6001 Tax Deferred Annuity/Compensation

  • The board of directors may contract with an eligible employee to defer any portion of their compensation at an eligible employee’s direction, the district may provide for participation in a tax deferred annuity program, as defined by Section 403(b) and 403(b)(7) of the Internal Revenue Code of 1986 as amended.

    Upon receipt of all documents required by the school district under the administrative procedure for tax deferred annuities, the board will enter into a tax deferred annuity contract when five or more eligible employees request a contract with a company of the employee’s choice.

    The superintendent or designee is directed to create a tax deferred annuity program at the request of five or more eligible employees.  Procedures shall address: 

    1. Employee responsibilities for carrying out the deferred annuity program.

    2. How and when employees can be contacted by representatives of the companies that comply with all of the requirements set forth in the administrative procedures.

    3. The assurance that the school district shall be held harmless for any actions occurring after the authorized funds have been disbursed to the company designated by the employee.

    4. The employee’s responsibility for determining that the disbursement does not exceed the limits set forth in applicable law.

    Legal References: 
    RCW 28A.400.250         Tax deferred annuities

    ADOPTED: 05/27/1999

    Procedure No. 6001P Tax Deferred Annuity/Compensation

    Eligible employees may elect to defer a portion of their salary or wages to pay for a tax deferred annuity. Eligible employees may make their deferral arrangements with any district authorized insurance company or mutual fund (both hereinafter referred to as “Service Provider”).  A Service Provider may be authorized if five or more eligible employees request the district to enter into a contract with an insurance company offering a tax deferred annuity contract and licensed to do business in the State of Washington or a mutual fund that provides custodial contracts for tax deferred annuity programs, and complies with all district policies and procedures. The following are procedures pertaining to staff participation, hold harmless agreements, and sales representation contacts: 

    1. The district will initiate salary reductions when five salary reduction agreement forms have been submitted for a Service Provider, and an authorized officer of the Service Provider has signed and submitted the district’s Hold Harmless and Indemnity Agreement and a Tax Sheltered Annuity Company Basic Information Form. Only the district’s specific Hold Harmless and Indemnity Agreement will be acceptable. Failure to execute the district’s Hold Harmless and Indemnity Agreement will be sufficient grounds for denial or dismissal of the Service Provider as an approved Service Provider.  In the event that the district has employees participating in a plan with a Service Provider that will not sign a district Hold Harmless and Indemnity Agreement, the district will not allow additional employees to participate in the plan offered by the Service Provider until the Service Provider signs the district’s Hold Harmless and Indemnity Agreement and meets all of the requirements of this administrative procedure.  It is the responsibility of the employees requesting approval of a Service Provider to provide the district with the documents required by this procedure.

    2. An eligible district employee, or an agent, registered representative, or registered investment advisor may request a tax deferred annuity authorization form (salary reduction agreement) from the district payroll office. The employee and the Service Provider, or an agent registered representative, or registered investment advisor shall complete and sign the salary reduction agreement.  Only the district’s salary reduction agreement will be accepted. No substitutions will be accepted. In the case of a 403(b) tax sheltered annuity from an insurance company, the salary reduction agreement must be signed by the employee and an authorized and licensed agent of the company or registered investment advisor. The agent, registered representative, or registered investment advisor, must register with the district by completing a Representative Profile, providing a copy of their current Washington State Insurance license (if applicable) and submitting a Hold Harmless and Indemnity Agreement for Agents and Registered Representatives/Registered Investment Advisors.

    3. The salary reduction agreement will remain in force until modified or cancelled by the employee or employment has terminated.  Payroll reductions will not be made if there are insufficient earnings to make a complete reduction.

    4. Service Providers, their agents, registered representatives and registered investment advisors must comply with all pertinent written directives regarding the solicitation of employees. Solicitation of employees conducted on school premises during scheduled work hours is not permitted. Presentations before and after normal school hours may be given only if approved by the building Administrator. Tax deferred program literature may be disbursed via intraschool mail from the payroll office the first of each calendar quarter.

    5. In the event that participation in a program offered by a Service Provider drops below 5 participants, the district will notify the Service Provider that participation must be at least five participants within a six month period or the Service Provider will be dropped from the district’s approved Service Provider list. Once a Service Provider has been dropped from the approved list, the Service Provider will be required to meet all the qualifications of a new Service Provider in order to add new participants.  This procedure does not affect participants currently contributing to a plan with the Service Provider.  Current participants will continue to have all rights and options provided under the plan.

    6. An Employee must submit a Maximum Allowable Contribution worksheet with each salary reduction agreement. In addition, a Maximum Allowable Contribution worksheet must be submitted annually if the employee’s contribution for a calendar year is equal to or greater than $10,000 (or applicable limit) or if the employee has elected a special 415 Election or is using a “catch-up” provision.  The required annual Maximum Allowable Contribution worksheet must be submitted to the district by November 1 of the calendar year in which the above circumstances apply.  In the event the Maximum Allowable Contribution Worksheet is not in the district office by the deadline for payroll changes in January of the following year, the district will stop contributions until the employee submits the Maximum Allowable Contribution worksheet.  The accuracy of the Maximum Allowable Contribution worksheet must be certified by the employee and a Service Provider, agent, registered representative, or registered investment advisor.  The district will assume no responsibility for verifying or certifying the accuracy of the Maximum Allowable Contribution worksheet.

    ADOPTED: 05/27/99

6000 Policies