Current Pension Topics
Tradespeople Should Swap

By JOEL L. FRANK

For decades the skilled-tradespeople employed by the City University of New York have been offered only a high-priced (fees and commissions) 403(b) annuity/investment. This group is paid on a "state payroll," so allowing them to join the city's 457(b) plan was not in the cards.

Mr. Frank is a fee-only Retirement Financial Planner. He can be reached by telephone at (732) 536-9472, or via e-mail at rollover@optonline.net .

Having said that, these employees have at long last been rescued from this 403(b) shark attack perpetrated by the Metropolitan Life Insurance Company at the behest of CUNY. The rescue comes in the form of an invitation to join the New York State Deferred Compensation Plan. All of you should join as soon as possible and be sure to stop your 403(b) contributions to Metropolitan Life at the same time.

Having said that, there are a few issues that need to be addressed. I will tend to them in Q. & A. format.

Q.: I am younger than 59-1/2 and still employed by CUNY. How do I treat my current 403(b) balance with Metropolitan?

A.: Utilize Revenue Ruling 90-24 as soon as possible. The ruling allows you to transfer tax-free your 403(b) account balance with Metropolitan to another 403(b) investment. I recommend The Vanguard Group for this purpose. Call them at 1-800-662-CREW. Tell the rep that you want to effectuate a Revenue Ruling 90-24 transfer of your current 403(b) to a 403(b) investment with Vanguard.

The ruling compels you to transfer 403b funds to only another 403(b) investment. Under the ruling, you may not transfer 403(b) funds to any other type of pre-tax retirement account; i.e. IRA, 457(b), 401(k).

Invest all of the transferred money in the appropriate Target Date fund offered by Vanguard.

Q.: I am older than 59-1/2 and still employed by CUNY. How do I treat my current 403(b) balance with Metropolitan?

A.: Roll over (not a transfer) your 403(b) balance to the New York State Deferred Compensation Plan. The Plan Administrator can assist you with the steps involved. You may also roll your funds over to an IRA. Use Vanguard for this purpose. In either case invest all the transferred money in the appropriate Target Date fund.

Q.: I am retired/severed employment with CUNY and younger than 59-1/2. How do I treat my current 403(b) balance with Metropolitan?

A.: If they accept it, roll over (not a transfer) your 403(b) balance to the NYSDCP. If they do not accept it, roll over the balance to an IRA with Vanguard. In either case, invest all funds in the appropriate Target Date fund.

Q.: I am retired/severed employment with CUNY and older than 59-1/2. How do I treat my current 403(b) balance with Metropolitan?

A.: If they accept it, roll over (not a transfer) your 403(b) balance to the New York State Deferred Compensation Plan. If they do not accept it, roll over the balance to an IRA with Vanguard. In either case, invest all transferred money in the appropriate Target Date fund.

Alert: Final 403(b) Regulations were issued by the Internal Revenue Service on July 23. As part of these new regulations, tax-free capital transfers between 403(b) investments, authorized pursuant to Revenue Ruling 90-24, will no longer be permitted after Sept. 24.

Besides the skilled trades at CUNY, there are thousands more of you who have been fleeced by other high-priced and inferior 403(b) programs over the years. Among them are: UFT/TRS, NYSUT/ING, HHC/Prudential, Board of Education/Prudential. So if you see the obvious benefits of having your 403(b) investment run by a different, low-cost financial services firm, you have until Sept. 24, to transfer your investment to the firm of your choice. If you are still dissatisfied with your 403(b) investment after that date, you'll have no one to blame but yourself.

If you are unsure of whether you will benefit from a Revenue Ruling 90-24 capital transfer and would like my opinion, please call me immediately. Please alert your family, friends and colleagues to this very important financial planning news.