Aurora’s Retirement Plan is Changing | Advice for Life

August 12th, 2020 | | Advice4Life

Aurora’s Retirement Plan is Changing

If you are trying to decide how to proceed with the given options or know someone who is, please read on, AEGIS Financial advisors can provide help…

Background

As a result of Aurora Healthcare and Advocate Health Care’s merger changes were made to the employee retirement plan.  Participant contributions are now only allowed into the new Advocate Aurora Health 401(k) plan and Aurora’s 403(b) was eliminated.  Advocate Aurora employees need to decide what to do with their 403(b) account by September 30th, 2020.

Options

Advocate Aurora employees have three options:

  • Rollover their 403(b) Plan balance into the new Advocate Aurora Health 401(k) Plan.
  • Rollover their 403(b) Plan balance to a traditional or Roth IRA.
  • Take a lump sum cash withdrawal subject to potential taxes and penalties (default option).

What is the best option?  As you might guess, everyone’s situation is unique.  We will highlight one situation where the best option was to roll the 403(b) to the new 401(k).

High income, young professional:  If an individual or family exceeds certain income limits, contributions to a Roth IRA are not allowed.  These high-income individuals can use a procedure known as a “Backdoor Roth” to make a non-deductible IRA contribution and then immediately convert the account to a Roth IRA.  However, this option is not feasible if an individual has a Traditional IRA balance.

In the case of our young professional client who exceeded the income limits, we looked at the cost savings of rolling over the 403(b) balance to an IRA and compared it to the tax savings of continuing to convert or contribute to a Roth IRA at a young age.  The tax savings of the Roth IRA contributions far exceeded any of the benefits of rolling the 403(b) to an IRA here at AEGIS Financial, and therefore we advised our client to roll the 403(b) to the new 401(k)  This advice resulted in our firm not gaining additional assets to manage, but it was the advice that was in the client’s best interest. 

We pride ourselves in always giving advice which benefits you, the client, first and putting your interests before ours.  If there is someone you care about who needs unbiased client-first advice, please feel free to refer them to the advisors at AEGIS Financial.

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