403(b) TSA (Tax Sheltered Annuity)
A 403(b) plan is also known as a tax-sheltered annuity plan and is a supplemental retirement plan. It allows employees of public school districts, other non-profit organizations, or churches to contribute a portion of their earned income on a pre-tax basis into a retirement account through salary deferral.
The 2020 SECURE Act changed the Required Minimum Distribution (RMD) age requirement.
403(b) plans require that minimum distributions (RMD) begin the latter of:
- When you reach age 72, or
- When you retire (if after age 72)
Required Minimum Distributions must begin by December 31st each year thereafter. Consult a tax professional on how RMDs may affect you.
Funds in a 403(b) plan can be invested in an annuity contract or in a custodial account. An investment professional can help you determine which type of investment is suitable for you.
Generally all eligible employees of school districts, other non-profit organizations, or churches may participate. You should check with your employer and/or plan administrator to determine how to enroll in the plan.
If the plan allows, you may contribute 100% of your compensation or the maximum annual contribution limit set by the IRS, whichever is less. Investment earnings and dividends grow tax-deferred until funds are withdrawn from the account. Be sure to check with your plan administrator on plan rules, provisions, and requirements.
Distributions from a 403(b) plan are taxed as ordinary income, and if taken prior to reaching age 59 ½, may be subject to an additional 10% early withdrawal penalty (IRS tax penalty). Consult a tax professional before taking a distribution.
You may rollover funds in a 403(b) plan into a traditional IRA upon reaching age 59 ½ or separation from service. Consult your plan administrator for eligibility of in-service distributions.
Contact one of our investment professionals to obtain more information.
