TSA – Tax Sheltered Annuity


Current Status of TSA and Lawsuit
In 2009, the DeKalb County School District stopped payment on a retirement fund for district employees.  Plaintiffs claim this was in direct violation of the contract the district agreed to and has resulted in a loss of millions of dollars for district employees.

DeKalb teacher Elaine Gold and school psychologist Amy Shaye filed suit against the district in June 2011.  Their suit seeks class action status, which would allow other DeKalb Schools employees to join the suit against the district.

The next hearing in the case will take place on October 14th and October 15th at 9:00am before DeKalb Superior Court Judge Mark Anthony Scott.  Judge Scott will hear oral arguments on various issues, including whether to grant class-action status to the case.  This hearing is open to the public.  For those unable to attend, please check back here for regular updates.

What is Board TSA vs. Optional TSA Programs
Board TSA vs. Optional TSA Programs
The Board TSA and the Optional TSA provide investment vehicles to employees governed by Section 403 (b) of the IRS Tax Code. Section 403 (b) provides the opportunity for tax deferred investments for DeKalb School employees. TSA is an abbreviation for “Tax Sheltered Annuity.” Historically, 403 (b) investments were limited to tax sheltered annuity products. In the 1980’s, the tax code was modified to allow investments in mutual funds. The name “TSA” has stuck to these products despite the change to include mutual funds.

Board TSA
The Board of Education elected to opt out of Social Security in 1978. As an alternative to Social Security, they established the Board TSA for the district’s employees. The Board of Education provides contributions into an account for each eligible employee (thus the name Board TSA). The employee is not allowed to make contributions into their Board TSA account. The employee is allowed to select the investments in which he or she desires to place the funds.

The Board TSA is collectively considered an institutional investor. There are no fund fees or expenses charged to the employees’ accounts for investment products offered within the Board TSA. This is a significant and very important difference from the Optional TSA program in which all companies charge investment and expense fees on their products.

Optional TSA
The Optional TSA program allows employees to open an account with an investment company and have pretax payroll deductions, called contributions, taken from their paycheck. Thus, an Optional TSA account is employee funded.

The employee is able to invest the contributions in mutual funds or annuities offered through these companies. All Optional TSA companies charge investment fees and expenses in this program. Investment fees and expenses vary from company to company and significantly impact the net return an employee experiences on their investments. Additionally, most companies charge surrender fees for withdrawing or rolling over funds in their account to another company.

Timeline

  • 1977: Reviewed the extent to which DeKalb County Schools’ employee retirement benefits should incorporate, or rely upon, Social Security.
  • 1977 – 1979 : Identified and weighed the pros and cons of Social Security versus an alternative employee retirement benefit administered privately.
  • 1979: [May 14, 1979] Passed the following resolution:

NOW THEREFORE, BE IT FURTHER RESOLVED, That in the event of withdrawal from Social Security, funds currently budgeted for Social Security shall be used for the support of the alternative plan, and the funding of the alternative to Social Security shall be adjusted annually in proportion to the employer’s Social Security amount; and

BE IT FURTHER RESOLVED, That before the budget is adopted each year, a determination shall be made as to the amount that would have been required for continued participation in Social Security during the current year and the projection shall be made as to the amount that would have been required to continue participation in Social Security during the forthcoming budget year, and

BE IT FURTHER RESOLVED, That the amount required for the forthcoming year to continue funding Social Security shall be the amount budgeted to fund the alternative to Social Security, and that to the Board of Education will give a two-year notice to the employees before reducing or terminating these funding provisions.

  • 1979: [May 21, 1979] More than 70% of DeKalb County Schools’ employees approved the alternative, private plan providing Social Security-type benefits. TSA funds in individual employee accounts would be tax-sheltered until needed, or withdrawn.
  • 1983: [July 11, 1983] Established the TSA Plan (Alternative to Social Security)..
  • 2009: [July 27, 2009] Facing difficulty balancing its budget, the Board suddenly declared an emergency meeting. Though not on the published agenda, CFO Marcus Turk suggested a temporary suspension of funding for the TSA and the Board agreed.
  • 2009: [August 1, 2009] Funding for the TSA Plan was suspended and has not been restored.
  • 2010: [January 25, 2010] Then-Superintendent Crawford Lewis announced DeKalb County Schools’ funding for the TSA Plan would be restored on July 1, 2010. It was not.
  • 2010: [May 10, 2010] The Board realized its error in violating its own policy and suspending TSA contributions. The Board voted to “waive” its TSA policy requiring a two- year notice when contributions were suspended or terminated.
  • 2010: [June 14, 2010] The Board voted to eliminate provisions of the Board’s Bylaws and Policies that were “not part of the TSA Plan itself,” presumably to delete and remove the two-year notice requirement that the Board, by its earlier illegal actions, had violated.