Dallas Independent School District
457(b) FICA Alternative Plan
Plan Description
 

DISD 457(b) FICA Alternative Plan

The Board of Trustees of the Dallas Independent School District (“DISD”) selected Public Agency Retirement Services ("PARS") as the trust administrator of the DISD 457(b) FICA Alternative Plan (“the Plan”) effective January 1, 2005.

The Plan allows eligible employees to have an alternative to paying Social Security taxes. Eligible employees include (a) new employees who are exempt from the Teacher Retirement System of Texas (TRS) Pension Plan coverage during their first 90 days of employment (if they are in a TRS-covered position) and (b) substitutes, part-time, seasonal, and temporary employees, who are not eligible for TRS Pension Plan. Active retirees are not eligible to participate in the Plan.

Effective January 1, 2005, all eligible employees will be automatically enrolled in the Plan. They will have fourteen (14) days to opt out of the Plan. The decision to opt out is a one-time irrevocable election.

Plan Highlights

  • Social Security requires that you pay 6.2% of your earnings to FICA taxes. The FICA Alternative Plan requires a 7.5% contribution to the Plan but you will receive this money back plus earnings when you terminate your employment with DISD or retire. You will continue to contribute to Medicare.

  • The Plan lowers your current income taxes since contributions to the Plan are made on a "pre-tax" basis, unlike Social Security withholdings, which are made on an "after-tax" basis.

  • You are 100% immediately vested (meaning you own the money) on your contribution to the Plan.

  • When you leave DISD, you can rollover your account balance to an Individual Retirement Account or another qualified retirement plan or take a cash distribution subject to taxation.

  • There is no IRS penalty for taking a cash distribution prior to retirement.

  • If you become eligible later for TRS, you can use your Plan account balance to purchase service credit.

  • Plan assets are managed by a professional registered investment advisor, TCG Advisors, LP.

Eligibility

You are eligible to participate in the Plan if you are an active employee and are not eligible to participate in the TRS Pension Plan.

Distributions

You or your beneficiary can receive a distribution from the Plan for any of the following reasons:

  • Retirement

  • Termination of Employment

  • Permanent and Total Disability

  • Death

  • Change of employment status to a position covered by another retirement system (e.g., TRS) subject to the following condition(s):

  • If there have been no contributions to the account for two (2) years and the account balance is less than $5,000, the employee may be able to request a distribution.

  • If there have been no contributions to the account for two (2) years and the account balance is $5,000 or greater, the account will only be eligible for distribution due to termination, retirement, death or disability.

Taxation

When an employee begins to receive benefits, the funds received become taxable income. However, because the Plan is set up under a Section 457(b), participants who take a cash distribution prior to retirement will not have to pay the 10% IRS penalty tax. If the taxable portion of the account balance exceeds $200, the employee can avoid immediate taxation by directing the account balance to: a) a traditional IRA or, b) an eligible employer plan that accepts the rollover (i.e. TRS, 403(b), 457, etc.).

Designating a Beneficiary

If you die while a participant, the account balance will be distributed to your beneficiary. If you are married at the time of death, the spouse is automatically the beneficiary. If you wish to designate someone other than the spouse as beneficiary, you must do so in writing and the spouse must sign a spousal consent form. If you are unmarried at the time of death, the account balance will be paid to your estate unless another beneficiary has been designated. To designate a beneficiary other than your spouse or estate, please select the forms link on the PARS website or go to the DISD Benefits website and click on Get Forms.

Current Plan Participants

If you currently participate in the MetLife 403(b) FICA Alternative Plan, you will automatically be switched to the DISD 457(b) FICA Alternative Plan through PARS on January 1, 2005. Your MetLife account will be frozen and you will be eligible to receive a distribution when you leave the DISD or have another event that qualifies for a distribution under the MetLife Plan.

If you currently participate in the DISD 457(b) FICA Alternative Plan through TIAA-CREF, you will be automatically switched to the DISD 457(b) FICA Alternative Plan through PARS on January 1, 2005 and your account balance will be transferred to PARS. Plan participants will receive more information regarding the transfer of assets from TIAA-CREF to PARS.

Plan Enrollment

Enrollment in the Plan is automatic. Employees have the option to opt out of the plan. To opt out of the Plan, employees must complete the Election to Opt Out of the DISD 457(b) FICA Alternative Plan Form and return it to the DISD Payroll Department. The Election to Opt Out form will be mailed to your home shortly after your first payroll has been processed. You must elect to opt out within fourteen days from the date of notification if you do not want to participate in the Plan. The election to opt out of the Plan is a one-time opportunity and is irrevocable. This election includes any future periods of employment with DISD. Failure to complete and return the Election to Opt Out form by the deadline date will mean you have waived your rights to opt out of the DISD 457(b) FICA Alternative Plan.

Additional Information

For additional information about how the DISD 457(b) FICA Alternative Plan can benefit you, please contact PARS at (800) 540-6369.