Alpine outlines early-retirement stipend and 403(b) special-pay plan

Alpine School District benefits staff explained the district's early-retirement stipend formula and described how the district will deposit those stipend payments into a tax-deferred 403(b) account administered by Pellion Benefits.

The district's benefits presenter said staff must receive notice of intent to retire by Feb. 1 to be on the district's list for early-retirement incentives, though the presenter said the district will open a later window (to April 1) if major changes require it. The presenter said eligibility requires either (a) 15 consecutive contracted years with Alpine and age 60, or (b) 30 years of service under URS; part-time educators receive a pro rata benefit based on FTE.

Drew Hill of Precision Retirement Group and Financial Educational Systems described the special-pay mechanism. "This 403(b) account is a tax-deferred savings plan," Hill said. He explained the district deposits the stipend into the 403(b) to avoid FICA on the payment and to allow the retiree to defer federal and state income taxes until withdrawal. Hill said the plan is currently paying about 3% with a 1% guaranteed minimum while funds are held in the account and that there are no sales charges or participant fees while the money remains in the plan.

The presenters described the annual deposit limit that applies to these employer-funded accounts: the most that can be deposited in a tax year is $70,000. Hill gave an example that if a retiree's total stipend is, say, $140,062, the district would deposit $70,000 in the fiscal year of retirement and the balance in the following January (and, if needed, again the next January), meaning large stipends are spread over multiple calendar/fiscal years.

Presenters said participants can later roll money from the Pellion-administered 403(b) into other qualified accounts (401(k), another 403(b), or a traditional IRA) or take distributions. Hill noted that conversions to Roth accounts would be taxable transactions at the time of conversion. He also said that, similar to other retirement distributions, individuals who are age 55 or older in the year they retire may access funds without additional early-withdrawal penalties; otherwise the 59— rule applies.

The presenter reiterated that the stipend calculation uses an employee's base salary (not supplemental pay), subtracts a new teacher's base salary, applies the stipend percentage (54% in the certified example shown; 27% for classified after recent negotiations), and multiplies by the number of years the stipend is intended to cover (up to four years maximum, prorated by months to full Social Security age).

The district clarified that the stipend funds come from district operating funds and that guarantee of the program beyond the current transition period (the district split mentioned in questions) depends on future boards; staff said employees were told the stipend would continue for the two Alpine years plus one year after a split, but beyond that the outcome depends on later board decisions.

The district offered enrollment help: employees who notify the district of their retirement will be put on a list and Precision/Pellion personnel will contact them to set up the 403(b) account and provide enrollment forms and login information.

Ending: The district encouraged employees who intend to retire this year to submit the district retirement form by the Feb. 1 deadline and to contact benefits staff or Drew Hill for help with the 403(b) setup and timing of deposits.