The CEA Board of Directors is encouraging members to learn more about a new, in fact never before available, state of Connecticut investment program. The new program is called the State of Connecticut Deferred Compensation 457 Plan (CTdcp457). Under the Internal Revenue Code, a 457 investment is distinctly different from a 403(b) investment, and specific regulations and requirements apply to both teachers and their school districts for each investment program.

CEA President Phil Apruzzese said, “An objective of our CEA Special Services program has been to encourage members to save on a tax-favored basis. While we have been doing this through a 403(b) endorsement, the CEA Board of Directors decided to shift focus at our March meeting. We are excited about the state plan, given its attractive fee structure and potential to enhance teachers’ ability to save for retirement.”

CEA Executive Director John Yrchik said, “While we are excited about the new state program, we are aware that it will take some time before CEA members can begin to invest in the state plan, which is overseen by the State Comptroller’s Office as part of its mission to assist municipalities. Local district payroll slots will need to be secured for the State of Connecticut Deferred Compensation 457 Plan. In May, our UniServ staff met with representatives of the State Comptroller’s Office to discuss how this can be accomplished.“

In terms of existing 403(b) plans, it will be up to each teacher to decide whether it makes sense to change any existing investments.

First, many teachers who currently have 403(b) contracts will not qualify to move their money from their 403(b) contract to the state 457 program. The Internal Revenue Service (IRS) imposes strict requirements on the teacher 403(b) program. These IRS requirements mean that funds can only be distributed from a 403(b) contract and rolled over to another eligible plan (a 457, for example) upon a teacher reaching 59 1/2, severing employment, becoming disabled, or dying.

As a result of the above IRS rules, each teacher’s situation will determine whether he or she is eligible to change any investments.

Second, with 403(b) investments, penalties as well as surrender fees may apply if teachers move their investment funds.  CEA urges all CEA members to carefully review the plan prospectus they received when they signed a 403(b) contract and to consult with their 403(b) contract financial advisors.

In the future, when—and if—a local school district has both a 457 payroll deduction slot as well as a 403(b) payroll slot, then teachers can make contributions to both a 403(b) plan and a 457 plan within contribution limits established by the IRS, if they elect to save for retirement in this way. The State of Connecticut Defined Contribution Plan (CTdcp457), now being endorsed by the CEA Board of Directors, offers teachers extraordinary buying power. CEA members get to team up with 147,000 state and municipal employees and their $2.6 billion in assets. In the state plan, average total expenses are about 0.45 percent. The CTdcp457 plan provides an excellent vehicle for CEA members to increase their retirement plan savings by enjoying exceptionally low fees.

The opportunity for CEA to work with the State Comptroller’s office on its CTdcp457 plan arose late last year. The State Comptroller recently restructured the State’s Deferred Compensation 457 plan in order to reduce fees and increase investment choices, and has been rolling out its plan to municipalities. The State Comptroller’s mission is to provide services to municipal employees, including teachers. CEA President Apruzzese said, “CEA will be working with the state, our field staff, and our local presidents to expand the availability of State 457 payroll slots in Connecticut school districts. Personally, I look forward to this endeavor because it is an exciting way to enhance benefits for our members.”

Comprehensive information about the state program can be found at http://www6.ingretirementplans.com/SponsorExtranet/Connecticut/. After learning about the program, teachers are encouraged to contact their UniServ representatives to determine how they can secure access to payroll deduction in their school districts.