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Pensions News Thursday 23rd August 2007
403(b) Retirement Savings to change, IRS OK's moveTax deferred retirement plans for those that work for non-profit organizations and educational institutions are set to undergo a major overhaul. The new regulations are geared towards providing employers with greater control over the savings programs and have been approved by the Internal Revenue Service.The new implementation, to be integrated by 2009, will be similar to the equivalent savings plans in operation for private sector workers, 401(k). Both plans allow workers to set aside pre-tax earnings which grow, tax deferred until such time as they are withdrawn, when they be taxed as normal income. Employers in both non-profit and private organizations often offer matching contributions. The current limit for contributions for the majority of workers is $15,500. In the new plans, it will be the responsibility of the non-profit employers to provide written documentation for their plans by the 1st Jan 2009. In the past they have been able to rely on the account documents of the insurance companies that they invest with. This means that from the consumer's perspective, the emphasis is on the employer to ensure that provisions documented in the plans are delivered. Some have criticized the new plans because they limit the option for employees to transfer their funds into higher yielding, low costs investments such as mutual funds. These transfers have acted as a lifeline in some cases under the old system, as employees are sometimes only offered poor investment opportunities involving high fees by their companies. Such transfers are not allowed under the new system unless the transfers are to companies with signed agreements with the employer. Other Pensions Recent News and Articles |
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