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.

403(b) plans require that minimum distributions (RMD) begin the latter of:

  • When you reach age 70 ½ , or
  • When you retire (if after age 70 ½)

Required Minimum Distributions must begin by April 1 following the year you retire or when you reach age 70 ½ and by December 31st each year thereafter.

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  Investment earnings and dividends grow tax-deferred until funds are withdrawn from the account.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) plans 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.

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