joel

Belgarath: Have your parents annuitized their annuity or are they still in the accumulation phase?

Take Andy's advice and run do not walk away from this broker who is simply interested in selling and not advising. People should not be taken in by the brokerage desk at their friendly bank. They are nothing more than commissioned salespeople are are "advising" you to invest in those products that give them a commission. If you need an annuity and that is a big if you can get one without paying a commission.

getaxa: Could you please describe the type/kind of annuity that would not be in violation of Section 9003.7?

I thought it would be instructive to post the Rule ===================================================== "9003.7 Precluded investments. No contract or agreement entered into with a financial organization may provide for the investment of any amounts under a plan in any annuity contract providing for a term which could exceed five years or which is measured by one or more natural lives or any life insurance or other contract providing traditional death benefits."

Marie---you might want to get a headsup on the Proposed 403(b) regs.

AGREED! ESPECIALLY WHEN IT COMES TO THE 403(b) SALARY REDUCTION PLANS. The picture is not as bleak in the 457(b) arena. NY has two outstanding plans, the State's 457(b) Plan and the one operated by the City for its employees. These are low cost programs. The City's is particularly noteworthy inasmuch as it has coverted from a mutual funds platform to Separately Managed Accounts. This conversion resulted in a weighted average expense ratio including administration and recordkeeping of 0.34 basis points. Unlike the State, the City was not sleeping at the wheel during the time when governments could establish 401(k) plans. So City employees have both to choose from and may, as you know, max out on both. The City's Deferred Compensation Board manages both plans. Happy New Year, Joel

George, Thank you for the kind words and it's always too early in the year for confrontation. I just did not get the gist of what you were saying. My goal is to have public employers step up to the plate and offer low cost plans. These low cost arrangements should not be much more expensive than what it costs to operate a PERS on a per capita basis. The letter from the NYS Deferred Compensation Board confirms my suspicion that there are some unethical commissioned operators out there in NY attempting to market their expensive variable annuity wrappers to the unsuspecting sponsor and its employees. There is no reason why any public jurisdiction in NY should put up with these solicitations when the Deferred Compensation Board has made the State's Plan available to local employers. Peace and Hope, Joel L. Frank

What is the 2005 maximum contribution (employee and employer combined) for a 457(b) governmental plan?

George, With all due respect please rephrase your reaction to the letter. Thanks, Joel

Even the law does not stop these sharks from marketing their products. ===================================================== NYS DEFERRED LINDA ANGELLO COMPENSATION FREDERICK J. JACOBS BOARD MARY LOUISE MALLICK www.nysdcp.com December 7, 2004 «Name» «Locality» «Address1» «Address2» «City», «State» «PostalCode» Dear «Salutation»: The purpose of this letter is to reiterate requirements of the Rules and Regulations of the New York State Deferred Compensation Board (the “Rules”) and of the Plan document for Model Deferred Compensation Plans (the “Model Plan Document”) that preclude certain annuity contracts and set forth acceptable methods for distributing plan benefits to participants. Precluded Investments (Certain Annuity Contracts) As you are aware, the Rules set forth basic requirements for establishing and operating a deferred compensation plan. Although compliance is required, recent inquiries from plan sponsors and service providers have indicated a less than complete understanding of Rules that pertain to annuity contracts as precluded investments. For this reason, these basic rules are summarized below: · A plan may not provide for the investment of assets in an annuity contract providing for a term which could exceed five years or which is measured by one or more natural lives or any life insurance or other contract providing traditional death benefits (Section 9003.7) · Contracts of any description may not exceed five (5) years in duration in most circumstances and in exceptional circumstances may be extended for a maximum of two consecutive one (1)-year periods by a vote duly taken (Section 9003.5). Model Plan Document Criteria for Distributing Plan Benefits Section 7 of the Model Plan Document sets forth criteria that govern the distribution of plan benefits to participants who have severed from employment or have attained age 70½. These criteria are summarized below: · Plan benefits must be paid from the plan trust (Section 7.1). · Permissible distribution options include lump sum payments, periodic payments (monthly, quarterly, semiannual, annual) or partial lump sum payments (Section 7.3). · The portion of a participant’s account not necessary for a current benefit payment shall continue to participate in the investment performance of the selected investment fund(s) (Section 7.3 ©). NEW YORK STATE DEFERRED COMPENSATION BOARD ROOM 124, EMPIRE STATE PLAZA CONCOURSE – NORTH P.O. BOX 2103 ALBANY, NY 12220-2103 (518) 473-6619 Fax: (518) 473-7255 «Name» Page 2 December 7, 2004 Model Plan Document Criteria for Distributing Plan Benefits (cont.) · A participant must be permitted to change both the timing and form of the benefit payment option they have previously chosen (Section 7.4 (a)). · If a participant dies prior to receiving the full amount of his or her plan benefit, the remaining assets will be paid to the beneficiary (Section 7.2). An annuity contract that guarantees a benefit payment over the life of the participant or the life of the participant and a beneficiary is not in conformance with the Model Plan Document and, therefore, is precluded as a distribution option. Conclusion As you are aware, by operating a Model Plan fully compliant with the Rules and the Model Plan Document, you are offering an important and valued benefit to your employees. Plan service providers share in the responsibility for ensuring that your plan is in compliance with the Rules and the Model Plan Document, both of which may be obtained from the New York State Deferred Compensation Plan’s Web site (www.nysdcp.com) or from this office. If you have questions regarding this letter or the requirements of the Rules and the Model Plan Document, please contact me or Edward J. Lilly, Deputy Executive Director, at (518) 473-6619. Very truly yours, Julian M. Regan Executive Director JMR:st

George, I never doubted mb's assertion that he knows of municipalities in NY that use annuitites for their 457 plans. He then went on to attempt to prove that the law allows it when it clearly does not. So the question now is did these local governments receive an exemption? In your view what would be grounds for an exemption? Joel

I disagree becausse the reg 9001.2(a) specifically permit an employer to establish a 457 plan under one of three options including a separate plan that complies with IRC 457and there are municiipal employers who have annuities in their 457 plan. ===================================================== MB: C'mon give us a break! All of the plans must comply with section 457(b) THIS IS A GIVEN. While 457 does permit annuities as funding vehicles NYS law does not! NYS law controls. The language is quite clear. Those muncipalities that offer annuities as funding mediums for their 457 plans are violating state law.

8. a. The term "financial organization" shall mean an organization authorized to do business in the state of New York and (A) which is an authorized fiduciary to act as a trustee pursuant to the provisions of an act of congress entitled "Employee Retirement Income Security Act of 1974" as such provisions may be amended from time to time, or an insurance company; and (B) (i) is licensed or chartered by the state insurance department, (ii) is licensed or chartered by the state banking department, (iii) is chartered by an agency of the federal government, (iv) is subject to the jurisdiction and regulation of the securities and exchange commission of the federal government, or (v) is any other entity otherwise authorized to act in this state as a trustee pursuant to the provisions of an act of congress entitled "Employee Retirement Income Security Act of 1974" as such provisions may be amended from time to time. ================================================ This section has nothing do do with funding mediums but everything to do with fiduciary qualifications.

Section 9000.1 Scope. This Subtitle applies to every deferred compensation plan established by the board or any local employer pursuant to section 5 of the State Finance Law. This means that section 9003.7 prohibition of annuities as a funding medium applies not only to the 457(b) plan operated by the state government of NY but to 457(b) plans operated by local governments of the state of NY.

Reg 9000.1 states that the rules of the Board apply to a 457 plan established by any municipal employer under sect 5 of the NYS finance law. ==================================================== And rule 9003.7 states: 9003.7 Precluded investments. No contract or agreement entered into with a financial organization may provide for the investment of any amounts under a plan in any annuity contract providing for a term which could exceed five years or which is measured by one or more natural lives or any life insurance or other contract providing traditional death benefits.

You are a strange character inasmuch as you tell me you don't know and you don't care and then come back and pose a question. I elect not to discuss this topic with you because I am of the opinion you are mean spirited.

Posted on Dec 23 2004, 01:32 PM I know of 457 plans established by municipal govts that are funded with VAs so I dont know what the reg prohibits. ===================================================== It prohibits VAs as funding mediums...it would not be the first time a municipal government violated state law.

Are these local governments in NY?

Tomorrow, Wall Street Week will be interviewing Ted Siedle. He will be disclosing the shark like fees associated with investing in DC plans.

Tomorrow on Wall Street Week Ted Siedle will be discussing the shark like fees associated with 403(b) investing

Ted Siedle will be on Wall Street week tomorrow. He will be disclosing the shark like fees associated with 403(b) investing.

For those of us who do care: Section 9001.1 Application; Incorporation by Reference. (a) This Subtitle shall be interpreted and applied so that any plan established hereunder shall be an eligible deferred compensation plan under section 457 of the Internal Revenue Code.

I don't know, and I don't care. ======================================== Pax: Are you feeling ok?

9003.7 Precluded investments. No contract or agreement entered into with a financial organization may provide for the investment of any amounts under a plan........

mb, Here is the citation Joel ---------------------------------------------------------------------------------------------- NY State Finance Law, § 5; L. 1982, ch. 547) Sec. Sec. 9003.1 Contracts or agreements 9003.5 Miscellaneous requirements 9003.2 Competitive proposals 9003.6 Acknowledgment 9003.3 Criteria for selection 9003.7 Precluded investments 9003.4 Provision of diverse investments 9003.8 Transfer of assets 9003.7 Precluded investments. No contract or agreement entered into with a financial organization may provide for the investment of any amounts under a plan in any annuity contract providing for a term which could exceed five years or which is measured by one or more natural lives or any life insurance or other contract providing traditional death benefits.