As an employee of an educational institution, you have the opportunity to enjoy significant tax savings--through pre-tax investing and tax-sheltered compounding of earnings--while building toward a more comfortable retirement. One of the best ways to invest for the future is through a special plan known as a 403(b) tax-deferred (TDA) or tax-sheltered annuity (TSA).
Named after the Federal tax section that governs it, the 403(b) plan is a powerful and unique way to invest. Other investments can have various purposes (saving for a home or a child’s education, for example), but a 403(b) TDA is specially designed to help you prepare today for a secure retirement in the future.
The chief advantage of a TDA plan is that your earnings are allowed to grow and compound year after year, without being reduced by Federal or state taxes. Of course, once you begin removing money from your TDA at retirement, you will pay taxes, based upon your income and state residency at that time.
How much can I contribute?
The maximum annual amount that may be tax-deferred is limited by the
Internal
Revenue Code. The Economic Growth and Tax Relief Reconciliation Act of
2001 (EGTRRA), effective January 1, 2002,
increases the
maximum annual amount that can be set aside before taxes for later use as
a retirement income, as shown below:
| YEAR | AMOUNT | |
|---|---|---|
| 2008 | $15,500 | |
| 2009 | $16,500 |
An additional amount per year may be contributed for employees age 50 or older. These additional amounts are shown below:
| YEAR | AMOUNT |
|---|---|
| 2008 | $5,000 |
| 2009 | $5,500 |
An additional $3,000 per year may be contributed for employees with 15 or more years of services at KSU with a lifetime maximum of $15,000.
The university does not contribute to this plan.
When can I make withdrawals from my 403(b)
account?
Withdrawals are permitted at age 59 1/2, death disability, or
separation from service. You’ll pay income tax at your usual tax
rate
when you make a withdrawal for any
of these reasons. In
addition, a 10% penalty tax will be assessed on any withdrawal made
before age 59 1/2 because of separation from service.
How do I enroll in the TDA
program?
The first step is to choose a TDA provider, establish an account eligible
to accept payroll contributions and complete
an
application with that company. You may choose from the listing of
approved companies, found on the Kansas Board
of Regents home page, at: http://www.kansasregents.org/download/vtsa.html.
Next, decide how much you want to save tax-deferred. Contributions must be made as a percentage or flat dollar amount of your bi-weekly gross salary.
Then, complete a Voluntary Retirement Plan Investment Agreement (pdf) and submit it to the Division of Human Resources to begin the payroll deduction. The Division of Human Resources will deduct the authorized amount from your future pay periods and forward the deductions to the company you selected.
Related Links:
Form: Kansas Board of Regents Voluntary Retirement Plan Investment Agreement (PER-19) (pdf)
Related KSU
Policy and Procedures Manual Chapter:
4810 Retirement
Plans, Policies and Procedures
Related Handbook:
University
Handbook, Section E: Leaves, Insurance, and Retirement Programs:
Retirement Programs