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In an article that first appeared on the Focus On Public Benefits blog and later in the National Tax-Deferred Savings Association’s (NTSA) NTSA Advisor, BB&K Partner Jeff Chang examines 403(b) plans of California school districts and charter schools, and the confusion around their tax-sheltered annuity (TSA). Jeff explains that California public school district and charter school employees mistakenly believe they are entitled to select the TSA provider of their choice simply because they are allowed to direct the investment of their plan account.

Jeff writes that “one way to analyze this issue is by understanding the differences between a ‘non-employer-sponsored 403(b) arrangement,’ or NFA, and an ‘employer-sponsored 403(b) plan,’ or EFP.”

According to Jeff, “in an NFA, the employer is not taking an active role in either the design or administration of the program, and is simply facilitating the purchase of annuity contracts, or custodial account investments, by employees on a salary reduction basis.” Alternatively, “an EFP is an employer-sponsored plan—one that the employer designs, administers and accepts fiduciary responsibility for.”

The NTSA is the nation’s only independent, nonprofit association dedicated to the 403(b) and 457(b) marketplace. The NTSA was formed in 1989 and has grown to include practitioners, agencies, corporate and employer members.

Jeff’s NTSA Advisor article can be read in its entirety here.

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