|
Tax Deferred Retirement Saving Plan Comparison* |
||
| Effective January 1, 2007 | TSA Section 403(b)** | DCP Section 457(b)** |
| Eligibility | Employees of schools, hospitals, and other charitable or educational organizations. | Employees of a state/local government, public school/college. |
| Salary Reduction | Yes | Yes |
| Established only with employer involvement | Yes | Yes |
| Tax treatment of contributions and investment income | Federal and State (Ohio) income taxes deferred. | Federal and State (Ohio) income taxes deferred. |
| Contribution Limit (2006) *Employees may contribute to both plans up to their respective limits, potentially allowing up to $31,000 per year. |
Up to the lesser of 100% of compensation or
$15,500.
|
Up to the lesser of 100% of compensation or
$15,500.
|
| Catch-Up Contributions (2006) *Only one catch-up provision per plan may be elected in any one tax year. |
Employees who are age 50 or older are able to
contribute an additional $5,000 per year. After 15 years of service with the same employer, employees who underutilized deferrals from previous years may be able to contribute an additional $3,000 per year for a lifetime total of $15,000. |
Employees who are age 50 or older are able to
contribute an additional $5,000 per year. During 1 or more of the 3 years prior to normal retirement age, the catch-up limit for employees who underutilized deferrals in previous years will be twice the dollar limit in effect for the year, subject to the other requirements applicable to the 457(b) catch-up limit. |
| Permitted Investments | Annuity contracts, mutual funds, money market funds, and unit investment funds. | Annuity contracts, mutual funds, and guaranteed return. |
| Ownership of Investments | Employee | Employer |
| Possible Distribution Events | Death, age 59-1/2, termination of employment, financial hardship. | Death, termination of employment, approved financial emergency. |
| Definition of Hardship/Emergency | College tuition, home purchase, eviction. | Accident or illness, catastrophe loss. |
| Tax-Free Loan | Available if offered by investment provider. | Available if offered by investment provider. |
| Penalty for Early Distribution | 10% IRS penalty may apply for distributions prior to age 59-1/2 in addition to normal income taxes. | Upon termination of employment, no early withdrawal penalty for distributions at any age. Normal income taxes apply. |
| IRS Required Minimum Distribution | Later of age 70-1/2 or termination of employment with eligible employer. Contributions permitted at any age. | Later of age 70-1/2 or termination of employment with eligible employer. Contributions permitted at any age. |
| Distribution Restrictions | Total distribution over lives or life expectancy of participant and named beneficiary. | Total distribution over lives or life expectancy of participant and named beneficiary. |
| Tax Treatment of Distributions | Taxed as ordinary income. | Taxed as ordinary income. |
| In-Service Transfers | To another 403(b) provider. | To another eligible 457(b) plan if both plans permit. |
| Rollovers | To an IRA after separation or age 59-1/2. | To an IRA after separation. |
*403(b) and 457(b) funds can be used to buyback STRS, PERS,
and SERS Service Years Credit beginning January 1, 2002
*This outline compares some, but not all provisions of these retirement plans.
Because of the outline format, the information is simplified and cannot be fully
accurate. To learn more, contact a Tax
Deferred Annuity Representative of your choice.
**Information provided by J. Seckel of AIG VALIC (403(b)), and Ohio Public
Employees Deferred Compensation (457(b)).