At League Financial & Insurance Services (www.LeagueFinancial.com)
we are committed to fulfilling the retirement needs and other financial
concerns of Teachers, Hospital employee’s, and non-profit employees with
product and services that best fit their personal situation. Specifically, we
provide information and guidance regarding 403(b)/TSA’s, Tax Sheltered Life,
and Cafeteria Section 125 "Flex-Ed" programs.
Our systems are established and firmly positioned to help you fulfill these
kinds of needs while showing you how to best utilize pre-tax dollars to
off-set the 30-40% retirement income deficit (the better known "Retirement
Gap") that will occur upon the retirement of such persons. Our company’s focus
is to support the financial goals of businesses, school systems, teachers,
churches, hospitals and nonprofit organizations through retirement programs
offering attractive interest rates, tax benefits and financial security.
So that we can be of direct help to you please send, or fax us
(1.310.861.8466), a copy of your most recent STRS/PERS Annual Plan Statement
along with copies of your 2 most recent pay stubs, since this kind of
information will help us in preparing a comprehensive set of personalized
recommendations and strategies for you that include: TEST
-
Reducing income taxes.
-
Demonstrating unique methods for initiating and/or
increasing 403(b) contributions to establish greater financial
independence.
-
Increasing retirement benefits and assets to avoid
the "Retirement Gap."
-
Paying off outstanding debts with the help of tax and
interest savings.
-
Creating lower interest rate lines of credit.
- 403(b)/TSA
Overview -
|
Tax
Rate |
Annual Contributions |
Annual
Tax Savings |
|
15% |
$3000 |
$450 |
|
28% |
$3000 |
$840 |
|
36% |
$3000 |
$1080 |
|
Gross
Pay |
Tax Withholdings* |
Sub Total |
Savings |
|
$3000 |
$840 |
$2160 |
$300 |
TSA Savings (note the reduced tax withholding due to the pre-tax savings)
|
Gross Pay |
Pre Tax Savings |
Adjusted Gross |
Tax Withholdings* |
Net Pay |
|
$3000 |
$415 |
$2585 |
$724 |
$186 |
*assuming a tax rate of 28%
When can I make any withdrawals from a TSA?
At
age 59 1/2, or 55 if you are separated from service.
IRS
imposes penalties for withdrawal prior to age 59 1/2.
Is there any access to the TSA account?
Yes,
most TSA’s allow you to borrow by using the TSA as collateral,
without incurring any taxes or penalties.
When are taxes paid on a TSA?
When the funds withdraw, and as "ordinary income" in the year you receive
them.
Do I have any options regarding withdrawals?
Several options are available:
Lump Sum
Monthly, quarterly or annual payment
Payments for certain periods
Payments for certain amounts
Lifetime payments
What happens to the TSA if I die?
The
named beneficiary will become the new owner of the account.
The
TSA proceeds are not subject to probate.
How much can I contribute into my TSA?
The MEA or Maximum Exclusion Allowance for 403(b) plans are now the lesser
of:
-
$40,000 or 100% of the employee’s compensation - Annual Addition Limit.
-
$11,000 - Elective Deferral Limit.
PORTABILITY/ROLLOVERS: Eligible rollover distributions are no longer
limited to an IRA or another 403(b) and now also include: 457(b); a
qualified plan under 401(a), or another 403(a) qualified Annuity (NOTE:
there remain the following non-eligible rollover distributions: SEPP -
Substantially Equal Periodic Payments; RMD - Required Minimum Distributions;
hardship distributions; excess contributions; defaulted loans; and PS 58
costs).
How Does A TSA Compare To An IRA?
|
TSA |
IRA |
|
Tax benefits are usually realized every paycheck. |
Tax benefits are realized when you do your taxes once a year. |
|
Easier to save because it’s done on a monthly basis. |
Usually you save in a one lump sum basis. |
|
Tax free loans available at approx. a 2-4 % effective cost. |
No loans are available. |
|
May avoid probate. |
May not avoid probate. |
|
Tax benefits on any income. |
If single, lose tax benefits on a graduated basis of AGI, between
$25k-35k, or, if filing joint return, between $40-$50k. |
|
Withdrawal age is 59 1/2. |
Same |
|
Systematic withdrawals must begin by age 70 1/2. |
Same |
IRS AMENDS REQUIRED MINIMUM DISTRIBUTION 403(b) BEGINNING DATE RULE:
The IRS has indicated that Treasury will correct a typographical error in the
regulation concerning 403(b) provisions. The correct regulation will indicate
that all 403(b) plans are subject to the qualified plan rule, except that the
five percent owner rule does not apply. Treasury will make this
correction by changing the reference in Prop. Treas. Reg. §403 (b)-2, Q-1(c)
from Code §403(b)(9) to Code §403(b)(10). The change in the regulation will
make the 403(b) plan required beginning date consistent with Code
§401(a)(9)(c), IRS Notice 96-67,403(b) examination guidelines and IRS
Publication 571.
(CLICK
HERE TO lINK
TO
THE IRS PUBLICATION ON TSA - 403B
PLANS)
Disclaimer: The material discussed herein
is meant for general illustration or informational purposes only and is
not to be construed as financial advice. Although the information has been gathered from sources believed to
be reliable, it is not guaranteed. Please note that individual situations
can vary; therefore, the information contained herein should be relied upon only when
coordinated with individual professional advice. We are not licensed for
and therefore do not provide tax or legal advice.
About
the Author: Paul M.
League, QFP, CFP® is the Founding Principal of both League Financial & Insurance
Services (www.LeagueFinancial.com) & League Financial Services (www.LeagueFS.com),
which are privately held companies
located in Palm Desert, CA.
Paul and his companies specialize in assisting clients to
create, expand & preserve assets. Contact Information: Paul M. League, QFP, CFP®, P.O. Box
11800, Palm Desert, CA 92255-1800 · 800.482.5347 ·
Info@LeagueFinancial.com.
©Paul M. League. All Rights Reserved.
