403(b) Plan / Tax Sheltered Annuity Arrangement [TSA]
403(b) / TSA - Distributions:
A. May begin at age 59 1/2. Funds withdrawn before age 59 1/2 are subject to a 10% penalty tax except for death, disability, medical expenses, first time home purchases, higher education costs, & medical insurance premiums. B. Are mandatory by age 70 1/2. Required minimum distributions [RMDs] must begin no later than April 1st following the calendar year in which the owner reaches age 70 1/2. Late distributions are subject to a 50% penalty tax on the insufficient distributions. ● EXCEPTION: Required minimum distributions from a 403(b) plan can be delayed until retirement if you continue to be employed by the plan sponsor beyond age 70 1/2. C. Distributions to plan holders are taxable as ordinary income with a cost basis of zero.
Non-Qualified Deferred Compensation Plans - Plan Info.:
● A contractual agreement is executed under which an employee agrees to defer receipt of part of compensation until retirement, disability or death. ● Agreements may list conditions under which some or all benefits ill be forfeited. ● Agreements are promises to pay. The employee enjoys no right to any assets of the employer until retirement, disability or death. ● Business failures could lead to no payments as plan assets could be subject to the company's creditors. ● Income taxes are deferred until receipt. ● Such plan may be indexed to inflation.
Non-Qualified Deferred Compensation Plans - Intro.
● is generally a non-qualified contract between an individual & their employer to defer compensation as agreed upon between the 2 parties. ● Such a plan is frequently used by highly-paid athletes & executives who enter into large compensation contracts. ● Non-tax Qualified Deferred Compensation Plan are not subject to ERISA since they are agreements between 2 parties & the employer is not making contributions on behalf of the employee. ● Since the plan is not subject to ERISA, the employer may discriminate to whom such a plan is offered in favor of highly paid employees.
403(b) / TSA - Contribution Info. -
A. Annual contributions [Additions"] to a TSA plan may include: ● Elective salary reduction contributions made by the employee ● Non-elective contributions made by the employer ● After-tax contributions made by the employee B. Contributions may be made annually up to specified limits. All types contributions are aggregated & cannot exceed the annual limit. C. Individuals who will be at least 50 years of age during the tax year may contribute an additional "catch-up" amount to the plan. D. Annual contributions [Additions"] to a TSA plan are limited to the lesser of 100% of the employee's compensation or: Year 2009 - 2011 Max Contribution - $49,000 Catch-Up Contribution - $5,500 Year 2012 Max Contribution - $50,000 Catch-Up Contribution - $5,500
403(b) / TSA - Rollovers
Distributions from a TSA plan may be rolled over into another TSA plan or into other types of retirement plans such as IRAs or qualified plans [401k].
403(b) / TSA - Plan Designed For:
Employees of certain non-profit organizations only. This includes pubic schools as well as educational, charitable & religious organizations [hospitals, foundations, churches, etc.]
Non-Qualified Deferred Compensation Plans - Payroll Deductio Plans:
are typically non-qualified plans that allow an employee to voluntarily elect to have their employer take deductions [after-tax] from their paychecks to fund insurance, healthcare or other items.
403(b) / TSA :
is a type of plan for use by certain tax-exempt [non-profit] organizations to provide retirement benefits for their employees. This type of plan provides benefits by purchasing annuities or contributing to custodial accounts invested in mutual funds.