School Biz Today

Tales from the Business Office...

Growing a 403b program that benefits all…..

IRS rules that were to be effective 1/1/09 significantly changed the 403(b) world because they included a requirement for districts allowing 403(b) products for their employees’ use to serve as “plan sponsors” like 401k plans in the private sector, which inherently puts a greater fiduciary responsibility on the district offering the plan.  Since there are numerous 403(b) vendors who all historically offer different products and pricing models, the compliance obligations for district “plan sponsors” under these new IRS rules seemed almost insurmountable.  ESSDACK saw an opportunity to create a new model that assists Kansas school districts as “plan sponsors” in meeting this compliance need, and from this grew the ESSDACK 403(b) Consortium Plan. The foundation of the ESSDACK plan was built with the following five goals in mind.

  1. Full Compliance with New IRS Rules for 403(b) plans
  2. No Cost to the Districts
  3. Full Disclosure of all Plan Costs
  4. Maximize Return to Investors
  5. Tool to Help Recruit and Retain Teachers

We believe we have constructed, with the help of Brian Johnston (Attorney with Polsinelli Firm), Ameritime (Independent Financial Advisors), and TPP (Independent Third Plan Administrator) a solid program to augment KPERS and Social Security as retirement vehicles. The plan uses an Asset Under Management model. Simply pooling numerous entities funds in a common program allows for us to reduce costs, and thereby maximize the return to the investor.  It also allows the elimination of all front-end or back-end “loads”, surrender fees and other termination costs that may prohibit the future use of other lower cost/higher performing investments.  Moreover, the costs of the ESSDACK plan reduce as more money is contributed to the plan.

The program is structured with for actual break points in pricing.  They are as follows:

  • $1,500,000
  • $2,000,000
  • $4,000,000
  • $8,000,000

ESSDACK has had the program in place for 18 months and has already reached the 3rd tier of pricing. As illustrated in the following diagram. The program now has 24 participating districts, 1021 participants, and over 4 million in assets.

If you would like to find out more about the program or how it can benefit your K12, college or university, give me a  call 620-931-2588 or email me at finance@essdack.org.

Pete Lundrigan
CFO/CIO

1 Comment by admin on February 19, 2010
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Service Center Finances, just how does it work!

One of the questions I get most often is how are Services Centers funded. ESC (Educational Services Centers) are self funded. We are truly like any business we have to generate revenue and watch expenses to survive.  We receive no direct money from the State. other than the occasional grant.

The term Interlocal is used when describing a ESC.  Meaning we are bound by our membership.  This legal construct extends all the rights and privileges of a School with the exception of being able to levy taxes.

Our revenue stream comes from several sources, which include the following:

  • Membership
  • Learning Centers/Charter School Administration
  • Consulting Services in and out of state
  • Program development/Partnerships (Blackboard, IKON, PD360, etc)
  • Grants

This is by no means an exhaustive list. , but is used to illustrate the breath of services we provide to our members and non-members alike.

From the perspective of the CFO our biggest challenges is out thinking the economy.  Budgeting occurs on a day to day basis and requires constant monitoring.  Unlike a school (with the exception of recent years), when the budget is set the district can anticipate a very specific amount of FTE dollars from the state.

I hope this helps answer any questions. Until next Time…..

Pete

No Comments by admin on February 16, 2010
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From the Business Office At ESSDACK....