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 –

  • What is TSA (Tax Sheltered Asset – Using Either Annuities or Mutual Funds)?

A TSA is a saving program under Section 403b of the IRS Code which allows you to accumulate funds, free of income tax, toward your retirement and you pay no taxes until withdrawal.

  • Who is eligible for a TSA?

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    Any employee of public schools like teachers, colleges, universities and certain nonprofit organizations.

  • How do I contribute to a TSA?

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    Through a payroll deduction.

  • What are benefits of a TSA?

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    It is a saving toward retirement. You save by deferring some of your federal and state taxes.

    Tax Rate Annual Contributions Annual Tax Savings
    15% $3000 $450
    28% $3000 $840
    36% $3000 $1080
    Regular Savings
    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 — QUALIFIED FINANCIAL PLANNER, is the Founding Principal of League Financial & Insurance Services (www.LeagueFinancial.com), which is a privately held company, established in 1984, and located in Palm Desert, CA. Paul and his company specialize in assisting clients to create, expand & preserve assets “…in a league of our own.” Contact Information: Paul M. League, P.O. Box 11800, Palm Desert, CA 92255-1800; 800.482.5347; Info@LeagueFinancial.com. © Paul M. League. All rights reserved.

     

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