403(b) Employer Matching and Vesting Contribution Program

WEA Member Benefits

Enhance your Wisconsin school district employee benefit program

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Graded vesting schedule Cliff vesting schedule1 year 20% 1 year 0%

2 years 40% 2 years 0%

3 years 60% 3 years 0%

4 years 80% 4 years 0%

5 years 100% 5 years 100%

IntroductionThe 403(b) is an employee benefit offered by most Wisconsin public schools and a great way for employees to save for retirement. Many school districts offer an employer match through their 403(b) program. While this is not required, it provides substantial benefits to employees and employers alike. A vesting schedule is also typically part of the program.Like the 401(k) in the private sector, school districts can decide what type of match they would like to provide in their program. Two common types of 403(b) matching programs are illustrated below.

Matching examplesThe district matches a percentage of employee contribution up to a certain limit. Example: The employer matches 50% of the first 6% of salary that an employee contributes.

The district matches dollar for dollar up to a certain limit. Example: The employer matches 100% of employee’s contribution up to 5% of their salary.

Vesting schedulesEmployee contributions are always 100% vested and are owned by the employee. Contributions made by the employer may be set up on a vesting schedule. This means the employee will not own 100% of

the employer contributions or employer matching contributions until the conditions of the vesting schedule have been fulfilled. Two common vesting schedules are graded and cliff. A graded vesting schedule gradually vests over a certain time period. On a cliff schedule, the employee goes from 0% vested to 100% vested after a certain amount of time has passed. Examples of graded and cliff vesting schedules are illustrated below.

Paycheck amountEmployee contribution per paycheck

Employer contribution per paycheck Annual total

$1,000 10% ($100) Half of 6% ($30) Employee: $2,600 Employer: $780

Paycheck amountEmployee contribution per paycheck

Employer contribution per paycheck Annual total

$1,000 10% ($100) 5% ($50) Employee: $2,600 Employer: $1,300

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Administering a 403(b) matching contribution programInitiating a matching program is a fairly simple process. The school district controls the parameters of the program by:

• Designating how the program will be funded and paid out, and • Defining which employee groups are eligible to participate in the program. The district may also choose to set up a vesting schedule to encourage staff retention.

BenefitsA 403(b) matching and vesting program can offer substantial benefits to both employees and employers.

How does it help your school district?• It saves on employment taxes (FICA, workers compensation) on employer contributions.• A matching and vesting program encourages employee retention and makes your district more competitive for

attracting and retaining quality staff.• Employers can use forfeitures to reduce vesting costs. Forfeiture occurs when an employee leaves your district

before they are fully vested. These amounts can be used to pay future employer contributions.

Why is it good for employees?• Contributions made by the employer are free to the employee, allowing the employee to accumulate more

retirement savings. • It offers more incentive for employees to save for retirement.• More flexibility is built in to employees’ retirement savings by accumulating assets outside of Social Security or

the state pension plan.• Employees have the ability to grow tax-deferred retirement savings.

Member Benefits can help employers get started on a 403(b) vesting and matching programAdding a match to your program can help increase participation. For example, in May 2015, one

school district had 58 participants in their 403(b) program. After implementing a match, they ended the year with 348 participants. Other districts we work with have experienced similar results.Member Benefits has helped guide districts through the 403(b) issues and framework to process the vesting/matching contributions. We can also assist you with communication about your program and provide record-keeping services. Our 403(b) experts are dedicated to assist you, so it’s easier to get started than you might think.Contact a Retirement Consultant today.

Call 1-800-279-4030E-mail retirement@weabenefits.com

WEA Member Benefits • 660 John Nolen Drive • Madison, WI 53713 • weabenefits.com

READY TO GET STARTED?Meet with a Member Benefits representative to explore the option

of a 403(b) employer matching contribution plan for your school district.

1-800-279-4030retirement@weabenefits.com

This brochure is for informational purposes only and is not intended to constitute legal, financial, or tax advice. Certain recommendations or guidelines may not be appropriate for everyone. Consult your personal advisor or attorney for advice specific to your unique circumstances before taking action. The 403(b) retirement program is offered by the WEA TSA Trust. TSA program registered representatives are licensed through WEA Investment Services, Inc., member FINRA.

WEA Member Benefits helps Wisconsin public school employees and their families achieve their financial goals by providing personal insurance, retirement and investment, and financial planning programs that are designed specifically for the education community. Over 426 Wisconsin public school districts offer our 403(b) program and over 48,000 members participate in our retirement saving programs.

We specialize in 403(b) programs and have been providing 403(b) record-keeping services for Wisconsin public school districts since 1978. We also provide plan compliance and plan document services.

If your district is interested in setting up a matching/vesting program, our 403(b) experts can help. Call us for more information.

TSA 4265-280-0216 (W)