fica alternative plan

[Guest rubaiyat]

what is a fica alternative plan? My friend is a substitute teacher for a school board and she has a fica alternative plan. If she is unhappy with the results can she use a 90-24 transfer to another 403b?

[Carol V. Calhoun]

In states which have not elected in to Social Security, employees of state and local governments must nevertheless be covered by Social Security unless the employees are covered by a retirement plan that meets certain requirements ("FICA alternative plan"). Treas. Reg. § 31.3121(b)(7)-2 gives the details. So long as certain minimum benefit, etc., requirements are met, the plan can be any type of retirement plan -- 401(a), 403(b), 457, etc. The rules which would apply to a FICA alternative plan, once the money was in it, would be identical to that of any other plan of a similar type. Thus, for example, a FICA alternative 403(b) plan could make a 90-24 transfer, if one was otherwise available, but a FICA alternative 401(a) plan could not.

Also, you have to look at the specific terms of the plan and contract involved. Rev. Rul. 90-24 merely governs the tax consequences of a transfer, if one is permitted. However, the plan document, applicable state or local law, or the contract involved may prohibit such transfers.

[Guest rubaiyat]

If permanent teachers were allowed a 90-24 transfer in their 403b plan would it be the same for the substitute's alternative plan or would they have different rules? Would I call the plan administrator or the company who runs the plan? To learn about the 90-24 transfer for my plan, I had to call and call and then each person had different answers! This is in Florida.

[Carol V. Calhoun]

The rules could be the same or different, depending on the plan document. Most commonly they are the same, but unfortunately, you really have to check.