1. Double Your Retirement Savings Opportunities: Section 457 Plans for Public School Employees Presented March 14, 2002 PASBO 47 th Annual Conference Securities offered through Lincoln Investment Planning, Inc., Advisory Services and Registered Investment Advisor Member NASD/SIPC Jerry Wozniak, CFP™ David Blask, CPC

2. New Savings Opportunities Prior to January 2002 457 Plan contributions limited to $8,500 457 money could not be rolled to an IRA or elsewhere upon separation from service. Only choices were: Take cash and pay tax Leave it where it was If even one dollar was contributed to a 457 plan, your 403(b) limit became $8,500

3. New Savings Opportunities Effective After 12/31/2001 Contributions limited to the lesser of 100% of compensation or: $11,000 in 2002 $12,000 in 2003 $13,000 in 2004 $14,000 in 2005 $15,000 in 2006 Indexed in $500 increments thereafter

4. New Savings Opportunities Effective After 12/31/2001 Catch-up Contributions for Individuals age 50 or older 2002 $1,000 2003$2,000 2004$3,000 2005$4,000 2006$5,000

5. New Savings Opportunities Effective After 12/31/2001 Distributions from 457 plans now eligible to be rolled to an IRA or plan of subsequent employer after separation from service.* * Applies to governmental 457 plans only

6. New Savings Opportunities Effective After 12/31/2001 Contributions to a 403(b) are not reduced by 457 plan contributions. Public school employees can contribute to both plans. Contributions made within three years of the Normal Retirement Date may double the amount contributed* *Dependent upon the number of years in the plan and prior contributions.

7. 457 /403(b) Example Example: 2002 403(b)457 $11,000$11,000* $ 1,000 if over age 49 $ 3,000 (maybe) $ 15,000$11,000 = $26,000 Example: 2006 $15,000$15,000* $ 5,000 if over age 49 $ 3,000 (maybe) $ 23,000$15,000 = $38,000 * May be doubled under certain circumstances

8. How Does a 457 Plan Differ From 403(b)? The 457 plan must be adopted by the employer. Plan is usually governed by the plan document. Hardship withdrawals are more difficult to obtain. In-service distributions only for “Unforeseeable Hardships” which does not include college or buying a home Loans usually not allowed

9. 457(b) and 403(b) Reasons To Use A 403(b)  403(b)’s have loan provisions – 457(b)’s do not  403(b)’s do not require a plan document – 457(b)’s do  Higher limit and catch-up provision  Can be used in “Enhanced” format  Easy to implement & traditionally already in place

10. 457(b) and 403(b) Reasons To Use A 457(b)  No 10% excise tax upon withdrawals  When combined with a 403(b) allows for sheltering of larger sums of money

11. What Are The Steps Needed To Install A 457 Plan Adopt Plan Documents Get Board Approval Structure payroll system for handling 457 contributions

12. How Will The Payroll Department Implement This Plan Not necessary to create a new payroll slot May be included on current slot but separately noted Reporting on W-2

13. Why You Need To Know About 457 Employees will be asking for them They may become a negotiation item If your district offers bonuses or incentives, they will become a priority item Higher compensated employees may ask for them They may benefit you personally

14. Lincoln Investment Planning, Inc. & School District Administrators Planning Together To “Help You Retire Well” Lincoln Investment Planning, Inc., Broker/Dealer, Registered Investment Advisor Member NASD/SIPC One Station Square, The Landmarks Building, Suite 210, Pittsburgh, PA 15219 412-565-7000