TSA/403(b) Plans

A TSA/403(b) is a plan which allows employees of educational institutions and certain organizations to make pre-tax contributions towards their retirement savings. Contributions and any investment earnings in a TSA/403(b) grow tax deferred until withdrawal (assumed to be retirement), at which time they are taxed as ordinary income.

Eligibility Requirements

You must be an employee of a public school system or an organization under Section 501(c)(3) of the Internal Revenue Code, including but not limited to the following; non-profit hospital, religious organization, humane society, social welfare agency, charitable institution, museum, symphony orchestra, zoo, library or public university.

If your employer is uncertain about its eligibility/501(c) (3) status, they can refer to IRS Publication 557 or see IRS Publication 571, which covers 403(b) plans.

Contribution Flexibility

Elective Deferral Contribution: A deferred contribution arrangement of an employer-sponsored retirement plan under which participants can choose to set aside part of their compensation (via employee paycheck) as a pre-tax contribution to the plan.

Tax Advantages

A TSA/403(b) account is a cost-effective way to save for retirement by contributing a percentage of your salary to an account you control.

• TSA/403(b) contributions are made on a pre-tax basis, which reduces a participant's current taxes. For example, a contribution of $100 a month could reduce current Federal Income taxes by roughly $25/month (assuming a 25% marginal tax bracket).
• Dividends, interest, and capital gains accumulate in a TSA/403(b) account on a tax-deferred basis.
• Distributions are taxed as ordinary income, which may be at a lower rate after retirement.

Talk to your employer about options at your organization. While State Farm does not offer TSA/403(b) Plans, a State Farm agent can help you as you plan for retirement. A Traditional or Roth IRA may be an option.

AP2009/08/3196