Sponsored by:
Senator RAJ MUKHERJI
District 32 (Hudson)
Senator VIN GOPAL
District 11 (Monmouth)
SYNOPSIS
Requires certain boards of education to select minimum number of financial institutions or pension management organizations to provide tax sheltered annuity plans.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning retirement plan options for school district employees and supplementing chapter 66 of Title 18A of the New Jersey Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. a. (1) The board of education of a school district, which offers a 403(b) plan to eligible school district employees pursuant to section 403(b) of the federal Internal Revenue Code of 1986 (26 U.S.C. s.403(b)), shall select a minimum of six financial institutions or pension management organizations to provide investment services to the 403(b) plan. The board of education shall ensure that, in selecting financial institutions or pension management organizations pursuant to this section, eligible school district employees are provided sufficient opportunities to invest in annuity contracts, as authorized pursuant to section 403(b)(1) of the federal Internal Revenue Code of 1986 (26 U.S.C. s.403(b)(1)), or custodial accounts, as authorized pursuant to section 403(b)(7) of the federal Internal Revenue Code of 1986 (26 U.S.C. s.403(b)(7)). The board shall also ensure that employees are offered self-directed investment options. If fewer than six financial institutions or pension management organizations are determined to be available, then the board of education shall select the number of available providers able to meet the requirements of this section.
(2) Notwithstanding the provisions of paragraph (1) of this subsection to the contrary, the board of education of a school district with a student enrollment of less than 1,000 students, which offers a 403(b) plan to eligible school district employees, may select fewer than six financial institutions or pension management organizations to provide investment services to the 403(b) plan; provided, however, that the board shall ensure that, in selecting the financial institutions or pension management organizations, eligible school district employees are provided sufficient opportunities to invest in annuity contracts or custodial accounts and that the employees are offered self-directed investment options.
(3) The selection of financial institutions or pension management organizations pursuant to this section shall be a mandatory subject of collective negotiations between a board of education, which offers a 403(b) plan to eligible school district employees, and an applicable collective bargaining unit in accordance with section 2 of this act.
b. A financial institution or pension management organization selected by a board of education pursuant to subsection a. of this section shall not also be selected as a third party administrator for a 403(b) plan offered by the board.
c. A financial institution or pension management organization selected to provide services to a board of education pursuant to subsection a. of this section shall:
(1) enter into an agreement with the board of education requiring the financial institution or pension management organization to provide in an electronic format all data necessary to evaluate the investment of 403(b) plan funds as determined by the board of education; and
(2) provide all data required by the board of education to facilitate disclosure of all fees, charges, expenses, commissions, compensation, and payments to third parties related to investments offered under the 403(b) plan.
d. A board of education and the majority representative of the employees in an applicable collective bargaining unit shall not be responsible for:
(1) any investment loss incurred under the 403(b) plan;
(2) the failure of any investment to earn any specific or expected return; and
(3) the failure of any investment to earn as much as any other investment opportunity or to cost less than any other investment opportunity, regardless of whether the other opportunity was offered to participants in the 403(b) plan.
2. The following shall be mandatory subjects of collective negotiations between a board of education, which offers a 403(b) plan to eligible school district employees pursuant to section 403(b) of the federal Internal Revenue Code (26 U.S.C. s.403(b)), and an applicable collective bargaining unit:
a. the selection of financial institutions or pension management organizations to provide services to the 403(b) plan in accordance with section 1 of this act; and
b. the ability of an eligible school district employee to deposit supplemental compensation for accumulated unused sick leave, not to exceed the maximum amount of supplemental compensation permitted pursuant to section 3 of P.L.2010, c.3 (C.18A:30-3.6) as applicable, into a 403(b) plan account.
3. This act shall take effect immediately.
STATEMENT
This bill requires the board of education of a school district, which offers a 403(b) plan to eligible school district employees, to select a minimum of six financial institutions or pension management organizations to provide investment services to the 403(b) plan. Under the bill, the board of education of a school district with a student enrollment of less than 1,000 students may select fewer than six financial institutions or pension management organizations to provide investment services to the 403(b) plan.
A 403(b) plan, also referred to as a tax-sheltered annuity plan, is a type of defined contribution plan sponsored by public educational organizations. Under a 403(b) plan, employees may defer some of their salary, either on a pre-tax or after-tax basis, for deposit into individual accounts that can provide a source of income in retirement.
In selecting financial institutions or pension management organizations under the bill, a board of education is to ensure that eligible school district employees are provided sufficient opportunities to invest in annuity contracts, which are generally investment options provided by an insurance company, or custodial accounts, in which moneys are invested in mutual funds. The board is also required to ensure that employees are offered self-directed investment options. The selection of financial institutions or pension management organizations under the bill is required to be a mandatory subject of collective negotiations between a board of education and an applicable collective bargaining unit.
A financial institution or pension management organization that provides services to the 403(b) plan under the bill is required to provide certain data related to the investment of 403(b) plan funds and the fees, charges, expenses, commissions, compensation, and payments to third parties related to investments offered under the plan. The bill provides that a board of education and the majority representative of an applicable collective bargaining unit is not responsible for any investment loss or failure of an investment to earn any specific return for the services provided by the selected financial institutions or pension management organizations providing investment services to the 403(b) plan.
Lastly, the bill stipulates that the ability of an eligible school district employee to deposit supplemental compensation for accumulated unused sick leave into a 403(b) plan account is to be a mandatory subject of collective negotiations.