In addition to either the State Employees' Retirement Plan or TIAA-CREF, Penn State employees are eligible to participate in a tax-sheltered investment program through convenient payroll deduction. These types of plans are permissible under Section 403(b) and Section 457 of the Internal Revenue Code. The 403(b) plan is a Tax Deferred Annuity Plan (TDA). The 457 plan is a Deferred Compensation Plan (DCP). You may participate in one or both of these plans.
You may enroll in an optional plan at any time during the year. Enrollments are due by the first business day of the month for that month's payroll deduction.
Both the TDA and DCP plans allow you to contribute a part of your income on a tax-deferred basis to a qualified retirement plan. When you receive benefits from your tax-sheltered investment, the payments will be reportable as income for tax purposes. Since the reportable income you receive at retirement is likely to be less than your income while working, you usually gain a tax advantage. Information on the TDA and DCP plans are provided below.
| Provision | Tax Deferred Annuity (TDA) | Deferred Compensation (DCP) |
|---|---|---|
| Contribution Limits |
Annual salary reduction contributions are limited to the following:
|
Annual salary reduction contributions are restricted to that year's basic contribution limit ($15,500 - 2008) Catch-up contributions are allowed. |
| Age 50 Catch-up Provision | If you are age 50 or older, you may contribute an additional $5,000 in 2008, above the maximum annual deferral amount. Amounts will be adjusted for inflation in subsequent years. | |
| Distributions |
Distributions must meet a qualifying event:
|
Distribution must meet a qualifying event:
|
| Rollovers | Rollovers are allowed if the guidelines of a qualifying event are met. Employer approval may be required. | Rollovers are allowed from a governmental plan if the guidelines of a qualifying event are met. Employer approval may be required. |
|
Additional Catch-up Provision (Cannot be used with the Age 50 and Over Catch-up Provision) |
"15 Year Rule": An additional amount up to $3,000 may be available if you have 15 years of service with a qualified organization and previous years' deferrals have averaged less than $5,000. (Not to exceed $15,000.) | "3 Year Rule": An additional amount up to $12,000* may be available if you have not deferred in previous years when you were eligible for a 457(b) Plan. This provision may be used only in the three years before you attain normal retirement age. |
| Loans | Yes, loans are available to the extent provided by the annuity contract or custodial account. | Yes, loans are available to the extent provided by the annuity contract or custodial account. |
|
Withdrawals (Only considered when an employee has no other resources including Plan loans). |
Withdrawals can be made any time after age 59½ or in the event of a Qualified Financial Hardship: Unreimbursed medical expenses, purchase of a primary residence, tuition expenses, funeral expenses, or prevention of a foreclosure or eviction. | Withdrawals can be made any time after age 70½ or in the event of unforeseen emergencies: unreimbursed medical expenses, casualty loss, sudden and unforeseeable emergency, funeral expenses, or prevention of a foreclosure or eviction. |
| Distributions | Distributions can be done any time after separation from state employment, financial hardship, death, at 59½, or at age 70½. You may roll over funds into other types of employer-sponsored plans, IRAs, or other eligible options. Penalty applies for withdrawals prior to age 59½. | Distributions can be done any time after separation from state employment, financial hardship, death, or at age 70½. You may roll over funds into other types of employer-sponsored plans, IRAs or other eligible options. |
Five investment companies are authorized to provide 403(b) tax-deferred annuity plans to Penn State faculty and staff. Two of these companies, TIAA-CREF and VALIC, also offer 457(b) deferred compensation plans. The company profile links provide general information about the company, including a list of available investments. Web page links provide access to the company's general web site information.
| WEB PAGES | COMPANY PROFILE |
|---|---|
| AXA Equitable | Equitable Profile |
| Fidelity Investments | Fidelity Profile |
| TIAA-CREF | TIAA-CREF Profile |
| VALIC | VALIC Profile |
| Vanguard | Vanguard Profile |
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