State Retirement System Sponsoring 403(b) Plan

[Guest mozak@mindspring.com]

May a state retirement plan sponsor a 403(b) for eligible education employees of local school districts. Since such employees are not employed by the state, but by the local school district, could a state retirement system be considered an eligible employer in order to offer a 403(b) plan to such employees?

[Peter Gulia]

While a State retirement system won’t be the public-schools employee’s “employer” for § 403(b) purposes, it’s possible for a contract issued under a plan that was established on or before May 17, 1982 and that meets several other conditions to continue as a permitted § 403(b) investment. If all of the transition-rule conditions are met, such a contract may continue to cover those participants covered on May 17, 1982, including “an employee who becomes covered for the first time under the plan after May 17, 1982[.]” Treasury Reg. § 1.403(b)-8©(3). For citations to, and explanations about, the 1960s rulings on these plans, see Q 5:19B in the current supplement of 403(b) Answer Book (Aspen Publishers).

[joel]

The 403(b) Plan of the Teachers' Retirement System of the City of New York is such a plan. Can it open its doors to other school districts in the State of New York?