Teachers Can Home-School Themselves on 403(b) Plans

Trying to make their way through the thicket of school 403(b) plan rules has frustrated teachers throughout the country. In the Los Angeles Unified School District, the experience made an activist of Stephen A. Schullo, an elementary school teacher.

Along with colleagues, Schullo is lobbying the L.A. district to offer more no-load fund companies and is asking the teachers’ union to help educate members about retirement saving because districts are reluctant to do so. Schullo and his fellow activists distribute “self-directed 403(b) instructions” and encourage teachers to become do-it-yourself investors.

Some mutual-fund families, such as Invesco and Vanguard, give teachers general guidelines and “maximum exclusion allowance” formulas, Schullo said, but the teachers must do the math to determine the exact amount.

Teachers get so bogged down in the details that they often give up and turn to an insurance agent for help, he said, who most likely would put them in a high-cost and probably inappropriate annuity provided by his or her company.

Schullo has heard from teachers who were unable to get the list of eligible 403(b) providers from their schools and were told to see an agent. In that case, Schullo advises teachers to cite the 770.3 clause of the California Insurance Code, which gives employees the right to choose the investment company for their 403(b).

Teachers shouldn’t hesitate to get into a plan even if they are unsure of the contribution limits. “Generally speaking, a teacher at the top of the scale, earning more than $50,000 a year, can contribute $8,000 to $10,000. New teachers are safe contributing $1,000 to $3,000 a year to their 403(b) plans. If you’re in the middle, contribute between $4,000 and $8,000,” Schullo said. “The important thing is to get started.”

Teachers seeking additional information about 403(b)s may find these Web sites useful, according to Schullo:

* https://www.morningstar.com. Click on “Conversations,” then “All Topic Forums” and look for “403(b) Forum.”

* Two Web sites that have lively 403(b) discussions mixed with 401(k) and related topics: https://www.timyounkin.com; https://www.bobbrinker.com.

* https://users.aol.com/gmaclaren/403b.html skewers annuities and provides a dozen links to other sites.

* https://vicinities.com has a site for teachers that Schullo helped create. Search “retirement/403b,” where there is specific information about Los Angeles Unified plans.