization under § 3121(w)(3)(B)) or applies with respect to one or more ministers.1

.03 Adoption of the model plan language contained in the Appendix by an eligible

employer that is not a public school does not have the same status as a private letter

ruling with respect to the adopted language. However, if an eligible employer that is not

a public school has received from the IRS a favorable private letter ruling under § 403(b),

then, except as provided in section 5.02 of this revenue procedure, the eligible employer’s

adoption of appropriate plan model language contained in the Appendix will not result in

the loss of its reliance on the private letter ruling for periods prior to the effective date of

the 2007 regulations.

SECTION 6. DATE AMENDMENTS ARE ADOPTED

Pursuant to this revenue procedure, a § 403(b) plan will be treated as having been

amended timely to reflect a requirement of the 2007 regulations if an amendment that 1 See United States Department of Labor Field Assistance Bulletin No. 2007-02.

7

satisfies that requirement (such as the model language in the Appendix of this revenue

procedure that reflects that requirement) is adopted no later than the first day of the first

taxable year beginning after December 31, 2008, the amendment is effective as of the

applicable effective date of the requirement under the 2007 regulations, and the written

plan is operated as if that amendment is in effect. This section 6 applies to the

requirement to have a written plan. However, for a special rule with respect to

amendments made pursuant to the Pension Protection Act of 2006, Public Law 109-280

(PPA ’06), see section 1107 of the PPA ’06.

SECTION 7. AREAS NOT COVERED BY SECTIONS 3 AND 4 OF THIS REVENUE PROCEDURE Except as provided in section 5 of this revenue procedure, the model plan

language referenced in sections 3 and 4 of this revenue procedure is not designed to apply

to any employer other than a State or local government with respect to its employees

performing services for a public school.

SECTION 8. GUIDANCE REGARDING CERTAIN CONTRACTS ISSUED BEFORE 2009 .01 Contracts issued before 2009 as part of employer’s plan. In the case of a

contract issued after December 31, 2004 and before January 1, 2009 by an issuer that

does not receive contributions under the plan in a year after the contract was issued (e.g.,

due to the issuer having been discontinued as an issuer under the plan or the issuer having

become an issuer under the plan due to the contract having been issued in a post-

September 24, 2007 exchange permitted under Rev. Rul. 90-24, 1990-1 CB 97), the

contract will not fail to satisfy § 403(b) for the year merely because the contract is not

part of a written plan that satisfies § 1.403(b)-3(b)(3) of the 2007 regulations if the

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employer makes a reasonable, good faith effort to include the contract as part of the

employer’s plan that satisfies § 1.403(b)-3(b)(3) of the 2007 regulations. For this

purpose, a reasonable, good faith effort to include those contracts as part of the

employer’s plan includes collecting available information concerning those issuers (for

which purpose, the information is not required to be collected for issuers that ceased to

receive contributions before January 1, 2005) and notifying them of the name and contact

information for the person in charge of administering the employer’s plan for the purpose

of coordinating information necessary to satisfy § 403(b). As an alternative to the actions

described in the preceding sentence, a reasonable, good faith effort to include that

contract as part of the employer’s plan also includes the issuer taking action before

making any distribution or loan to the participant or beneficiary which constitutes a

reasonable, good faith effort to contact the employer and exchange any information that

may be needed in order to satisfy § 403(b) with the person in charge of administering the

employer’s plan.

.02 Contracts issued before 2009 held for former employees or beneficiaries. In

the case of an issuer that holds § 403(b) contracts under a § 403(b) plan, but which ceases

to receive contributions before January 1, 2009 (e.g., due to the issuer having been

discontinued as an issuer under the plan, the employer having ceased to exist, or the

issuer having become an issuer under the plan due to the contract having been issued in a

post-September 24, 2007 exchange permitted under Rev. Rul. 90-24, 1990-1 CB 97),

those contracts continue to be subject to the requirements of § 403(b) and the 2007

regulations to the extent applicable. However, pursuant to this revenue procedure, a §

403(b) plan will not be treated as failing to satisfy the requirements of § 1.403(b)-3(b)(3)

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if the plan does not include terms relating to those contracts. If the participant or

beneficiary requests a loan from the contract in accordance with § 72(p)(2), this relief

applies only if the issuer makes such a loan only after the issuer has made reasonable

efforts to determine: (1) whether the participant or beneficiary has in the prior 12 months

had any other outstanding loans from qualified employer plans of the employer (taking

into account §§ 72(p)(2)(D) and 72(p)(5)); and (2) if the participant or beneficiary has

had any such loans, the highest outstanding balance of such loans during that period. For

this purpose, assuming the employer is still in existence at the time of the loan, mere

reliance on information from the participant or beneficiary about outstanding loans does

not constitute reasonable efforts to determine whether the participant or beneficiary has

other outstanding loans from plans of the employer.

The special rules in this section 8.02 apply only with respect to a contract that has

been issued before January 1, 2009, under a § 403(b) plan that is held on behalf of a

participant who, on January 1, 2009, is a former employee of the employer or for a

beneficiary. For this purpose, the issuer can rely on information from the participant as

to whether the participant is a former employee, assuming that reliance on that

information is not unreasonable under the facts and circumstances.

8.03. Re-exchange back into plan. If, after September 24, 2007 and before

January 1, 2009, a contract is issued in an exchange permitted under Rev. Rul. 90-24 (an

“intermediate contract”) and, before July 1, 2009, the contract is exchanged in

accordance with Rev. Rul. 90-24 for a contract issued by an issuer which is either

receiving contributions as part of the plan or has an information sharing agreement as set

forth in § 1.403(b)-10(b)(2)(i)(C)(1) and (2) of the 2007 regulations, then the information

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sharing conditions in § 1.403(b)-10(b)(2)(i)(C)(1) and (2) of the 2007 regulations do not

apply to the intermediate contract.

8.04. Information sharing agreements. The model plan in this revenue procedure

includes optional provisions in Section 6.4(a) through (d) to allow contract exchanges

with an issuer that is not receiving contributions. See Section 6.4(d) of the model

language for the type of information that would satisfy the information sharing agreement

conditions in § 1.403(b)-10(b)(2)(i)(C)(1) and (2) of the 2007 regulations.

SECTION 9. COMMENTS REQUESTED

Treasury and IRS are interested in receiving comments on the model language

contained in this revenue procedure and any other model language that interested parties

believe should be added to this revenue procedure. Comments are specifically requested

on the following questions. While the model language has generally been prepared for

use by employers based on provisions commonly found in defined contribution

retirement plans, are there additional provisions which should be added to reflect features

that are widely used? Are there changes that should especially be made to reflect the

circumstances applicable to public schools, including not only revised versions of the

model language, but also whether additional provisions are necessary or appropriate for

them? Should the provisions found in section 7.3 of the model language, which have

been prepared to satisfy the 2007 final regulations requirements for the plan document to

reflect the available vendors, be expanded, including changes to reflect the special relief

in section 8 of this revenue procedure?

Comments should be sent to the following address: Internal Revenue Service,

Attn: CC:PA:LPD:PR (Rev. Proc. 2007-71), Room 5203, P. O. Box 7604, Ben Franklin

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Station, Washington, DC 20044. Written comments may be hand delivered Monday

through Friday between 8 a.m. and 4 p.m. to: Internal Revenue Service, Courier’s Desk,

Attn: CC:PA:RU (Section 403(b) Plans), 1111 Constitution Avenue, NW., Washington,

DC 20224. Alternatively, written comments may be submitted electronically via the

Internet to [email protected] (Rev. Proc. 2007-71). Comments

should be received by March 16, 2008.

SECTION 10. EFFECTIVE DATE

This revenue procedure is effective December 17, 2007.

DRAFTING INFORMATION

The principal author of this revenue procedure is Robert Architect of the

Employee Plans, Tax Exempt and Government Entities Division. For further information

regarding this revenue procedure, please contact the Employee Plans taxpayer assistance

telephone service at (877) 829-5500 (a toll-free number) between the hours of 8:30 am

and 4:30 pm Eastern Time, Monday through Friday. Mr. Architect may be e-mailed at

[email protected].

APPENDIX FOR REVENUE PROCEDURE 2007-71 MODEL PLAN LANGUAGE

Note to sponsors: The model language in this Appendix is designed primarily for use by a public school in order for it to offer its employees the ability to elect to make pre-tax elective deferrals in accordance with § 403(b) of the Internal Revenue Code. (See section 5 of the revenue procedure for use of the model language by an organization that is a tax-exempt organization under § 501(c)(3) or for a church entity.) In addition, the contributions permitted under the model language are limited to pre-tax elective deferrals, and it is assumed that the plan is maintained on the basis of the calendar year. This model language is not designed for a plan that provides for matching contributions or other employer nonelective contributions, or for adoption by any other type of employer. The model language also includes certain optional alternatives, including an alternative under which the plan may automatically enroll employees for elective deferrals (or alternatively to enroll only employees who file an affirmative

12

election) and an alternative under which the plan may permit a contract issued under the plan by a vendor to whom contributions are made to be exchanged for a contract issued by vendors to whom contributions are not made under the plan. The portions of this Appendix printed in italics are explanatory notes for the benefit of the public school plan sponsor and thus are not to be included in the model plan document. In addition, certain items indicated by brackets can be filled in by the plan sponsor as appropriate.

Section 403(b) Model Plan Language for a Public School

Section 1 Definition of Terms Used

The following words and terms, when used in the Plan, have the meaning set forth

below.

1.1 "Account": The account or accumulation maintained for the benefit of any Participant or Beneficiary under an Annuity Contract or a Custodial Account.

1.2 "Account Balance": The bookkeeping account maintained for each Participant which reflects the aggregate amount credited to the Participant’s Account under all Accounts, including the Participant’s Elective Deferrals, the earnings or loss of each Annuity Contract or a Custodial Account (net of expenses) allocable to the Participant, any transfers for the Participant’s benefit, and any distribution made to the Participant or the Participant’s Beneficiary. If a Participant has more than one Beneficiary at the time of the Participant’s death, then a separate Account Balance shall be maintained for each Beneficiary. The Account Balance includes any account established under Section 6 for rollover contributions and plan-to-plan transfers made for a Participant, the account established for a Beneficiary after a Participant’s death, and any account or accounts established for an alternate payee (as defined in section 414(p)(8) of the Code).

Note: A vendor is not required to maintain a separate account for each beneficiary in order to satisfy § 401(a)(9), but this sample plan language provides for such separate accounts so that installment payments are permitted to be made over each beneficiary's life expectancy as permitted under § 1.401(a)(9)-8, A-2(a)(2) of the Income Tax Regulations. However, because, under the sample plan language, each separate account is permitted to have only a single beneficiary, certain beneficiary designations are not permitted under the sample plan language, such as a death benefit in the form of a fixed dollar payment that is not determined as of the date of death and that is not to be maintained in a separate account to which gains and losses are credited.

1.3 "Administrator": [INSERT IDENTITY OF PERSON, COMMITTEE, OR

ORGANIZATION APPOINTED TO ADMINISTER THE PLAN].

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1.4 "Annuity Contract": A nontransferable contract as defined in section 403(b)(1) of the Code, established for each Participant by the Employer, or by each Participant individually, that is issued by an insurance company qualified to issue annuities in [Insert name of State] and that includes payment in the form of an annuity. 1.5 "Beneficiary": The designated person who is entitled to receive benefits under the Plan after the death of a Participant, subject to such additional rules as may be set forth in the Individual Agreements.

1.6 "Custodial Account": The group or individual custodial account or accounts, as defined in section 403(b)(7) of the Code, established for each Participant by the Employer, or by each Participant individually, to hold assets of the Plan.

1.7 "Code": The Internal Revenue Code of 1986, as now in effect or as hereafter amended. All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered.

1.8 "Compensation": All cash compensation for services to the Employer,

including salary, wages, fees, commissions, bonuses, and overtime pay, that is includible in the Employee's gross income for the calendar year, plus amounts that would be cash compensation for services to the Employer includible in the Employee's gross income for the calendar year but for a compensation reduction election under section 125, 132(f), 401(k), 403(b), or 457(b) of the Code (including an election under Section 2 made to reduce compensation in order to have Elective Deferrals under the Plan).

1.9 "Disabled": The definition of disability provided in the applicable Individual Agreement.

1.10 "Elective Deferral": The Employer contributions made to the Plan at the election of the Participant in lieu of receiving cash compensation. Elective Deferrals are limited to pre-tax salary reduction contributions.

1.11 "Employee": Each individual, whether appointed or elected, who is a common law employee of the Employer performing services for a public school as an employee of the Employer. This definition is not applicable unless the employee’s compensation for performing services for a public school is paid by the Employer. Further, a person occupying an elective or appointive public office is not an employee performing services for a public school unless such office is one to which an individual is elected or appointed only if the individual has received training, or is experienced, in the field of education. A public office includes any elective or appointive office of a State or local government.

1.12 "Employer": [NAME OF PUBLIC SCHOOL]. Note: The definitions of “Employee” and “Employer” are specifically tailored

for use by a State or local government maintaining a § 403(b) plan for its employees who perform services for a public school and must be modified for use by any other employer.

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1.13 "Funding Vehicles ": The Annuity Contracts or Custodial Accounts issued

for funding amounts held under the Plan and specifically approved by Employer for use under the Plan.

1.14 "Includible Compensation": An Employee’s actual wages in box 1 of

Form W-2 for a year for services to the Employer, but subject to a maximum of $200,000 (or such higher maximum as may apply under section 401(a)(17) of the Code) and increased (up to the dollar maximum) by any compensation reduction election under section 125, 132(f), 401(k), 403(b), or 457(b) of the Code (including any Elective Deferral under the Plan). The amount of Includible Compensation is determined without regard to any community property laws.

1.15 "Individual Agreement": The agreements between a Vendor and the

Employer or a Participant that constitutes or governs a Custodial Account or an Annuity Contract.

1.16 "Participant": An individual for whom Elective Deferrals are currently being made, or for whom Elective Deferrals have previously been made, under the Plan and who has not received a distribution of his or her entire benefit under the Plan.

1.17 "Plan": [INSERT NAME OF PLAN]. 1.18 “Plan year”: The calendar year. 1.19 “Related Employer”: The Employer and any other entity which is under

common control with the Employer under section 414(b) or (c) of the Code. For this purpose, the Employer shall determine which entities are Related Employers based on a reasonable, good faith standard and taking into account the special rules applicable under Notice 89-23, 1989-1 C.B. 654.

Note: The definition of “Related Employer” is specifically tailored for use by a

State or local government maintaining a § 403(b) plan for its employees who perform services for a public school and must be modified for use by any other employer by deleting the sentence in Section 1.19 that begins “For this purpose …” because Notice 89-23 only applies to employers that are State or local public schools and churches. See § 1.414(c)-5 of the Income Tax Regulations (and the related discussion at pages 41137 and 41138 of the Federal Register (72 FR 41128) in the preamble to those regulations).

1.20 “Severance from Employment": For purpose of the Plan, Severance from

Employment means Severance from Employment with the Employer and any Related Entity. However, a Severance from Employment also occurs on any date on which an Employee ceases to be an employee of a public school, even though the Employee may continue to be employed by a Related Employer that is another unit of the State or local government that is not a public school or in a capacity that is not employment with a

15

public school (e.g., ceasing to be an employee performing services for a public school but continuing to work for the same State or local government employer).

Note: The definition of “Severance from Employment” is specifically tailored for

use by a State or local government maintaining a § 403(b) plan for its employees who perform services for a public school and must be modified for use by any other employer.

1.21 “Vendor": The provider of an Annuity Contract or Custodial Account.

1.22 "Valuation Date": [Each business day/The last day of the calendar month/The last day of the calendar quarter/ Each December 31].

Section 2

Participation and Contributions

2.1 Eligibility. Each Employee shall be eligible to participate in the Plan and elect to have Elective Deferrals made on his or her behalf hereunder immediately upon becoming employed by the Employer. However, an Employee who is a student-teacher (i.e., a person providing service as a teacher’s aid on a temporary basis while attending a school, college or university) or who normally works fewer than 20 hours per week is not eligible to participate in the Plan. An Employee normally works fewer than 20 hours per week if, for the 12-month period beginning on the date the employee’s employment commenced, the Employer reasonably expects the Employee to work fewer than 1,000 hours of service (as defined under section 410(a)(3)(C) of the Code) and, for each plan year ending after the close of that 12-month period, the Employee has worked fewer than 1,000 hours of service.

Note: This model language assumes that the plan has immediate eligibility, that

the plan is limited to pre-tax elective deferrals, and that the plan has no matching or other employer non-elective contributions.

The model language in Section 2.1 also assumes that employees who normally

work fewer than 20 hours per week or who are student-teachers are not eligible. Either of these exclusions may be deleted on a uniform basis for all employees. If this model language is used by a § 501(c)(3) employer that is not a public school and the plan is subject to ERISA, the plan should delete the exclusion for employees who normally work fewer than 20 hours per week.

2.2 Compensation Reduction Election. (a) General Rule. An Employee

elects to become a Participant by executing an election to reduce his or her Compensation (and have that amount contributed as an Elective Deferral on his or her behalf) and filing it with the Administrator. This Compensation reduction election shall be made on the agreement provided by the Administrator under which the Employee agrees to be bound by all the terms and conditions of the Plan. The Administrator may establish an annual minimum deferral amount no higher than $200, and may change such minimum to a lower amount from time to time. The participation election shall also include designation of the Funding Vehicles and Accounts therein to which Elective Deferrals are to be made

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and a designation of Beneficiary. Any such election shall remain in effect until a new election is filed. Only an individual who performs services for the Employer as an Employee may reduce his or her Compensation under the Plan. Each Employee will become a Participant in accordance with the terms and conditions of the Individual Agreements. All Elective Deferrals shall be made on a pre-tax basis. An Employee shall become a Participant as soon as administratively practicable following the date applicable under the employee’s election.

(b) Special Rule for New Employees. (1) Automatic Enrollment for New

Employees. For purposes of applying this Section 2.2, a new Employee is deemed to have elected to become a Participant and to have his or her Compensation reduced by [5%] (and have that amount contributed as an Elective Deferral on his or her behalf), at the time the Employee is hired, and to have agreed to be bound by all the terms and conditions of the Plan. Contributions made under this automatic participation provision shall be made to the Funding Vehicle or Vehicles selected for this purpose for all new Employees by the Administrator. Any Employee who automatically becomes a Participant under this Section 2.2(b) shall file a designation of Beneficiary with the Funding Vehicle or Vehicles to which contributions are made.

(2) Right to File a Different Election; Notice to Employee. This Section 2.2(b)

shall not apply to the extent an Employee files an election for a different percentage reduction or elects to have no Compensation reduction, or designates a different Funding Vehicle to receive contributions made on his or her behalf. Any new Employee shall receive a statement at the time he or she is hired that describes the Employee’s rights and obligations under this Section 2.2(b) (including the information in this Section 2.2(b) and identification of how the Employee can file an election or make a designation as described in the preceding sentence, and the refund right under Section 2.2(b)(3), including the specific name and location of the person to whom any such election or designation may be filed), and how the contributions under this Section 2.2(b) will be invested.

(3) Refund of Contributions. An Employee for whom contributions have been

automatically made under Section 2.2(b)(1) may elect to withdraw all of the contributions made on his or her behalf under Section 2.2(b)(1), including earnings thereon to the date of the withdrawal. This withdrawal right is available only if the withdrawal election is made within 90 days after the date of the first contribution made under Section 2.2(b)(1).

Note: Section 2.2(b) is an optional provision that provides for any new employee

to be automatically enrolled in the Plan, with 5% of Compensation to be contributed to the Plan, unless the employee elects otherwise. See §§ 414(w) and 4979(f) of the Code for special relief that applies to a plan that uses automatic enrollment, as provided in Section 2.2(b). Plan sponsors should make any revisions in this optional provision that may be necessary in order to take into account any additional guidance that may be provided by the Treasury Department or the IRS regarding automatic enrollment under §§ 414(w) and 4979(f) of the Code.

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2.3 Information Provided by the Employee. Each Employee enrolling in the Plan should provide to the Administrator at the time of initial enrollment, and later if there are any changes, any information necessary or advisable for the Administrator to administer the Plan, including any information required under the Individual Agreements.

2.4 Change in Elective Deferrals Election. Subject to the provisions of the

applicable Individual Agreements, an Employee may at any time revise his or her participation election, including a change of the amount of his or her Elective Deferrals, his or her investment direction, and his or her designated Beneficiary. A change in the investment direction shall take effect as of the date provided by the Administrator on a uniform basis for all Employees. A change in the Beneficiary designation shall take effect when the election is accepted by the Vendor.

2.5 Contributions Made Promptly. Elective Deferrals under the Plan shall be transferred to the applicable Funding Vehicle within 15 business days following the end of the month in which the amount would otherwise have been paid to the Participant.

2.6 Leave of Absence. Unless an election is otherwise revised, if an Employee is

absent from work by leave of absence, Elective Deferrals under the Plan shall continue to the extent that Compensation continues.

Note: If this Section 2 is adopted separately, the following definitions from

Section 1 should also be adopted: Account, Administrator, Beneficiary, Compensation, Elective Deferral, Employee, Employer, Funding Vehicles, Individual Agreement, Participant, Plan, and Vendor.

Section 3

Limitations on Amounts Deferred

3.1 Basic Annual Limitation. Except as provided in Sections 3.2 and 3.3, the maximum amount of the Elective Deferral under the Plan for any calendar year shall not exceed the lesser of (a) the applicable dollar amount or (b) the Participant's Includible Compensation for the calendar year. The applicable dollar amount is the amount established under section 402(g)(1)(B) of the Code, which is $15,500 for 2007, and is adjusted for cost-of-living after 2007 to the extent provided under section 415(d) of the Code.

3.2 Special Section 403(b) Catch-up Limitation for Employees With 15 Years of Service. Because the Employer is a qualified organization (within the meaning of § 1.403(b)-4(c)(3)(ii) of the Income Tax Regulations), the applicable dollar amount under Section 3.1(a) for any “qualified employee” is increased (to the extent provided in the Individual Agreements) by the least of:

(a) $3,000;

(b) The excess of:

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(1) $15,000, over

(2) The total special 403(b) catch-up elective deferrals made for the qualified employee by the qualified organization for prior years; or

(c) The excess of:

(1) $5,000 multiplied by the number of years of service of the employee with the qualified organization, over

(2) The total Elective Deferrals made for the employee by the qualified organization for prior years.

For purposes of this Section 3.2, a “qualified employee” means an employee who has completed at least 15 years of service taking into account only employment with the Employer.

Note: Section 3.2 is specifically written for use by a State or local government maintaining a § 403(b) plan for its employees who perform services for a public school and, if used by a § 501(c)(3) employer, must be limited to cases in which the Employer is a “qualified organization” under § 1.403(b)-4(c)(3)(iii) of the Income Tax Regulations.

3.3 Age 50 Catch-up Elective Deferral Contributions. An Employee who is a Participant who will attain age 50 or more by the end of the calendar year is permitted to elect an additional amount of Elective Deferrals, up to the maximum age 50 catch-up Elective Deferrals for the year. The maximum dollar amount of the age 50 catch-up Elective Deferrals for a year is $5,000 for 2007, and is adjusted for cost-of-living after 2007 to the extent provided under the Code.

3.4 Coordination. Amounts in excess of the limitation set forth in Section 3.1 shall be allocated first to the special 403(b) catch-up under Section 3.2 and next as an age 50 catch-up contribution under Section 3.3. However, in no event can the amount of the Elective Deferrals for a year be more than the Participant’s Compensation for the year.

3.5 Special Rule for a Participant Covered by Another Section 403(b) Plan.

For purposes of this Section 3, if the Participant is or has been a participant in one or more other plans under section 403(b) of the Code (and any other plan that permits elective deferrals under section 402(g) of the Code), then this Plan and all such other plans shall be considered as one plan for purposes of applying the foregoing limitations of this Section 3. For this purpose, the Administrator shall take into account any other such plan maintained by any Related Employer and shall also take into account any other such plan for which the Administrator receives from the Participant sufficient information concerning his or her participation in such other plan. Notwithstanding the foregoing, another plan maintained by a Related Entity shall be taken into account for purposes of Section 3.2 only if the other plan is a § 403(b) plan.

3.6 Correction of Excess Elective Deferrals. If the Elective Deferral on behalf

of a Participant for any calendar year exceeds the limitations described above, or the

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Elective Deferral on behalf of a Participant for any calendar year exceeds the limitations described above when combined with other amounts deferred by the Participant under another plan of the employer under section 403(b) of the Code (and any other plan that permits elective deferrals under section 402(g) of the Code for which the Participant provides information that is accepted by the Administrator), then the Elective Deferral, to the extent in excess of the applicable limitation (adjusted for any income or loss in value, if any, allocable thereto), shall be distributed to the Participant.

Note: Corrective distributions are generally required to be made within 2½

months after the end of the calendar year, but can be made within 6 months after the end of the calendar year if the plan uses the optional provision at Section 2.2(b) and otherwise constitutes an eligible automatic contribution arrangement. See §§ 414(w)(3) and 4979(f) of the Code.

3.7 Protection of Persons Who Serve in a Uniformed Service. An Employee whose employment is interrupted by qualified military service under section 414(u) of the Code or who is on a leave of absence for qualified military service under section 414(u) of the Code may elect to make additional Elective Deferrals upon resumption of employment with the Employer equal to the maximum Elective Deferrals that the Employee could have elected during that period if the Employee’s employment with the Employer had continued (at the same level of Compensation) without the interruption or leave, reduced by the Elective Deferrals, if any, actually made for the Employee during the period of the interruption or leave. Except to the extent provided under section 414(u) of the Code, this right applies for five years following the resumption of employment (or, if sooner, for a period equal to three times the period of the interruption or leave).


Section 1 should also be adopted: Administrator, Code, Compensation, Elective Deferral, Employee, Employer, Includible Compensation, Participant, Plan, and Related Employer.

Section 4

Loans

4.1 Loans. Loans shall be permitted under the Plan to the extent permitted by the Individual Agreements controlling the Account assets from which the loan is made and by which the loan will be secured.

4.2 Information Coordination Concerning Loans. Each Vendor is responsible for all information reporting and tax withholding required by applicable federal and state law in connection with distributions and loans. To minimize the instances in which Particpants have taxable income as a result of loans from the Plan, the Administrator shall take such steps as may be appropriate to coordinate the limitations on loans set forth in Section 4.3, including the collection of information from Vendors, and transmission of information requested by any Vendor, concerning the outstanding balance of any loans made to a Participant under the Plan or any other plan of the Employer. The

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Administrator shall also take such steps as may be appropriate to collect information from Vendors, and transmission of information to any Vendor, concerning any failure by a Participant to repay timely any loans made to a Participant under the Plan or any other plan of the Employer.

4.3 Maximum Loan Amount. No loan to a Participant under the Plan may

exceed the lesser of: (a) $50,000, reduced by the greater of (i) the outstanding balance on any loan

from the Plan to the Participant on the date the loan is made or (ii) the highest outstanding balance on loans from the Plan to the Participant during the one-year period ending on the day before the date the loan is approved by the Administrator (not taking into account any payments made during such one-year period); or

(b) one half of the value of the Participant’s vested Account Balance (as of the

valuation date immediately preceding the date on which such loan is approved by the Administrator).

For purposes of this Section 4.3, any loan from any other plan maintained by the

Employer and any Related Employer shall be treated as if it were a loan made from the Plan, and the Participant’s vested interest under any such other plan shall be considered a vested interest under this Plan; provided, however, that the provisions of this paragraph shall not be applied so as to allow the amount of a loan to exceed the amount that would otherwise be permitted in the absence of this paragraph.

Note: Loans are included in taxable income under certain conditions, including: if the loan, when combined with the balance of all other loans from plans of the employer, exceeds the limitations described in Section 4.3; or if there is a failure to repay the loan in accordance with the repayment schedule. Because the tax treatment of a loan depends on information concerning aggregate loan balances under all annuity contracts and custodial accounts within the Plan (and under all plans of the employer), information about loan balances under the contracts and accounts of other vendors is needed before making a loan. That information may be obtained from the participant, but this sample language provides for the Administrator also to collect and coordinate that information in order to decrease the instances in which participants have taxable income from plan loans.

Note: See § 1.72(p)-1 of the Income Tax Regulations for the federal income tax

treatment of loans generally.

Note: If this Section 4 is adopted separately, the following definitions from Section 1 should also be adopted: Account, Administrator, Account Balance, Employer, Individual Agreement, Participant, Plan, Related Employer, Valuation Date, and Vendor.

Section 5

Benefit Distributions

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5.1 Benefit Distributions At Severance from Employment or Other

Distribution Event. Except as permitted under Section 3.6 (relating to excess Elective Deferrals), Section 5.4 (relating to withdrawals of amounts rolled over into the Plan), Section 5.5 (relating to hardship), or Section 8.3 (relating to termination of the Plan), distributions from a Participant’s Account may not be made earlier than the earliest of the date on which the Participation has a Severance from Employment, dies, becomes Disabled, or attains age 59½. Distributions shall otherwise be made in accordance with the terms of the Individual Agreements.

5.2 Small Account Balances. The terms of the Individual Agreement may

permit distributions to be made in the form of a lump-sum payment, without the consent of the Participant or Beneficiary, but no such payment may be made without the consent of the Participant or Beneficiary unless the Account Balance does not exceed $5,000 (determined without regard to any separate account that holds rollover contributions under Section 6.1) and any such distribution shall comply with the requirements of section 401(a)(31)(B) of the Code (relating to automatic distribution as a direct rollover to an individual retirement plan for distributions in excess of $1,000).

5.3 Minimum Distributions. Each Individual Agreement shall comply with the minimum distribution requirements of section 401(a)(9) of the Code and the regulations thereunder. For purposes of applying the distribution rules of section 401(a)(9) of the Code, each Individual Agreement is treated as an individual retirement account (IRA) and distributions shall be made in accordance with the provisions of § 1.408-8 of the Income Tax Regulations, except as provided in § 1.403(b)-6(e) of the Income Tax Regulations. Note: This Section 5.3 assumes that each individual agreement with a vendor complies with the minimum distribution requirements of § 401(a)(9) of the Code. See section 5 of the Appendix for Rev. Proc. 2004-56, 2004-2 C.B. 37, for model language that may be used to set forth the minimum distribution requirements of § 401(a)(9) of the Code.

5.4 In-Service Distributions From Rollover Account. If a Participant has a separate account attributable to rollover contributions to the plan, to the extent permitted by the applicable Individual Agreement, the Participant may at any time elect to receive a distribution of all or any portion of the amount held in the rollover account.

Note: A plan is not required to permit in-service distribution from a rollover

account. See Rev. Rul. 2004-12, 2004-1 C.B. 478.

5.5 Hardship Withdrawals. (a) Hardship withdrawals shall be permitted under the Plan to the extent permitted by the Individual Agreements controlling the Account assets to be withdrawn to satisfy the hardship. If applicable under an Individual Agreement, no Elective Deferrals shall be allowed under the Plan during the 6-month period beginning on the date the Participant receives a distribution on account of

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hardship.

(b) The Individual Agreements shall provide for the exchange of information among the Employer and the Vendors to the extent necessary to implement the Individual Agreements, including, in the case of a hardship withdrawal that is automatically deemed to be necessary to satisfy the Participant’s financial need (pursuant to § 1.401(k)-1(d)(3)(iv)(E) of the Income Tax Regulations), the Vendor notifying the Employer of the withdrawal in order for the Employer to implement the resulting 6-month suspension of the Participant’s right to make Elective Deferrals under the Plan. In addition, in the case of a hardship withdrawal that is not automatically deemed to be necessary to satisfy the financial need (pursuant to § 1.401(k)-1(d)(3)(iii)(B) of the Income Tax Regulations), the Vendor shall obtain information from the Employer or other Vendors to determine the amount of any plan loans and rollover accounts that are available to the Participant under the Plan to satisfy the financial need.

5.6 Rollover Distributions. (a) A Participant or the Beneficiary of a deceased Participant (or a Participant’s spouse or former spouse who is an alternate payee under a domestic relations order, as defined in section 414(p) of the Code) who is entitled to an eligible rollover distribution may elect to have any portion of an eligible rollover distribution (as defined in section 402(c)(4) of the Code) from the Plan paid directly to an eligible retirement plan (as defined in section 402(c)(8)(B) of the Code) specified by the Participant in a direct rollover. In the case of a distribution to a Beneficiary who at the time of the Participant’s death was neither the spouse of the Participant nor the spouse or former spouse of the participant who is an alternate payee under a domestic relations order, a direct rollover is payable only to an individual retirement account or individual retirement annuity (IRA) that has been established on behalf of the Beneficiary as an inherited IRA (within the meaning of section 408(d)(3)(C) of the Code).

(b) Each Vendor shall be separately responsible for providing, within a

reasonable time period before making an initial eligible rollover distribution, an explanation to the Participant of his or her right to elect a direct rollover and the income tax withholding consequences of not electing a direct rollover.

Note: Section 402(f) of the Code requires a plan administrator to provide a written explanation to any recipient of an eligible rollover distribution. The written explanation must cover the direct rollover rules, the mandatory income tax withholding on distributions not directly rolled over, the tax treatment of distributions not rolled over (including the special tax treatment available for certain lump sum distributions), and when distributions may be subject to different restrictions and tax consequences after being rolled over. Section 402(f) provides that this explanation must be given within a reasonable period of time before the plan makes an eligible rollover distribution. See Notice 2002-3, 2002-1 C.B. 289, that contains a Safe Harbor Explanation that plan administrators may provide to recipients of eligible rollover distributions from employer plans in order to satisfy the notice requirement.

Note: See generally § 1.403(b)-6 of the Income Tax Regulations for rules relating

to restrictions on distributions.

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Note: If this Section 5 is adopted separately, the following definitions from Section 1 should also be adopted: Account, Account Balance, Beneficiary, Code, Disabled, Elective Deferral, Employer, Individual Agreement, Participant, Plan, Severance from Employment, and Vendor.

Section 6

Rollovers to the Plan and Transfers

6.1 Eligible Rollover Contributions to the Plan. (a) Eligible Rollover Contributions. To the extent provided in the Individual

Agreements, an Employee who is a Participant who is entitled to receive an eligible rollover distribution from another eligible retirement plan may request to have all or a portion of the eligible rollover distribution paid to the Plan. Such rollover contributions shall be made in the form of cash only. The Vendor may require such documentation from the distributing plan as it deems necessary to effectuate the rollover in accordance with section 402 of the Code and to confirm that such plan is an eligible retirement plan within the meaning of section 402(c)(8)(B) of the Code. However, in no event does the Plan accept a rollover contribution from a Roth elective deferral account under an applicable retirement plan described in section 402A(e)(1) of the Code or a Roth IRA described in section 408A of the Code.

Note: This provision does not permit rollovers to be accepted from a Roth

elective deferral account or a Roth IRA because the Plan does not provide for designated Roth contributions.

(b) Eligible Rollover Distribution. For purposes of Section 6.1(a), an eligible

rollover distribution means any distribution of all or any portion of a Participant’s benefit under another eligible retirement plan, except that an eligible rollover distribution does not include (1) any installment payment for a period of 10 years or more, (2) any distribution made as a result of an unforeseeable emergency or other distribution which is made upon hardship of the employee, or (3) for any other distribution, the portion, if any, of the distribution that is a required minimum distribution under section 401(a)(9) of the Code. In addition, an eligible retirement plan means an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, a qualified trust described in section 401(a) of the Code, an annuity plan described in section 403(a) or 403(b) of the Code, or an eligible governmental plan described in section 457(b) of the Code, that accepts the eligible rollover distribution.

(c) Separate Accounts. The Vendor shall establish and maintain for the

Participant a separate account for any eligible rollover distribution paid to the Plan. 6.2 Plan-to-Plan Transfers to the Plan. (a) At the direction of the Employer, for a class of Employees who are participants or beneficiaries in another plan under section 403(b) of the Code, the Administrator may permit a transfer of assets to the Plan

24

as provided in this Section 6.2. Such a transfer is permitted only if the other plan provides for the direct transfer of each person’s entire interest therein to the Plan and the participant is an employee or former employee of the Employer. The Administrator and any Vendor accepting such transferred amounts may require that the transfer be in cash or other property acceptable to it. The Administrator or any Vendor accepting such transferred amounts may require such documentation from the other plan as it deems necessary to effectuate the transfer in accordance with § 1.403(b)-10(b)(3) of the Income Tax Regulations and to confirm that the other plan is a plan that satisfies section 403(b) of the Code.

(b) The amount so transferred shall be credited to the Participant’s Account

Balance, so that the Participant or Beneficiary whose assets are being transferred has an accumulated benefit immediately after the transfer at least equal to the accumulated benefit with respect to that Participant or Beneficiary immediately before the transfer.

(c) To the extent provided in the Individual Agreements holding such transferred

amounts, the amount transferred shall be held, accounted for, administered and otherwise treated in the same manner as an Elective Deferral by the Participant under the Plan, except that (1) the Individual Agreement which holds any amount transferred to the Plan must provide that, to the extent any amount transferred is subject to any distribution restrictions required under section 403(b) of the Code, the Individual Agreement must impose restrictions on distributions to the Participant or Beneficiary whose assets are being transferred that are not less stringent than those imposed on the transferor plan and (2) the transferred amount shall not be considered an Elective Deferral under the Plan in determining the maximum deferral under Section 3.

Note: This provision limits transfer to the plan to cases involving a class of participants whose entire benefit is being transferred, such as where employees are being transferred from another employer to employment with the employer maintaining this plan and the portion of the other plan held on their behalf is being merged into this plan. Plan-to-plan transfers are not required to be limited to such situations. See § 1.403(b)-10(b)(3) of the Income Tax Regulations for rules relating to plan-to-plan transfers among § 403(b) plans and, in the case of plans that are subject to ERISA, see also § 1.414(l)-1 of the Income Tax Regulations.

6.3 Plan-to-Plan Transfers from the Plan. (a) At the direction of the Employer, the Administrator may permit a class of

Participants and Beneficiaries to elect to have all or any portion of their Account Balance transferred to another plan that satisfies section 403(b) of the Code in accordance with § 1.403(b)-10(b)(3) of the Income Tax Regulations. A transfer is permitted under this Section 6.3(a) only if the Participants or Beneficiaries are employees or former employees of the employer (or the business of the employer) under the receiving plan and the other plan provides for the acceptance of plan-to-plan transfers with respect to the Participants and Beneficiaries and for each Participant and Beneficiary to have an amount

25

deferred under the other plan immediately after the transfer at least equal to the amount transferred.

(b) The other plan must provide that, to the extent any amount transferred is

subject to any distribution restrictions required under section 403(b) of the Code, the other plan shall impose restrictions on distributions to the Participant or Beneficiary whose assets are transferred that are not less stringent than those imposed under the Plan. In addition, if the transfer does not constitute a complete transfer of the Participant’s or Beneficiary’s interest in the Plan, the other plan shall treat the amount transferred as a continuation of a pro rata portion of the Participant’s or Beneficiary’s interest in the transferor plan (e.g., a pro rata portion of the Participant’s or Beneficiary’s interest in any after-tax employee contributions).

(c) Upon the transfer of assets under this Section 6.3, the Plan’s liability to pay benefits to the Participant or Beneficiary under this Plan shall be discharged to the extent of the amount so transferred for the Participant or Beneficiary. The Administrator may require such documentation from the receiving plan as it deems appropriate or necessary to comply with this Section 6.3 (for example, to confirm that the receiving plan satisfies section 403(b) of the Code and to assure that the transfer is permitted under the receiving plan) or to effectuate the transfer pursuant to § 1.403(b)-10(b)(3) of the Income Tax Regulations.

Note: This provision limits transfer from the plan to cases involving a class of participants whose entire benefit is being transferred, such as where employees are being transferred from employment with the employer maintaining this plan to another employer and the portion of the plan held on their behalf is being merged into another plan. Plan-to-plan transfers are not required to be limited to such situations. See § 1.403(b)-10(b)(3) of the Income Tax Regulations for rules relating to plan-to-plan transfers among § 403(b) plans and, in the case of plans that are subject to ERISA, see also § 1.414(l)-1 of the Income Tax Regulations.

6.4 Contract and Custodial Account Exchanges. (a) A Participant or Beneficiary is permitted to change the investment of his or her Account Balance among the Vendors under the Plan, subject to the terms of the Individual Agreements. However, an investment change that includes an investment with a Vendor that is not eligible to receive contributions under Section 2 (referred to below as an exchange) is not permitted unless the conditions in paragraphs (b) through (d) of this Section 6.4 are satisfied.

(b) The Participant or Beneficiary must have an Account Balance immediately

after the exchange that is at least equal to the Account Balance of that Participant or Beneficiary immediately before the exchange (taking into account the Account Balance of that Participant or Beneficiary under both section 403(b) contracts or custodial accounts immediately before the exchange).

26

(c) The Individual Agreement with the receiving Vendor has distribution restrictions with respect to the Participant that are not less stringent than those imposed on the investment being exchanged.

(d) The Employer enters into an agreement with the receiving Vendor for the

other contract or custodial account under which the Employer and the Vendor will from time to time in the future provide each other with the following information:

(1) Information necessary for the resulting contract or custodial account, or any

other contract or custodial accounts to which contributions have been made by the Employer, to satisfy section 403(b) of the Code, including the following: (i) the Employer providing information as to whether the Participant’s employment with the Employer is continuing, and notifying the Vendor when the Participant has had a Severance from Employment (for purposes of the distribution restrictions in Section 5.1); (ii) the Vendor notifying the Employer of any hardship withdrawal under Section 5.5 if the withdrawal results in a 6-month suspension of the Participant’s right to make Elective Deferrals under the Plan; and (iii) the Vendor providing information to the Employer or other Vendors concerning the Participant’s or Beneficiary’s section 403(b) contracts or custodial accounts or qualified employer plan benefits (to enable a Vendor to determine the amount of any plan loans and any rollover accounts that are available to the Participant under the Plan in order to satisfy the financial need under the hardship withdrawal rules of Section 5.5); and

(2) Information necessary in order for the resulting contract or custodial account

and any other contract or custodial account to which contributions have been made for the Participant by the Employer to satisfy other tax requirements, including the following: (i) the amount of any plan loan that is outstanding to the Participant in order for a Vendor to determine whether an additional plan loan satisfies the loan limitations of Section 4.3, so that any such additional loan is not a deemed distribution under section 72(p)(1); and (ii) information concerning the Participant’s or Beneficiary’s after-tax employee contributions in order for a Vendor to determine the extent to which a distribution is includible in gross income.

(e) If any Vendor ceases to be eligible to receive Elective Deferrals under the

Plan, the Employer will enter into an information sharing agreement as described in Section 6.4(d) to the extent the Employer’s contract with the Vendor does not provide for the exchange of information described in Section 6.4(d)(1) and (2).

Note: Section 6.4(a) through (d) are optional provisions for a plan that chooses to allow participants to exchange all or a portion of their account balance with vendors with respect to which the plan has no regular contact, i.e., insurance companies or mutual funds that do not receive regular contributions made for participants. Note also that additional information would be necessary in the case of an exchange involving a designated Roth account. See generally § 1.403(b)-10(b)(2) of the Income Tax Regulations for rules relating to exchanges of contracts.

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6.5 Permissive Service Credit Transfers. (a) If a Participant is also a participant in a tax-qualified defined benefit

governmental plan (as defined in section 414(d) of the Code) that provides for the acceptance of plan-to-plan transfers with respect to the Participant, then the Participant may elect to have any portion of the Participant’s Account Balance transferred to the defined benefit governmental plan. A transfer under this Section 6.5(a) may be made before the Participant has had a Severance from Employment.

(b) A transfer may be made under Section 6.5(a) only if the transfer is either for the purchase of permissive service credit (as defined in section 415(n)(3)(A) of the Code) under the receiving defined benefit governmental plan or a repayment to which section 415 of the Code does not apply by reason of section 415(k)(3) of the Code. (c) In addition, if a plan-to-plan transfer does not constitute a complete transfer of the Participant’s or Beneficiary’s interest in the transferor plan, the Plan shall treat the amount transferred as a continuation of a pro rata portion of the Participant’s or Beneficiary’s interest in the transferor plan (e.g., a pro rata portion of the Participant’s or Beneficiary’s interest in any after-tax employee contributions). Note: See § 1.403(b)-10(b)(4) of the Income Tax Regulations for rules relating to transfers for permissive service credit.

Note: If this Section 6 is adopted separately, the following definitions from Section 1 should also be adopted: Administrator, Account Balance, Beneficiary, Code, Elective Deferral, Employee, Employer, Individual Agreement, Participant, Plan, Severance from Employment, and Vendor.

Section 7 Investment of Contributions

7.1 Manner of Investment. All Elective Deferrals or other amounts contributed to the Plan, all property and rights purchased with such amounts under the Funding Vehicles, and all income attributable to such amounts, property, or rights shall be held and invested in one or more Annuity Contracts or Custodial Accounts. Each Custodial Account shall provide for it to be impossible, prior to the satisfaction of all liabilities with respect to Participants and their Beneficiaries, for any part of the assets and income of the Custodial Account to be used for, or diverted to, purposes other than for the exclusive benefit of Participants and their Beneficiaries.

7.2 Investment of Contributions. Each Participant or Beneficiary shall direct the investment of his or her Account among the investment options available under the Annuity Contract or Custodial Account in accordance with the terms of the Individual Agreements. Transfers among Annuity Contracts and Custodial Accounts may be made to the extent provided in the Individual Agreements and permitted under applicable Income Tax Regulations.

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Note: See generally § 1.403(b)-8 of the Income Tax Regulations for rules relating to funding.


Section 1 should also be adopted: Annuity Contract, Beneficiary, Custodial Account, Individual Agreement, Elective Deferral, Participant, and Plan. 7.3 Current and Former Vendors. The Administrator shall maintain a list of all Vendors under the Plan. Such list is hereby incorporated as part of the Plan. Each Vendor and the Administrator shall exchange such information as may be necessary to satisfy section 403(b) of the Code or other requirements of applicable law. In the case of a Vendor which is not eligible to receive Elective Deferrals under the Plan (including a Vendor which has ceased to be a Vendor eligible to receive Elective Deferrals under the Plan and a Vendor holding assets under the Plan in accordance with Section 6.2 or 6.4), the Employer shall keep the Vendor informed of the name and contact information of the Administrator in order to coordinate information necessary to satisfy section 403(b) of the Code or other requirements of applicable law.

Section 8 Amendment and Plan Termination

8.1 Termination of Contributions. The Employer has adopted the Plan with the intention and expectation that contributions will be continued indefinitely. However, the Employer has no obligation or liability whatsoever to maintain the Plan for any length of time and may discontinue contributions under the Plan at any time without any liability hereunder for any such discontinuance.

8.2 Amendment and Termination. The Employer reserves the authority to amend or terminate this Plan at any time.

8.3 Distribution upon Termination of the Plan. The Employer may provide that, in connection with a termination of the Plan and subject to any restrictions contained in the Individual Agreements, all Accounts will be distributed, provided that the Employer and any Related Employer on the date of termination do not make contributions to an alternative section 403(b) contract that is not part of the Plan during the period beginning on the date of plan termination and ending 12 months after the distribution of all assets from the Plan, except as permitted by the Income Tax Regulations.

Note: See generally § 1.403(b)-10(a) of the Income Tax Regulations for rules relating to discontinuance of contributions and plan termination.


Section 1 should also be adopted: Account, Employer, Individual Agreement, Plan, and Related Employer.

Section 9 Miscellaneous

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9.1 Non-Assignability. Except as provided in Section 9.2 and 9.3, the interests

of each Participant or Beneficiary under the Plan are not subject to the claims of the Participant's or Beneficiary’s creditors; and neither the Participant nor any Beneficiary shall have any right to sell, assign, transfer, or otherwise convey the right to receive any payments hereunder or any interest under the Plan, which payments and interest are expressly declared to be non-assignable and non-transferable.

Note: The anti-alienation rules of section 401(a)(13) of the Code generally do not

apply to § 403(b) plans of public schools, but the parallel rule at section 206(d) of ERISA applies to plans that are subject to ERISA.

9.2 Domestic Relation Orders. Notwithstanding Section 9.1, if a judgment, decree or order (including approval of a property settlement agreement) that relates to the provision of child support, alimony payments, or the marital property rights of a spouse or former spouse, child, or other dependent of a Participant is made pursuant to the domestic relations law of any State (“domestic relations order”), then the amount of the Participant’s Account Balance shall be paid in the manner and to the person or persons so directed in the domestic relations order. Such payment shall be made without regard to whether the Participant is eligible for a distribution of benefits under the Plan. The Administrator shall establish reasonable procedures for determining the status of any such decree or order and for effectuating distribution pursuant to the domestic relations order.

Note: Section 9.2 is specifically written for use by a State or local government maintaining a § 403(b) plan for its employees who perform services for a public school and, if used by a § 501(c)(3) employer, must be revised to be limited to cases in which the domestic relations order is “qualified” under § 414(p) of the Code. Note: See generally § 414(p) of the Code and § 1.403(b)-10(c) of the Income Tax Regulations for rules regarding domestic relations orders.

9.3 IRS Levy. Notwithstanding Section 9.1, the Administrator may pay from a Participant's or Beneficiary's Account Balance the amount that the Administrator finds is lawfully demanded under a levy issued by the Internal Revenue Service with respect to that Participant or Beneficiary or is sought to be collected by the United States Government under a judgment resulting from an unpaid tax assessment against the Participant or Beneficiary. 9.4 Tax Withholding. Contributions to the Plan are subject to applicable employment taxes (including, if applicable, Federal Insurance Contributions Act (FICA) taxes with respect to Elective Deferrals, which constitute wages under section 3121 of the Code). Any benefit payment made under the Plan is subject to applicable income tax withholding requirements (including section 3401 of the Code and the Employment Tax Regulations thereunder). A payee shall provide such information as the Administrator may need to satisfy income tax withholding obligations, and any other information that may be required by guidance issued under the Code.

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9.5 Payments to Minors and Incompetents. If a Participant or Beneficiary

entitled to receive any benefits hereunder is a minor or is adjudged to be legally incapable of giving valid receipt and discharge for such benefits, or is deemed so by the Administrator, benefits will be paid to such person as the Administrator may designate for the benefit of such Participant or Beneficiary. Such payments shall be considered a payment to such Participant or Beneficiary and shall, to the extent made, be deemed a complete discharge of any liability for such payments under the Plan.

9.6 Mistaken Contributions. If any contribution (or any portion of a

contribution) is made to the Plan by a good faith mistake of fact, then within one year after the payment of the contribution, and upon receipt in good order of a proper request approved by the Administrator, the amount of the mistaken contribution (adjusted for any income or loss in value, if any, allocable thereto) shall be returned directly to the Participant or, to the extent required or permitted by the Administrator, to the Employer.

9.7 Procedure When Distributee Cannot Be Located. The Administrator shall make all reasonable attempts to determine the identity and address of a Participant or a Participant's Beneficiary entitled to benefits under the Plan. For this purpose, a reasonable attempt means (a) the mailing by certified mail of a notice to the last known address shown on [INSERT NAME OF THE EMPLOYER]’s or the Administrator's records, (b) notification sent to the Social Security Administration or the Pension Benefit Guaranty Corporation (under their program to identify payees under retirement plans), and (c) the payee has not responded within 6 months. If the Administrator is unable to locate such a person entitled to benefits hereunder, or if there has been no claim made for such benefits, the funding vehicle shall continue to hold the benefits due such person.

9.8 Incorporation of Individual Agreements. The Plan, together with the Individual Agreements, is intended to satisfy the requirements of section 403(b) of the Code and the Income Tax Regulations thereunder. Terms and conditions of the Individual Agreements are hereby incorporated by reference into the Plan, excluding those terms that are inconsistent with the Plan or section 403(b) of the Code.

9.9 Governing Law. The Plan will be construed, administered and enforced according to the Code and the laws of the State in which the Employer has its principal place of business. 9.10 Headings. Headings of the Plan have been inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof.

9.11 Gender. Pronouns used in the Plan in the masculine or feminine gender include both genders unless the context clearly indicates otherwise.

IN WITNESS WHEREOF, the Employer has caused this Plan to be executed this

___ day of _____, ______.

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Employer: ________________________________ By: ________________________________ Title: ________________________________ Date signed: ________________________________

Effective Date of the Plan: __________________

Note: The provisions in Section 9 are optional provisions that are not required to be adopted.

Note: If this Section 9 is adopted separately, the following definitions from Section 1 should also be adopted: Administrator, Account Balance, Beneficiary, Employer, Individual Agreement, Participant, and Plan.