MetLife Resources (MLR) Certification Training

Transcription

1 MetLife Resources (MLR) Certification Training MetLife Resources Sales Support / MLRSalesSupport@MetLife.com For Use Only by Former MPCG Advisors Who Have Transitioned to MassMutual Updated September 2017

2 Table of Contents MetLife Resources Overview Importance of MLR Certification Training MLR Business Overview 403(b) Plans Tax Sheltered Annuities (TSAs) ERISA 403(b) Regulations 457(b) Plans 401(a) and 401(k) Plans 403(a) Plans State Specific Retirement Plans Maximum Allowable Contributions (MAC) Calculations Thank You and Next Steps 2

3 MetLife Resources Overview MetLife Resources (MLR) is a division of Metropolitan Life Insurance Company (MetLife) that specializes in providing retirement plan products and services to healthcare, educational, governmental and other not-for-profit employers and their employees Each of these employer groups is allowed to sponsor a retirement plan for its employees participation under one or more Internal Revenue Code sections 403(b), 457(b),401(a), and 403(a) State-specific Retirement Plans Optional Retirement Program (ORP) Public Employee Retirement Association (PERA) 3

4 MetLife Resources Certification Training Why is MLR Certification Training Important? Exclusively available to former MPCG advisors who have transitioned to MassMutual Provides the advisor with knowledge to market to new participants and service existing participants in existing MLR groups (excluding ERISA and their affiliated non-erisa groups) in the not-for-profit marketplace. MLR Certification training is recommended before marketing within an MLR group. Provides the advisor with knowledge to understand how 403(b)Tax Sheltered Annuities (TSAs) and Deferred Compensation Plans (DCP) operate and the tax advantages of each Provides the advisor with knowledge to understand the retirement benefits by learning the key provisions, and understand the tax code provisions that regulate payroll contributions to qualified plans 4

5 MLR Business Overview Distribution 403(b) 457(b) 401(a) 403(a) Markets Former MetLife Premier Client Group (MPCG) Advisors who have transitioned to MassMutual* Selected Third Party Brokers (on a grandfathered, exception basis only) MetLife and Brighthouse Products Sold in Existing MLR Plans Fixed Annuities Variable Annuities Mutual Fund Platform with fixed account options Plan Sponsors Education Healthcare Charitable Organizations Government Other Not-For-Profits Churches MetLife Resources Participants Teachers School Employees College Professors Doctors & Nurses Employees of Not-For-Profit Organizations and churches *Note that as of 4/10/2017, former MPCG advisors who have transitioned to MassMutual may no longer sell/service ERISA 403(b) groups and their affiliated non-erisa groups. (This change does NOT impact existing brokers from other broker dealers.) 5

6 MLR Knowledge Check Question 1 of 1 Select all that apply. Which of the following include MetLife Resources primary plan sponsors? Healthcare Sports Agencies For-Profit Organizations Education 6

7 MLR Knowledge Check - Answer Select all that apply. Which of the following include MetLife Resources primary plan sponsors? Healthcare Sports Agencies For-Profit Organizations Education 7

8 403(b) plans Tax Sheltered Annuities (TSAs) A tax-advantaged, defined contribution, retirement savings plan, sometimes called a taxsheltered annuity, available for public education organizations, institutions of higher education, some not-for-profit employers (only 501(c)(3) organizations), cooperative hospital service organizations and self-employed ministers in the United States May be subject to ERISA. 403(b) plans are either considered ERISA or non-erisa Employee contributions, which are payroll deducted into a 403(b) plan, are generally made on a pre-tax basis and are allowed to grow tax deferred; Withdrawals from the plan are taxed as ordinary income 403(b) plans are funded with annuity contracts and/or a mutual fund platform Roth contributions may be allowed and are taxable subject to certain requirements; Earnings on Roth contributions that meet certain requirements are not subject to Federal income tax* Some plans provide for employer match and/or non-match contributions on behalf of plan participants FICA taxes are currently withheld from salary reduction contributions to the 403(b) *Subject to certain requirements as state tax treatment varies 8

9 Section 403(b) Section 403(b) of the tax code permits employees of public educational organizations and Section 501(c)(3) nonprofit organizations to purchase an annuity contract and, subject to certain limitations, exclude the amount of the contributions from gross income for income tax purposes or, otherwise, pay tax and allocate the amount to a Roth account. A 403(b) annuity is normally funded by payroll deductions: Employee authorizes the employer to reduce his/her salary by a specified amount to contribute to a 403(b) Employer forwards this amount to an insurance company to fund a 403(b) on behalf of the employee No federal income taxes are currently withheld on the portion of salary contributed to the 403(b) and it is excluded from the employee s gross income for federal and most state income tax purposes, (except in the case of designated Roth contributions). However, FICA taxes are currently withheld from the portion of salary contributed to the 403(b). 9

10 Section 403(b) Each employee who wishes to participate in a 403(b) generally must submit a salary reduction agreement (SRA) (also referred to as an amendment to employment contract ) to the employer specifying the amount by which the employee s salary is to be reduced. Some 403(b) plans have automatic enrollment features that automatically begin salary reduction contributions when employees become eligible to participate, unless the participant affirmatively opts out. These automatic enrollment plans are also known as negative election plans. The tax code limits the amount each employee can contribute to a 403(b) plan. This amount depends on a number of factors and should be determined annually for each employee using a formula that complies with applicable tax requirements. More details on this will be discussed later in the section on Maximum Allowable Contributions. 10

11 What is ERISA? ERISA, (The Employee Retirement Income Security Act of 1974) is a federal law that sets standards for pension plans in private industry. It is intended to protect the retirement plan assets of participants by imposing certain requirements. Effective 4/10/2017, MetLife s ERISA plans (and ERISA-affiliated plans) may not be serviced by former MPCG advisors who have transitioned to MassMutual. A 403(b) plan may not be subject to ERISA requirements if it does not provide for any employer contributions (e.g. matching contributions) and the employer has a very limited role administering the plan. This determination is based on the particular facts and circumstances and should be made by the plan sponsor (not MetLife) in consultation with their own counsel. ERISA does not require any employer to establish a benefit plan, however for those that do, they must meet certain minimum standards as stated below: Requires plans to provide participants regularly and automatically with important plan information such as its features and funding Sets minimum standards for participation, vesting, claims processing, benefit accrual and funding. The law defines how long a person is required to work before becoming eligible to participate in a plan, accumulate benefits and have a non-forfeitable right to those benefits. In addition, plan sponsors are required to provide adequate funding for the plan Requires accountability of plan fiduciaries. ERISA defines a fiduciary as anyone exercising discretionary authority or control over a plan s management or assets, as well as anyone providing investment advice to the plan. Fiduciaries may be liable for restoring any losses for which they are responsible Gives participants the right to sue for benefits and breaches of fiduciary duty Guarantees payment of certain pension plan benefits through a federally chartered corporation, known as Pension Benefit Guaranty corporation, (PBGC). PBGC coverage generally does not apply to MLR customers plans. Government plans are never subject to ERISA 11

12 ERISA Considerations Some of the challenges that exist for tax-exempt nongovernmental employers are covered by Department of Labor (DOL) FAB and other recent DOL guidance DOL Fee Disclosure Regulations Require plan service providers to disclose fees and revenue information to assist plan sponsors in fulfilling obligations under ERISA rules (Plan-Level Fee Disclosures or "408(b)(2) regulations") Require plan sponsors to deliver disclosures and investment information to eligible employees, participant and beneficiaries (Participant-Level Fee Disclosure Requirements) Substantial liability may result from failing to comply with ERISA when a 403(b) plan is actually covered by ERISA Note that 403(b) plans not covered by ERISA may be subject to requirements similar to ERISA by applicable state law Employers should consult with their own tax and legal advisers ERISA plans are subject to 5500 reporting and annual audits 12

13 403(b) Plans Self-Study Click here to learn about the following topics related to 403(b) plans: Charges and Fees Withdrawals Hardships Taxation of Withdrawals/Distributions Loans 13

14 403(b) Retirement Benefits A 403(b) annuity contract may be annuitized at any time after becoming eligible for distribution There are 2 periods to an annuity; pay in (accumulation) and payout (annuitization) Until a 403(b) account is annuitized, required minimum distribution rules generally require taxable amounts begin to be distributed by April 1 of the year following the year the employee turns age 70½, or retires, whichever is later (participant should consult with tax and legal advisers) For example, when a participant turns age 70½ (or, if later, retires) in 2017, he or she must withdraw a required minimum distribution amount for the year However, you have until April 1, 2018 to actually receive the 2017 distribution. He or she then must take the distribution for year 2018 by December 31, Subsequent distributions must be taken by December 31 each year. Should a participant delay the first distribution until the year after turning 70 ½, he or she will be taxed on two distributions in the same year. The annual required distribution amount is calculated based on life expectancy tables provided by the IRS A federal tax penalty of 50% will apply to any required distribution amounts that are not taken Distributions can be made in one lump sum or at periodic intervals, including as annuity payments, depending on plan terms Income taxes are payable in the year a taxable distribution is received 14

15 403(b) Payout Options Other Than Lump Sum Life income Provides income payments during lifetime of annuitant. Upon death of annuitant there are no payments to beneficiary Life Income with Period Certain Provides income payments for period certain elected (5, 10, 15 or 20 years) or lifetime of annuitant, whichever is longer. If annuitant death occurs prior to end of elected period, beneficiary will receive payments for remainder of period certain. Beneficiary may not take remaining monies in lump sum Joint and Survivor Annuity Provides income payments for lifetime of two annuitants. Upon death of either annuitant, income continues to survivor for his/her lifetime. Payments to survivor may continue at the same amount or can be a reduced amount of two thirds or one half. Income for a Specified Period (AKA Income for a Designated Period or Period Certain Provides income payments for a selected period of time. Periods available are usually 3 to 30 years; This is a popular option because it allows the annuitant to individually customize distributions in the time period suited for his/her retirement needs 15

16 403(b) Knowledge Check Question 1 of 5 Select the best answer. Any of the following fees/charges may be assessed against a Tax-Sheltered Annuity except: Administrative fee Separate account charge Surrender charge State sales charge 16

17 403(b) Knowledge Check Answer Select the best answer. Any of the following fees/charges may be assessed against a Tax-Sheltered Annuity except: Administrative fee Separate account charge Surrender charge State sales charge 17

18 403(b) Knowledge Check Question 2 of 5 Select the best answer. How long does a participant have to pay back a loan that was not used to acquire his principal residence: 2 years Before retiring or severing employment 10 years 5 years 18

19 403(b) Knowledge Check Answer Select the best answer. How long does a participant have to pay back a loan that was not used to acquire his principal residence: 2 years Before retiring or severing employment 10 years 5 years 19

20 403(b) Knowledge Check Question 3 of 5 Select the best answer. Generally, required minimum distributions for a Tax-Sheltered Annuity must begin by April 1 st of what year? The year following the year in which the employee turns 70 ½ The year following the year in which the employee retires or turns 55, whichever is later The year following the year in which the employee turns 70 ½ or retires, whichever is later 20

21 403(b) Knowledge Check Answer Select the best answer. Generally, required minimum distributions for a Tax-Sheltered Annuity must begin by April 1 st of what year? The year following the year in which the employee turns 70 ½ The year following the year in which the employee retires or turns 55, whichever is later The year following the year in which the employee turns 70 ½ or retires, whichever is later 21

22 403 (b) Knowledge Check Question 4 of 5 Select the best answer. After taking a hardship withdrawal from her TSA, for what length of time will the client generally be prohibited from making salary reduction contributions to her TSA? 1 year 6 months 2 years She can make contributions immediately 22

23 403(b) Knowledge Check Answer Select the best answer. After taking a hardship withdrawal from her TSA, for what length of time will the client generally be prohibited from making salary reduction contributions to her TSA? 1 year 6 months 2 years She can make contributions immediately 23

24 403(b) Knowledge Check Question 5 of 5 True or False: Exchanges can be made between 403(b) and 401(a) plans. True False 24

25 403(b) Knowledge Check Answer True or False: Exchanges can be made between 403(b) and 401(a) plans. True False - Exchanges can NOT be made between 403(b) and 401(a) plans 25

26 403(b) Regulations Effective as of January 1, 2009 Any employer that makes a 403(b) plan available to its employees must adhere to certain requirements, including, in most cases, adopting and maintaining a written plan. Subject to certain restrictions, the plan must have been adopted by December 31,2009 The employer must establish and maintain the plan Adopt a written plan document Identify the approved providers that are available as part of the plan Determine employee eligibility and enforce universal availability requirements Determine if the plan will allow employees to effect exchanges and transfers Decide what type of contributions will be permitted, including Roth contributions Decide if the plan will allow employees to take a loan or hardship distribution Ensure contributions are remitted to approved providers in a timely manner For ERISA plans, comply with DOL Plan and Participant-Level Fee Disclosure Regulations, If the employer doesn t operate the plan in accordance with IRS and ERISA guidelines, it can have a severe adverse impact on plan participants and the tax-deferred status of the plan 26

27 403(b) Plans Key Provision: Written Plan Employers can either develop a single written plan document; or compile a series of documents that together constitute the written plan The IRS has released model plan language for public school 403(b) plans. MetLife also offers a specimen plan document. If required to maintain a written plan, the written plan must satisfy the 403(b) requirements in form and operation Written plan must contain all material terms and conditions including: Eligibility Applicable limitations Approved providers under the plan Time and form of distributions Assignment of compliance and administrative responsibility (Third party administrator (TPA), if applicable) Information sharing agreements are needed to maintain the 403(b) status of contracts and accounts that receive exchanges after 9/24/07 if the contract or account is not already part of the employer s plan. 27

28 403(b) Plans Key Provision: Written Plan Con t IRS 403(b) Pre-Approved Plan Document Program What is it? The IRS has established for the first time, a pre-approved 403(b) Plan Document Program (Program) similar to the pre-approved plan document program available for 401(a) and 401(k) plans. What purpose does it serve? The Program is designed to lower the cost and ease administration of 403(b) plans by providing an employer with assurance its written plan document complies with applicable tax code requirements. Are there additional benefits? The IRS has provided remedial amendment relief. By adopting a pre-approved plan by March 31, 2020, an employer with an existing written 403(b) plan document may be eligible to have reliance on the plan document s pre-approved status back to January 1, 2010 or, if later, the effective date of the employer s plan. What steps did MetLife take? MetLife submitted an application to the IRS for approval of its 403(b) plan and received IRS approval in May What will MetLife make available to plan sponsors? The MetLife pre-approved plan document is available to MLR 403(b) clients (subject to plan provisions) regardless of whether they currently use the MetLife specimen 403(b) plan document. What impact does this have on MetLife s existing 403(b) specimen document? Our expectation is that clients will use this opportunity to restate onto the pre-approved document to be able to rely on the IRS opinion letter and to take advantage of the remedial amendment relief. 28

29 403(b) Plans Key Provision: Universal Availability & Effective Opportunity Requirement Significant IRS audit focus Everyone or no one Rule - If the Plan is offered to one employee, it must be offered to all employees 1,000 hour rule - Employees working less than 1000 hours in the prior year may be excluded; Employer will need to keep records of actual hours Subject to certain transitional rules, collectively-bargained groups may no longer be excluded from eligibility to participate Effective opportunity requirement: Employees must be notified at least once per year of the availability to make salary reduction contributions; Plan must keep records of notifications for audit purposes Opportunity at least once per plan year to start or change deferrals Anti-conditioning requirement: A plan can t make participation conditional on another benefit or employer program Note that ERISA provisions may contain more stringent rules 29

30 403(b) Regulations Knowledge Check Question 1 of 2 True or False: Regarding 403(b) plan regulations, an employer may choose to allow employees to make nondeductible Roth contributions True False 30

31 403(b) Regulations Knowledge Check Answer True or False: Regarding 403(b) plan regulations, an employer may choose to allow employees to make nondeductible Roth contributions True False 31

32 403(b) Regulations Knowledge Check Question 2 of 2 Select the best answer. In addition to the required 403(b) plan document, the employer has the option of including which of the following provisions? Loans and hardships Exchanges and rollovers Automatic enrollment All of these 32

33 403(b) Regulations Knowledge Check Answer Select the best answer. In addition to the required 403(b) plan document, the employer has the option of including which of the following provisions? Loans and hardships Exchanges and rollovers Automatic enrollment All of these 33

34 457(b) Plans A 457(b) Plan is an eligible non-qualified, tax deferred compensation plan under section 457(b) of the Internal Revenue Code and a retirement savings plan available to state and local government employers and certain tax exempt non-government 501(c) employers that are not churches Contributions are pre-tax with no Federal income tax paid until distribution, however state income tax may apply. Earnings grow tax deferred until distribution Not generally subject to ERISA (non-government 457(b) plans are subject to certain parts of ERISA) Although 457(b) plans may allow Roth Contributions, MetLife and Brighthouse Financial do not provide this feature for certain products 34

35 457(b) - Plan Ownership The trustee or custodian holds a governmental plan s annuity contract, or custodial accounts for the exclusive benefit of plan participants and their beneficiaries. Assets maintained by a non-governmental tax exempt employer remain the property of the employer. Nongovernmental plans may have a rabbi trust but are not required to. 35

36 457(b) Withdrawals/Distributions Withdrawals from the plan are generally limited to a triggering event such as attaining age 70½, separation from service or for unforeseeable hardship withdrawals. Emergency withdrawals are subject to more stringent requirements than hardship distributions from 403(b) or 401(k) plans; Unlike 403(b) or 401(k) plans, emergency withdrawals from a 457(b) plan do not allow for the purchase of principal residence or college tuition expenses. Taxable distributions are subject to ordinary income taxation, although there is no 10% penalty for withdrawals before age 59½* *Unless attributable to rollovers from a plan subject to the 10% tax penalty. Before taking withdrawals/distributions, participant should consult with tax and legal advisers 36

37 457(b) - Rollovers or Direct Transfers Governmental employers must allow eligible rollover distributions to IRAs, 401(a), 403(a), 403(b), and other governmental 457(b) plans If a plan accepts rollovers/transfers from a non 457(b) plan, it must provide for separate accounting since distribution before the participant reaches the age of 59½ may be subject to a 10% distribution penalty A governmental 457(b) plan may make direct transfers into a defined benefit governmental plan to allow for the purchase of permissive service credit, subject to certain restrictions An eligible retired public safety officer, subject to certain restrictions, may exclude up to $3,000 per year from taxable gross income for amounts that are transferred directly from a governmental 457(b) plan to the provider of accident, health or long term care insurance for the payment of premiums that provide coverage for the retiree, spouse and dependents 37

38 457(b) - Non-Governmental Plan Participation Non-governmental 457(b) plans must be top hat plans maintained primarily for a group of management or highly compensated employees MetLife generally places the burden on employers to determine if a plan qualifies as a top hat plan, as there is no authority that establishes when a plan is too large to be deemed a top hat plan To establish itself as a top hat plan, an employer must file a one-time statement with the U.S. Department of Labor within 120 days of establishment 38

39 457(b) - Non- Governmental Plan Funding A non-governmental 457(b) plan must be unfunded in order to avoid taxation of amounts credited under the plan. Plan assets are not held in trust for employers, but remain the property of the employer Assets cannot be set aside for the exclusive benefits of participants Employee deferrals in non-governmental plans are frequently placed in rabbi trusts. A rabbi trust creates security for employees because the assets within the trust are typically outside the control of the employers and are irrevocable The trust is funded, but the trust assets remain available to creditors. 39

40 457(b) - Loans Loans in 457(b) plans of non-governmental tax exempt employers are not permitted Although 457(b) governmental plans allow for loans, MetLife does not provide administrative services for this feature 40

41 Differences between 457(b) plans of Governmental and Non-Governmental Employers Funding Status of Plan ERISA Title 1 Reporting and Disclosure Requirements Participant Eligibility Participant Investment Direction Catch-up Contributions for Participants 50 and older Incoming rollovers and transfers Benefits Protected from Employer Bankruptcy Benefits Protected from Participant Bankruptcy (IRS claims excluded) Governmental Employer Non-Governmental Employer / Tax-Exempt Employer Assets must be held in a 457(g) trust custodial account or annuity contract for exclusive benefit of participant and beneficiaries Plan must be unfunded. All amounts must remain the property of the employer until made available to participants or beneficiaries. Rabbi trust may be used to protect from employers refusal to pay deferred compensation obligation N/A N/A if one time statement filed with DOL within 120 days of plan establishment. Determined by employer. May be discriminatory Yes, plan permitting Permitted after contribution limit is exceeded; not permitted in three years prior to reaching normal retirement age if catch-up provision is used Plan may agree to accept pre-tax rollovers from other qualified plans such as 401(a), 403(b), IRAs if separate accounting is provided Yes Maybe under state spendthrift trust laws or applicable state statutes Determined by employer; must be limited to select group of management or highly compensated employees Yes, plan permitting investment instruction by participants Not permitted Plan may agree to accept from other nongovernmental plans, subject to IRS 457(b) regulations No Maybe, through state law exemption 41

42 Differences between 457(b) plans of Governmental and Non-Governmental Employers (con t) Governmental Employer Non-Governmental Employer / Tax-Exempt Employer Loans May be permitted (MetLife does not provide) Not permitted Federal Income Tax withholding and reporting of distributions 10% of taxable amount withheld not eligible for rollover to a qualified plan unless participant opts out of withholding or increases withholding percentage. 20% of eligible rollover distributions not rolled over to another qualified plan. Tax Reporting done on IRS Form 1099 Distributions considered wages under 3401(a) subject to income tax withholding. Tax reporting on IRS Form W-2. 10% of taxable amount of distribution withheld to beneficiaries unless non-annuitized distribution, otherwise wage withholding rates apply, unless beneficiary opts out of withholding or increases withholding percentage. Tax Reporting on IRS Form 1099 State Income Tax Withholding and Reporting of Distributions If Federal income tax withheld, some states require withholding Distributions to participants withheld using published state supplemental wage withholding or graduated wage withholding tables Outgoing rollovers and Transfers IRS Premature Distribution Penalty prior to Age 59½ May be permitted to governmental Defined Benefit plans to purchase service credit. Plan must permit eligible rollover distributions to IRAs or other retirement plans. N/A to distributions to regular 457(b) contributions. May apply to taxable portion of distributions rolled into plan from other qualified plans such as 401(a), 403(b), IRAs Designated Roth Accounts Yes (MetLife does not provide) No If Federal income tax withheld, some states require withholding May be permitted to other 457(b) plans, subject to IRS 457(b) requirements N/A 42

43 457(b) Knowledge Check Question 1 of 3 Select the best answer. Generally, in a governmental 457(b) plan, distributions are allowed for all the following reasons except: Severance of employment Unforeseeable emergency as defined by the IRS Retirement Age 59 ½ 43

44 457(b) Knowledge Check Answer Select the best answer. Generally, in a governmental 457(b) plan, distributions are allowed for all the following reasons except: Severance of employment Unforeseeable emergency as defined by the IRS Retirement Age 59 ½ 44

45 457(b) Knowledge Check Question 2 of 3 Select the best answer. What are distributions from 457(b) plans taxed as? Ordinary Income Capital gains if participant was in the plan for over a year Contributions are tax-free, but earnings are taxable as ordinary income Tax-free if used for retirement 45

46 457(b) Knowledge Check Answer Select the best answer. What are distributions from 457(b) plans taxed as? Ordinary Income Capital gains if participant was in the plan for over a year Contributions are tax-free, but earnings are taxable as ordinary income Tax-free if used for retirement 46

47 457(b) Knowledge Check Question 3 of 3 True or False: Loans can be taken against both 457(b) Governmental and 457(b) Non-Governmental plans True False 47

48 457(b) Knowledge Check Answer True or False: Loans can be taken against both 457(b) Governmental and 457(b) Non-Governmental plans True False 48

49 401(a) Money Purchase and 401(k) Plans Retirement plan savings account primarily used by government employers, that enables an employer to offer employees an additional incentive program For a 401(a) plan, the sponsoring employer determines contribution amounts, whether dollar-based or percentagebased, eligibility and vesting schedules; Contributions are allowed by the employee, employer or both Funds are withdrawn from a 401(a) plan through lump-sum payment, rollovers to another qualified plan, or through an annuity 401(k) plans offered by a non-governmental employer may permit participant elective contributions on a Roth, pre-tax or post-tax basis 49

50 401(a) Knowledge Check Question 1 of 1 Select the best answer. Who determines the amount of money that may be contributed, vesting schedules and eligibility requirements for a 401(a) plan? Both employer and employee Employer Employee 50

51 401(a) Knowledge Check Answer Select the best answer. Who determines the amount of money that may be contributed, vesting schedules and eligibility requirements for a 401(a) plan? Both employer and employee Employer Employee 51

52 403(a) Plans A 403(a) is a retirement annuity plan; It is a deferred compensation plan that is established by an employer (commonly government organizations) to provide benefits to participating employees Plan generally works in a similar manner to a non-governmental qualified retirement plan except that the 403(a) plan does not have a trust or trustee. Rather, plan assets are held under annuity contracts Qualified plan funding only through annuities Funded solely by employer contributions Recommend that employer have independent investment advice May be eligible for a rollover if employee leaves the firm, depending on how the 403(a) annuity was created; Most individual retirement annuities and profitsharing plans may be rolled into a self-directed IRA post-employment (Employees should consult with annuity administrator regarding pension plan qualifications for rolling these type of annuity funds after employment has ended) 52

53 403(a) Knowledge Check Question 1 of 1 Select the best answer. How is a 403(a) funded? Mutual Funds Annuities Through a trust Mutual Funds and Annuities 53

54 403(a) Knowledge Check Answer Select the best answer. How is a 403(a) funded? Mutual Funds Annuities Through a trust Mutual Funds and Annuities 54

55 State Specific Retirement Plans ORP & PERA Optional Retirement Program (ORP) Another form of a defined contribution retirement plan which may be offered by a state to public employees of colleges, universities, K-12 schools, and local government agencies and public entities Generally offered as an alternative to participation in the traditional defined benefit plan Not offered in all states. States that currently offer ORPs include Florida, Massachusetts, New Jersey, New York, South Carolina, Texas Public Employees Retirement Association (PERA) Defined Benefit Plan A form of defined benefit pension plan which may be offered by a state to public employees of colleges, universities, K-12 schools, and local government agencies and public entities Generally offered as an alternative to participation in Social Security Not offered in all states. States that currently offer PERAs include Colorado, Minnesota, New Mexico. 55

56 Maximum Allowable Contributions (MAC) Calculation 401(k) and 403(b) plans defer taxes on income by allowing elective before-tax contributions Roth after-tax elective contributions are also permitted and when eventually distributed with earnings will be distributed tax-free subject to certain restrictions Before-tax and Roth elective contributions are aggregated for MAC purposes Two separate Internal Revenue Codes apply to contribution limits for the individual employee: Limit I. Section 415(c) General Limit: applies to both employer and employee contributions Limit II. Section 402(g) Elective Deferral Limit: applies to only the employee s voluntary salary reduction contributions (elective deferrals) A special increased elective deferral cap for certain employees is also permitted, and contains specific rules regarding aggregating 403(b) contributions and accrued benefits with those of other plans 56

57 Maximum Allowable Contributions (MAC) - Limits Limit I. Section 415 (c) General Limit Annual additions to a defined contribution plan on behalf of a participant (employer and employee contributions) cannot exceed the lesser of 100% of the participant s compensation or $54,000 (for 2017). Limit II. Section 402(g) Elective Deferral Limit Limit applies equally to all salary reduction contributions (elective deferrals) whether made by an individual to a 403(b), 401(k), SEP or SIMPLE IRA. All elective deferrals made by employee to other plans must be aggregated with the 403(b) contribution to determine if limit has been exceeded. (Contributions to 457(b) plans are not aggregated into the 402(g) limit for the above plans) The 2017 annual limit is the lesser of 100% of compensation or $18,000 Employees over age 50 are eligible to use a catch-up contribution of $6,000 (Govt. plans only Not available for 457(b) tax-exempt) Eligible employees can contribute $18,000 and a catch-up of $6,000 to both a 403(b) and a 457(b) *Refer to for more details on current limits 57

58 Maximum Allowable Contributions (MAC) Self-Study Click here to learn about the following topics related to MAC Calculations: Alternative to 402(g) Limit Catch-Up Contributions Salary Reduction Agreements Final Pay Plan Excess Deferrals and Contributions Contributions to 457(b) Plans Special Catch-Up Contributions to 457(b) Plans 58

59 MAC Knowledge Check Question 1 of 2 Select the best answer. In a 403(b) plan, what is the maximum additional annual deferral amount an individual can contribute if she has 15 years of service with her employer? $1,000 $3,000 $6,000 $5,000 59

60 MAC Knowledge Check Answer Select the best answer. In a 403(b) plan, what is the maximum additional annual deferral amount an individual can contribute if she has 15 years of service with her employer? $1,000 $3,000 $6,000 $5,000 60

61 MAC Knowledge Check Question 2 of 2 Select the best answer. Which of the following employer groups is not eligible to provide the special increase in deferral limits for employees with15 or more years of service? Churches Hospitals Educational Institutions Charitable Organizations 61

62 MAC Knowledge Check Answer Select the best answer. Which of the following employer groups is not eligible to provide the special increase in deferral limits for employees with 15 or more years of service? Churches Hospitals Educational Institutions Charitable Organizations 62

63 Thank You & Next Steps Thank you for completing the MetLife Resources Certification Training! Please a print screen shot of this page to MLR Sales Support at MLRSalesSupport@MetLife.com and cc your Manager so that completion of this training can be tracked. You must receive approval from your Manager and acknowledgement from the MetLife Resources Workplace Sales Director (WSD) to market to and/or service participants in an MLR employer group. Contact your Manager or MLR Sales Support for next steps Contact MLR Sales Support for help with your questions about the not-for-profit marketplace or MLRSalesSupport@MetLife.com Please note, if you have not already completed the MetLife Annuity product-specific training, visit 63

64 Disclosure Any discussion of taxes is for general informational purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax or accounting advice. Clients should confer with their qualified legal, tax and accounting advisors as appropriate. MetLife Resources is a division of Metropolitan Life Insurance Company (MLIC), New York, NY Annuities are issued by Brighthouse Life Insurance Company, Charlotte, NC and in New York only by Brighthouse Life Insurance Company of NY, New York, NY Variable annuity products are distributed through Brighthouse Securities, LLC (member FINRA). Product guarantees are solely the responsibility of Brighthouse Life Insurance Company or in New York only Brighthouse Life Insurance Company and not MetLife. MetLife, a registered service mark of Metropolitan Life Insurance Company, is used under license to Brighthouse Services, LLC and its affiliates. Brighthouse Financial is a service mark of Brighthouse Financial, Inc. or its affiliates. Securities, including Metropolitan Life Insurance Company variable products, are distributed by MetLife Investors Distribution Company (MLIDC)(member FINRA). L [exp0818][All States][DC] 64