What's Going On?
On June 30, 2020 the 403(b) plan for one of Wisconsin's largest employers will be terminated. If you are an employee of Advocate Aurora Health (formerly Aurora), this does not mean that you will no longer have a retirement plan, as you well know from the amount of paperwork you have been receiving from your employer, but there will need to be some decisions made.
At the beginning of 2020, Advocate Aurora decided they were going to make some changes to their retirement plan. When Aurora and Advocate joined forces in 2018 to become Advocate Aurora, Advocate employees had a 401(k) and Aurora employees had a 403(b). With that being said, these changes are more of a consolidation in which all employees under the former Aurora framework that previously held a 403(b) will now have to adopt a 401(k). Chances are, you have already begun contributing to your 401(k) but still have a 403(b) lingering out there.
403(b) Options
Employees now have 3 options about what to do with the assets that were previously in their 403(b). Employees MUST act on one of these options by September 30, 2020. However, if you wait to take action after August 24, 2020 fees may apply.
Option 1 - Roll over 403(b) funds into the AAH 401(k)
The simplest of the options. This keeps your assets with your employer, and investment choices will be subject to 401(k) plan provisions sponsored by AAH (Advocate Aurora Health), provided by Empower. If you previously had an outstanding loan or participated in the SDBA (self-directed brokerage account) these will automatically be rolled over.
*SDBA Disclaimer - while assets will be moved over from 403(b) to 401(k) the SDBA assets will no longer be able to be managed by a 3rd party manager under the Empower 401(k) plan.
Option 2 - Roll over 403(b) funds to a traditional or Roth individual retirement account (IRA) or to another employer-sponsored retirement plan
This option provides you with the most flexibility. While there will definitely be some paperwork involved here, this option will give you the most control over your assets. Here you are given the option to take the assets out of your employer sponsored plan and put the assets into your own plan, an IRA or Roth IRA.
A way that I like to describe this to my own clients is that right now, these are your assets in your employer's plan. When given the opportunity, it can be advantageous to take these assets and turn them into your assets in your own plan. This allows you to decide which investments to own, what fees you pay, etc. These assets can be managed by you through a self-directed IRA, or can be placed with a wealth management firm.
Many people may not know or feel comfortable managing their own retirement assets. As a professional in a different field, being an asset manager may not be the way you want to spend your time. This is where Fischer Wealth Management or another wealth management firm may be able to step in and help. Handling rollover IRAs is something that firms do all the time. A wealth management firm's goal is to help you reach your goals with your money and ultimately help you achieve what really matters in your own life.
Option 3 - Cash Withdrawal
Unless otherwise necessary, this is most likely not the option you want to be choosing, but it is an option nonetheless. A cash distribution will definitely have tax implications. Remember, any assets that are tax-deferred are, well... still taxable. Taking cash from your 403(b) could cause some issues for you come tax time next year. If you are thinking about this option, please consult your CPA, EA, or whoever you have doing your taxes.
The Time is Now
If you have a 403(b) with Aurora, you will need to take action prior to September 30, 2020. If this situation affects you, please contact us or your financial advisor to discuss which action best fits your financial situation. If you are not currently working with an advisor or firm, we'd love to help and have a conversation about which option works best for you.
If you know an Advocate Aurora employee, please share this information with them.