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| Tax-Sheltered Annuity |
| 403(b) PLANS FOR PUBLIC SCHOOLS Information for 501(c)(3) tax-exempt organizations available on request |
| Click the image above for an informative TSA presentation |
|
ELIGIBLE EMPLOYERS:
Public Schools
GENERAL DESCRIPTION:
A tax deferred arrangement under IRS code section 403(b). Can
either be funded with an annuity contract 403(b)(1) or a mutual fund
offered through a custodial account403(b)(7).
ERISA COVERAGE:
Exempt
EMPLOYEE RIGHTS:
Non forfeitable (100% vested) for employee salary reduction
contributions. Employer contributions may be subject to vesting
schedule.
TYPES OF CONTRIBUTIONS PERMITTED:
Employer contributions, employee before-tax contributions,
employee after-tax contributions, and designated Roth 403(b)
contributions if allowed by the employer plan.
CONTRIBURTION LIMITS:
Employees can make elective deferrals cumulatively, per tax year,
up to $16,500 in 2011.
Note that because this is a cumulative limit, the limit applies to all
elective deferrals made to a 401(k),403(b), SIMPLE or SARSEP Plan.
Employer, employee and forfeiture contributions to the plan are
subject to the IRC section 415(c) limit of the lesser of 100% of the
includable compensation of $49,000 for 2011.
AVAILABLE CATCH-UPS:
15 YEAR Catch-Up. For employees who have completed at least 15
years of service with an eligible employer, the annual deferred limit
is increased by the lesser of:
1. $3,000
2. $15,000 reduced by amounts not included in gross income for
prior years due to the catch-up election
3. $5,000 times the years of service with the employer, minus all
amounts attributable to elective deferrals made to the current
employer’s plans.
Note: the 15 year catch-up of up to $3,000 per year cannot exceed
cumulatively $15,000 over the lifetime of the 403(b) participant.
Age 50+ Catch-Up. Participants who reach age 50 by the end of the
calendar year may make an additional contribution in the amount of
$5,500 in 2011. This age 50+ Catch-Up may be used concurrently
with the special 15 year Catch-Up.
TAXATION AND FICA:
Benefits are includable in income when distributed.
Employee deferrals are subject to Social Security/FICA tax at the
time of deferral.
Employer contributions are not subject to FICA tax at either
contribution of distribution.
NON-DISCRIMINATION TESTS:
If salary reduction is permitted for any employee, in general, all
employees must be permitted to contribute, provided the annual
contribution exceeds $200.
Additional rules apply for employer contributions.
LOANS:
Permitted, if plan and/or annuity contract or custodial agreement
provides, up to IRC Sect. 72(p) limits.
WITHHOLDING ON DISTRIBUTIONS, REPORTING:
Eligible rollover distributions paid directly to a participant (or other
payee) are subject to mandatory20% federal income tax
withholding. No mandatory withholding if amounts rolled over to a
401(a),403(b), governmental 457(b) plan, or to a traditional or Roth
IRA. Virginia requires a mandatory 5% income tax withholding.
Other distributions that are not eligible rollover distributions are
subject to voluntary 10% federal income tax withholding.
Reported on form 1099R.
PERMITTED DISTRIBUTIONS:
Employee deferrals (including earnings) may generally be
distributed only upon your:
1. Attainment of age 591/2
2. Severance from employment
3. Death
4. Disability
5. Hardship
Certain exceptions my apply.
IRS 10% PREMATURE DISTRIBUTION PENALTY TAX:
Generally applies with certain exceptions relating to divorce,
qualified reservist distribution, and account of separation from
service on or after attaining age 55.
REQUIRED MINIMUM DISTRIBUTION:
RMD applies. Distributions must begin by April 1st of the calendar
year following the calendar year in which a participant reaches age
701/2 or retires which ever is later.
ROLLOVERS AND TRANSFERS:
Rollover to a traditional IRA or another 403(b), 401(a) or
governmental 457(b) plan if distribution is rollover eligible. Rollover
can be made by the participant, surviving spouse or spousal
alternative payee under a divorce order that is qualified domestic
relations order. Many rules apply.
Plan to plan transfers and contract to contract exchange may also
be available.
Public Schools
GENERAL DESCRIPTION:
A tax deferred arrangement under IRS code section 403(b). Can
either be funded with an annuity contract 403(b)(1) or a mutual fund
offered through a custodial account403(b)(7).
ERISA COVERAGE:
Exempt
EMPLOYEE RIGHTS:
Non forfeitable (100% vested) for employee salary reduction
contributions. Employer contributions may be subject to vesting
schedule.
TYPES OF CONTRIBUTIONS PERMITTED:
Employer contributions, employee before-tax contributions,
employee after-tax contributions, and designated Roth 403(b)
contributions if allowed by the employer plan.
CONTRIBURTION LIMITS:
Employees can make elective deferrals cumulatively, per tax year,
up to $16,500 in 2011.
Note that because this is a cumulative limit, the limit applies to all
elective deferrals made to a 401(k),403(b), SIMPLE or SARSEP Plan.
Employer, employee and forfeiture contributions to the plan are
subject to the IRC section 415(c) limit of the lesser of 100% of the
includable compensation of $49,000 for 2011.
AVAILABLE CATCH-UPS:
15 YEAR Catch-Up. For employees who have completed at least 15
years of service with an eligible employer, the annual deferred limit
is increased by the lesser of:
1. $3,000
2. $15,000 reduced by amounts not included in gross income for
prior years due to the catch-up election
3. $5,000 times the years of service with the employer, minus all
amounts attributable to elective deferrals made to the current
employer’s plans.
Note: the 15 year catch-up of up to $3,000 per year cannot exceed
cumulatively $15,000 over the lifetime of the 403(b) participant.
Age 50+ Catch-Up. Participants who reach age 50 by the end of the
calendar year may make an additional contribution in the amount of
$5,500 in 2011. This age 50+ Catch-Up may be used concurrently
with the special 15 year Catch-Up.
TAXATION AND FICA:
Benefits are includable in income when distributed.
Employee deferrals are subject to Social Security/FICA tax at the
time of deferral.
Employer contributions are not subject to FICA tax at either
contribution of distribution.
NON-DISCRIMINATION TESTS:
If salary reduction is permitted for any employee, in general, all
employees must be permitted to contribute, provided the annual
contribution exceeds $200.
Additional rules apply for employer contributions.
LOANS:
Permitted, if plan and/or annuity contract or custodial agreement
provides, up to IRC Sect. 72(p) limits.
WITHHOLDING ON DISTRIBUTIONS, REPORTING:
Eligible rollover distributions paid directly to a participant (or other
payee) are subject to mandatory20% federal income tax
withholding. No mandatory withholding if amounts rolled over to a
401(a),403(b), governmental 457(b) plan, or to a traditional or Roth
IRA. Virginia requires a mandatory 5% income tax withholding.
Other distributions that are not eligible rollover distributions are
subject to voluntary 10% federal income tax withholding.
Reported on form 1099R.
PERMITTED DISTRIBUTIONS:
Employee deferrals (including earnings) may generally be
distributed only upon your:
1. Attainment of age 591/2
2. Severance from employment
3. Death
4. Disability
5. Hardship
Certain exceptions my apply.
IRS 10% PREMATURE DISTRIBUTION PENALTY TAX:
Generally applies with certain exceptions relating to divorce,
qualified reservist distribution, and account of separation from
service on or after attaining age 55.
REQUIRED MINIMUM DISTRIBUTION:
RMD applies. Distributions must begin by April 1st of the calendar
year following the calendar year in which a participant reaches age
701/2 or retires which ever is later.
ROLLOVERS AND TRANSFERS:
Rollover to a traditional IRA or another 403(b), 401(a) or
governmental 457(b) plan if distribution is rollover eligible. Rollover
can be made by the participant, surviving spouse or spousal
alternative payee under a divorce order that is qualified domestic
relations order. Many rules apply.
Plan to plan transfers and contract to contract exchange may also
be available.