.
What is an annuity?
A contract between the annuity company and you which
assures that regular monthly payment will be paid to
you for as long as you live. If you do not wish to receive
lifetime payments, you may select an alternate payment
method.
What is the tax benefit?
A provision of the Internal Revenue Code Section 403(b)
allows you to defer from your taxable income, the portion
of your salary which is contributed to purchase an annuity
contract.
Who can take advantage of this plan?
The Before-Tax Annuity is designed for the faculty
and employees of universities, colleges, public school
systems, and certain non-profit organizations.
How does the tax benefit work?
Under a salary reduction agreement with your employer,
you will be reduced by the amount which will be sent
directly to the insurance company.
What interest will my account earn?
A competitive current interest rate. The current rate
is not guaranteed. The guaranteed interest rate is 4%.
Is there a minimum payment?
Payments cannot total less than $120 for the year.
No single payment should be less than $25.
Can I change the amount of contribution?
Yes. This agreement is between you and your employer
and can be changed by mutual agreement.
Are there withdrawal provisions?
You may withdraw up to 100% of the money paid to your
account plus the credited interest at any time. Unless
the withdrawal is made after 59 1/2 years of age or
on account of your death, disability, or medical expenses
meeting certain conditions, a 10% penalty tax will be
due on the amount withdrawn.
What are my options at retirement?
- You may elect a lump sum.
- You may elect to receive a monthly payment.
- You may elect to receive a life annuity with 120
months certain.
- You may elect to receive a monthly income for a
fixed period of years as allowed by the IRS.
What happens if I terminate my position?
- You may withdraw the value of your annuity account
which must be included as income for that tax year
and may be subject to the penalty tax
- You may leave your annuity account with the insurance
company and allow it to continue to earn interest
for you on a tax-deferred basis.
- You may elect an annuity option under which payments
will commence immediately when you retire.
- You may transfer your annuity account to a new
employer if your new employer will agree to make payroll
reduction available for your account.
What beneficiary options are available?
In the event your death occurs prior to retirement,
the contract provides that your beneficiary will receive
the value of your account.
How are contributions made?
The traditional way to fund a 403(b) is with employee
contributions. Pre-arranged amounts are deducted from
an employee's salary and contributed by the employer
to the account.
How do I start a 403(b) account?
You start the program by completing a salary reduction
agreement and the annuity application.
Why would I consider making contributions to a 403(b)
account?
- Tax incentive
- Investment advantage
- No current taxes on earnings
When can I make withdrawals?
Since your tax-deferred contributions and tax-sheltered
earnings on the contributions are intended for your
retirement years, the IRS allows withdrawals from your
403(b) account only if they are made for one of the
following reasons: you reached age 59 1/2, separated
from service, or become totally and permanently disabled.
How will I be taxed?
All distributions will be taxed as ordinary incomes.
If the distribution is considered an "eligible rollover
distribution", it is subject to an automatic 20% withholding
unless it is transferred by a direct rollover to either
an IRA or another 403(b) plan. In addition, any distribution
taken prior to age 59 1/2 may also be assessed a 10%
penalty tax since the IRS considers it a premature withdrawal
of retirement benefits.
At what age must I take withdrawals?
Distribution must begin by age 70 1/2 to avoid tax
penalties imposed by the IRS.
