Bill Would Allow Elimination of Oklahoma’s State 403(b) for Teachers
Legislation is before the Oklahoma House of Representatives that would allow the elimination of the state-sponsored 403(b) plan for teachers. Rep. Randy McDaniel (R-Oklahoma City) introduced HB 2553
on Feb. 5; it is now before the House of Representatives’ Banking and Business Committee.
The Oklahoma Teachers Retirement System describes the 403(b) plan it offers
as “a comprehensive, full-service defined contribution program available to Oklahoma’s school districts.”
HB 2553 would allow the OTRS Board of Trustees to terminate the 403(b). But it envisions a soft landing. It provides that the board may only terminate it in a way consistent with federal tax law and that minimizes financial harm to the plan participants.
HB 2553 provides that all employers that participate in the OTRS and that maintain their own 403(b) tax-sheltered annuity programs and employ a program participant in or employed a retired one permit the firm administering the program on the effective date of HB 2553 — if it is enacted — to be a provider in the employer's local programs.
The bill also provides that:
- employers need only keep the firm as a provider for a two-year period beginning with the end of the local programs’ current plan year as of the effective date of this HB 2553;
- the firm administering the program must continue to provide those investment options during that two-year period; and
- any active or retired local 403(b) program participant may choose any other provider offered under that program.
The bill would require the Board of Trustees to administer and distribute the funds in the plan to members and their beneficiaries and that distributions only be paid to members when they turn 59 1/2, separate from service, die, become disabled, or experience a qualifying hardship. It also provides that the retirement system allow members and qualified beneficiaries to elect a direct rollover of eligible distributions to another eligible retirement plan.