The LSU System provides the opportunity for you to participate in tax-deferred annuities [also referred to as tax-sheltered annuities (TSAs) or supplemental retirement accounts (SRAs)] through payroll deduction. The LSU System, in compliance with the new 403(b) regulations, adopted a formal tax-deferred annuity “plan” or “plan document” effective January 1, 2009. Your participation is totally voluntary and the LSU System does not make any contributions on your behalf.
Note: This summary is not intended to advise you on any investment risks or tax issues arising from investing in any of these options. The intent is to answer many of the most commonly asked questions regarding these types of accounts. You may wish to contact your tax advisor or legal counsel for assistance in determining which option is best for you.
Benefits of an Supplemental Retirement Account (SRA)
An SRA allows you to set aside a portion of your salary before federal and state income taxes are paid. This deferred salary (before-tax deductions) is placed into an investment account of your choice. Participating in an SRA allows you to delay payment of taxes on the money you invest and any interest that money has earned until later- usually at retirement.
Sample Benefit Calculation
[Your Pay] - [Before-tax Deductions] = Taxable Income
[Taxable Income] – [Income Tax Withholding and Other Deductions] = Spendable Pay
Example: Assuming $100/Month ($1200/year) Savings
|With 403(b)||Without 403(b)|
|Annual Salary (Gross Pay)||$30,000||$30,000|
|Less 403(b) or 457(b) Savings||- $1,200||N/A|
|Less Retirement Contribution (8%)||- $2,400||- $2,400|
|Less Federal Tax*||- $3,960||- $4,140|
|Less Medicare Tax||- $435||- $435|
|Less After Tax Savings||N/A||- $1,200|
|Remaining Spendable Pay||$22,005||$21,825|
*Assumes federal tax bracket of 15%. Savings will be even greater for person in higher tax brackets.
The maximum amount that may be tax-sheltered is determined by federal law and is set by the IRS each calendar year. If you are age 50 or older you may be eligible to contribute an additional amount as described in the “Catch-Up Provision.” To request a calculation, contact the Payroll Office.
Types of SRA Programs
The LSU System cannot guarantee the success of the SRA products or the level of service and we urge you to fully review the product before you participate.
LSU offers two forms of supplemental retirement accounts - the 403(b) and the 457(b). The federal government has made it possible for “not-for-profit” healthcare organizations, education institutions, and charitable agencies to allow their employees to tax-defer income through the Internal Revenue Service Code Section 403(b). They have also allowed for government entities to offer such programs to their employees through the Internal Revenue Service Code Section 457(b).
The 403(b) plan (through ING, TIAA-CREF, VALIC or MetLife) offers LSU System employees several options in terms of who they can invest their money with. Along with the several companies you have to choose from, you also have numerous funds available to you in which you can diversify your retirement portfolio. Termination of employment with the LSU System would allow you to roll your funds over to an IRA or other qualified plan. Early withdrawal penalties will be assessed if you withdraw your money prior to obtaining age 59½.
The 457(b) plan (through State of Louisiana Deferred Compensation Plan/Great West Financial Services) offers LSU System employees one option through the State of Louisiana Deferred Compensation Plan, the exclusive provider. Termination of employment with the LSU System would allow you to roll your contributions over to an IRA or other qualified plan or receive a cash distribution without an early withdrawal penalty.
You are eligible to maximize contributions to both a 403(b) and 457(b) account at the same time. However, you are only allowed to have one 403(b) agreement at one time. Employees may switch supplemental retirement account vendors at any point during the year.
Benefits of a 403(b) and a 457(b) Plans:
• Decide how much to save (subject to the minimum and maximum deposit limitations).
• An annuity settlement
*Both programs offer annuity contracts and mutual fund investment options.
Administers of Supplemental Retirement Accounts
TIAA-CREF - Teachers’ Insurance and Annuity Association – College Retirement Equity Fund
VALIC - Variable Annuity Life Insurance Company
DCCL - Louisiana Deferred Compensation Plan (DCCL)
Enrolling and/or Inquiries
403(b): For employees who are interested in opening a 403(b), except for with TIAA-CREF, contact the representative for the company of your choice using the information provided below. They representative will set up a meeting with you to complete the enrollment paperwork. For employees interested in opening a 403(b) with TIAA-CREF, click here for the 403(b) Enrollment Contract with TIAA-CREF. Return the completed contract along with a completed Salary Reduction Authorization form to 110 Thomas Boyd Hall.
• TIAA-CREF: Mark Digiovanni: 1-866-836-8935
• ING: Mike Sotile, Brandon Goll and Julie Russell: 225-766-8711
• VALIC: Mindy Lewis: 225-201-1009 or David Mills: 225-201-1060
• Met Life: Clyde J. Bohne, III: 225-765-7576, ext. 2261
To adjust contributions to an active 403(b), submit the Salary Reduction Authorization form to 110 Thomas Boyd Hall.
457(b): For employees who are interested in opening a 457(B)/Deferred Compensation supplemental retirement account, click here to obtain an enrollment form and the Salary Deferral Agreement. Return the completed enrollment forms to 110 Thomas Boyd Hall.
• La. Def Comp: Chris Burton: 225-926-8082, ext. 35507 or 1-800-937-7604
Once the supplemental 457(b)/Deferred Compensation account is open, employees may start, stop, increase, or decrease their contributions as necessary. To adjust contributions to a 457(b) account that is already open, complete and return the Deferred Compensation Salary Deferral Agreement form to 110 Thomas Boyd Hall.
Optional Retirement Plans Quarterly Fund Performance
Click here for ING's Fund Performance
Click here for TIAA-CREF's Funds Performance
Click here for VALIC's Fund Performance
Click here for MetLife’s Fund Performance
Do you want an alternative to ING’s 403(b)? ING offers an EZ-Enrollment Retirement Program. It’s a simplified “one-and-done” investment solution, providing a simple straightforward investment for your retirement account. You simply choose which ING Solution Portfolio tracks closest to the year you plan to retire, and ING’s professional investment managers do the rest. Click here for to learn more and to enroll in ING’s EZ-Enrollment Retirement Program.
There are two types of annuity contacts: fixed annuities and variable annuities.
The fixed annuities provide a guarantee of principal and a guaranteed rate of return. Fixed annuities also provide for fixed periodic payments at retirement and a specific rate of return for a certain period of time. At retirement, you can select from several payment options, depending on the investment contract or policy you have chosen.
The variable annuities invest mainly in stocks, bonds, and money market funds and do not have a fixed rate of return or a guarantee of principal. The amount of money you receive at retirement or your monthly retirement payments will vary, depending on the investment performance of the fund. This type of investment relies on growth over a period of time to increase the value of the fund. There are no guarantees that your account will grow; the value of your account can go up or down with the investment performance of the fund.
Some of the companies offer a combination of both fixed and variable annuities. You may specify the percent or amount of each deposit that is to be invested in each account.
The custodial accounts available through the mutual fund companies are very similar to the variable annuity option described above.
The value of your account can go up or down with the investment performance of the fund.
Withdrawing Money from your SRA
While Still Employed: The main purpose of the SRA is to help provide you with long-term financial security through current tax-efficient savings. In exchange for the tax breaks the IRS gives, you, government regulations limit withdrawals while you are employed. In addition, some investment companies have policy or contract restrictions that may include fees or interest penalties for early withdrawal. Be sure to review the company’s policy before making your decision. Withdrawal forms may be requested from your investment company or its representative
There are instances in which you would be eligible to withdraw this money in the event of a hardship. In order to qualify for a hardship, you must have a verifiable, immediate, and heavy financial need. The withdrawal must be necessary to meet the need; in other words, you are unable to meet the need from any other source. In this case, you can withdraw only your contributions, not the earnings on them.
If you withdraw money from your 403(b) SRA before 59 ½ you must pay a 10% penalty tax on the amount withdrawn unless the distribution meets one of the following requirements:
|• It is due to termination of employment on or after age 55;|
• It is in the form of substantially equal payments for life or life expectancy, after termination of employment;
• It is due to disability or death;
• It is for non-reimbursed medical expenses to the extent allowed to be itemized on your income tax return (more than 7.5% of adjusted gross income);
• It is a payment to an alternate payee directed by a qualified domestic relations order (QDRO).
403(b) Withdrawal Election form should be submitted to 110 Thomas Boyd Hall to apply for a withdrawal.
If you leave the LSU System, your deposits to the SRA will stop. The deposits and earnings you have accumulated can be withdrawn and paid to you (or your beneficiary if you die). Contract or policy withdrawal restrictions will apply.
Distributions made that are not part of a series of substantially equal payments made over a period of 10 years or more, or that are not required to be made under the IRS minimum distribution rules, may be rolled over to an IRA. You may also elect not to defer any tax liability. Any withdrawals that are not directly rolled over to an IRA or another SRA will be subject to tax withholding of 20%.
In addition, if you are not yet 59 ½ and do not meet any of the criteria explained under the governmental restrictions outlined, your distribution from a 403(b) will be subject to a 10% penalty tax according to IRS regulations. This penalty tax is in addition to any contract or policy withdrawal restrictions that may apply.
In the Event of Your Death
In the event of your death, your beneficiary must contact the investment company or its representative to receive withdrawal information.
When you enroll in an SRA, you will be given a beneficiary designation form that contains all the information for beneficiary election. In the event you want to change your designation of beneficiary, you need to contact the investment company or its representative.
Required Minimum Distributions
403(b) and 457(b) SRA Plans must begin by April 1 of the year following the later of these two events: you attain 70 ½ years of age or you retire.