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 to age 72 (previously age 70-1/2). December 2023 SECURE 2.0 raised the RMD age limit to 73. In 2033 the RMD age limit increases to age 75.
403(b) plans require that minimum distributions (RMD) begin the latter of:
- When you reach age 73 (age 75 in 2033), or
- When you retire (if after age 73 or after age 75 in 2033)
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 Investment earnings and dividends grow tax-deferred until funds are withdrawn from the account.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.
