What is a Tax Sheltered Annuity (TSA)?
Overview
The CSU 403(b) Tax Sheltered Annuity (TSA) Program is a voluntary program that allows eligible CSU employees to save toward retirement by investing pre-tax contributions in tax-deferred investments in either annuities or mutual funds, under Internal Revenue Code (IRC) Section 403(b). TSA contributions are made solely by the employee through payroll deductions, prior to federal and state taxes being calculated. Consequently, these pre-tax contributions result in reduced taxable income for participating employees.
The Internal Revenue Service (IRS) finalized new 403(b) regulations that were effective January 1, 2009. As a result, CSU made the following changes to the administration of its TSA Program:
- Implementation of VALIC as the Master Administrator for day to day administration; and
- Consolidation of fund sponsors and fund options.
Employees are allowed up to five (5) TSA deductions from the following fund sponsors:
- VALIC (Group Plan Number 01412001)
- Fidelity Investments (Group Plan Number 50537)
- ING (Group Plan Number vfr597 - Kit #140550)
- MetLife (Group Plan Number 1009800-01)
- TIAA-Cref (Group Plan Number 151163 - Access Code CA9988)
TSA enrollments and deferral changes are designated by employees via Retirement Manager, an online process through AIG Retirement, the Master Administrator. All salary reduction changes (stop, start, increase and/or decrease) are managed by the employee in Retirement Manager.
The cutoff day to make changes in Retirement Manager is the 5th of each month by 9:59 PM Pacific Standard Time (PST), or the next business day by 9:59 PM if the 5th falls on a holiday or weekend.
Fund investment selections are made directly through the fund sponsor(s) and employees can open a 403(b) account by accessing specific websites provided in the above links.
Annual Contribution Limits
Currently, two IRC limits apply: the IRC Section 402(g) "elective deferral limit" and the IRC Section 415(c) "percentage of compensation" limit. Currently, the contribution limit is 100% of adjusted gross income (up to $50,000), or a maximum of $17,000 per year.
Contributions to a 403(b) plan are not offset by contributions to a 457 plan. Employees can maximize contributions in both of these plans. For example, a participant could elect to contribute up to $17,000 to a 403(b) plan AND up to $17,000 to a 457 plan, for a total contribution of up to $34,000.
Contributions to a 403(b) plan are offset by any contributions to a 401(k) plan in the same tax year. Currently, employees contributing to both a 403(b) and 401(k) plan are restricted by IRS regulations to a combined total of $17,000.
Additional Catch-Up Provisions
Under IRC Code Section 402(g)(7), employees that have at least 15 years of service (full-time equivalent) with the CSU and have not maximized the annual contribution limits during this time, may be eligible to contribute an additional $3,000 per tax year for up to five years, for a total of $15,000. To take advantage of this additional catch-up allowance, proof of 15 years of service (annual CalPERS statement) and a completed Maximum Contribution Allowance Worksheet are required. The Worksheet below can calculate your annual maximum contribution amount based on information you provide. See below:
The age 50 catch-up is an age based catch-up allowance under IRC section 414(v). This provision allows employees that are or will turn age 50 by the end of the current tax year (December 31) to contribute an additional $5,500 to a 403(b) plan or to a 401(k) plan and also contribute an additional $5,500 to a 457 plan.
If an employee qualifies for both of the catch-up provisions, additional contributions will be first applied to the 15 year catch-up allowance and then to the age based catch-up provision.
More Information
For additional information regarding this program, including maximum contribution amounts, catch-up allowances, and administration of the TSA program, please refer to the following Comparison Chart and TSA Brochure, or contact the campus Benefits Office:
Information regarding 401(k) and the 457 plans administered by the Department of Personnel Administration (DPA) Savings Plus Program, can be obtained from their website at: www.sppforu.com.