WOBURN - The city's School Committee recently authorized Assistant Superintendent Joseph Elia to join an inter-municipal agreement for screening the legality of specially approved, tax-exempt, retirement options.

During the most recent School Committee meeting, Elia explained that two-year-old regulations regarding the management of municipal employees' 403B retirement options had shifted responsibility upon employers for ensuring that investments are made in legal vehicles.

In particular, the assistant superintendent detailed new federal Internal Revenue Service (IRS) rules that required the providers of the tax-exempt annuity plans to track each employees' contributions, in order to ensure that they weren't violating prohibitions on the types of investments allowed under the retirement planning option.

The equivalent of a private-sector 401K plan, a 403B plan is a tax-exempt retirement program that is restricted to certain non-profit and public school employees.

However, unlike a 401K plan, those taking advantage 403B proposals are prohibited in taking advantage of certain types of investment vehicles that are traditionally considered more risky, but more profitable during market upswings.

A number of years ago, Woburn began offering a matching 403B option to educators, when the School Committee agreed to contribute to such a retirement plan in instances when teachers limited the amount of sick leave being taken in any given year.

According to Elia, the relatively new IRS regulations now require employers to monitor the legality of 403B investments, instead of just ensuring that each paycheck is properly deducted and given to financial planning firms for each tax-exempt contribution.

"Our only task was to make sure their deduction was taken on a pre-tax basis and sent to the [company]," said Elia, explaining that investment firms were responsible for ensuring that no illegal transactions or penalty-linked loans against the funds occurred.

"They've [the IRS] put the onus back on us," the district's financial guru elaborated. "It puts us at a serious disadvantage, because a lot of people don't have that knowledge. If we make a misstep, the IRS could severely penalize the [district]."

While some school systems have decided to tackle the issue single-handedly, Elia conferred with a group of approximately 40 other districts, who agreed to join together to hire a third party group to maintain proper paperwork, ensure the legality of contributions, and ultimately provide payments to firms for employee's preferred investments.

Specifically, the pool of school districts accepted bids for five companies and ultimately awarded a tentative deal to a Lakeland, Florida company. In addition, the bid package included provisions for payments to a local law firm to prepare the initial batch of paperwork.

Under the joint deal, Woburn's share will cost the city nearly $8,500, or the equivalent of $22.50 for each of the 400 or so school employees taking advantage of the district's 403B offerings.

According to Elia, employees will still retain the sole authority to select the types of vehicles that investment firms contribute money to each pay period, but Mid-America will double check those deductions and cut the check for those payments.

"All we want them to do is the required paperwork, manage the program, and make the employees' investments as directed," the district's longtime business manager told School Committee members.

"If we did not do this, I would probably be coming to you looking for another body to handle this," Elia added. "This has to be established by Jan. 1. Timing is critical."

School Committee member John Wells, who ultimately endorsed the request, argued that the education board should consider including the new 403B payments into future contract negotiations, so that either employees or their investment firms were responsible for footing the bill for the third party screener.