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| |  What is a 403(b)?
A 403(b) plan, also known as a Tax-Sheltered Annuity (TSA) plan, is a tax-deferred retirement plan for full time and part time employees (working more than 20 hours) of certain tax-exempt or governmental organizations. An employer may sponsor a 403(b) plan to provide a benefit to its employees of the opportunity to save for retirement on a tax-deferred basis. The plan is primarily employee funded and generally provides favorable tax benefits if withdrawn at retirement.*
Why the new regulations?
The involvement of governmental entities, school districts, churches, and some 501(c)(3) organizations that sponsor 403(b) plans has traditionally been limited to making payroll deductions and forwarding contributions to the plan's investment providers. In years past, the federal government has not exercised significant oversight of 403(b) plans. However, in 1994 IRS audit activity began holding school districts and other 403(b) plan sponsors accountable for plan compliance. Many employers that became the subject of an IRS audit found themselves forced to either gain the competencies necessary to ruin the 403(b) plan in accordance with the Internal Revenue Code (IRC)or engage the services of a third party administrator (TPA). The "hands-off" approach of may employers also resulted in frequent abuse of 403(b) plan participants by high-cost investment and insurance companies.
In 2007, the IRS issued new 403(b) regulations for the first time in over 40 years. The new regulations shift the traditional 403(b) plan model toward that of 401(k) plans maintained by private employers. Previously, 403(b) plans required less employer involvement than 401(k) plans, however, the new regulations reinforce certain employer responsibilities and create new burdens for the employer. Many vendors no longer provide 403(b) Services.
Contribution Limits
2010 - 100% of includible compensation or $16,500, whichever is less
Catch-up contribution for age 50 or older is $5,500 for 2010
Distribution Events
Attainment of age 59 1/2
Disability, hardship or death
Qualified Domestic Relations Order (QDRO)
May allow loans
Distribution Requirements
Age 70 1/2 or severance of employment, whichever is later
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| | Securities offered through CUSO Financial Services, L.P., (CFS) are not NCUA/NCUSIF Insured, not Credit
Union Guaranteed and may lose value. KSFCU is in Partnership with CFS. Financial Advisors are employees of KSFCU and registered through CFS, (Member FINRA/
SIPC)
*For qualified tax advice see a Tax Professional. | |
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