403(b) Tax Sheltered Annuity (TDA) Plan Overview
In addition to participating in The Ohio ARP or the State Teacher Retirement System, you can systematically save pretax dollars by contributing to the Tax Deferred Annuity 403(b) program, a voluntary supplemental retirement savings plan authorized under Section 403(b) of the Internal Revenue Code. Whether you are in the Ohio ARP or the state's Defined Benefit Pension Plans, you can enjoy the benefits of setting aside additional pre-tax dollars (above your employee contribution to the ARP or DB Plans) by contributing to a 403(b) Tax Deferred Annuity (TDA).
Highlights of the 403(b) Tax Deferred Annuity include:
- Choices and control of your investments
- Tax-deferred investing - Under the Internal Revenue Code, with a 403(b) program, you are taxed only when you begin taking distributions
- Portability of your account
Note: This program does not include an employer contribution.
You decide, within certain Internal Revenue Code (IRC) limits, how much of your income you want to invest. Your employer will reduce your paycheck before income tax by that amount and forward it to Voya Retirement Insurance and Annuity Company and invested according to your instructions. Because these contributions are made on a pre-tax basis, you won't be taxed until you begin taking distributions.
Employee Deferrals (including earnings) may generally be distributed only upon your:
- Attainment of age 59½
- Severance from employment
- Disability, or
Note: Hardship withdrawals are limited to Employee Deferrals made after 12/31/88.
No IRC withdrawal restrictions apply to:
- 88 cash value (Employee Deferrals, including earnings, as of 12/31/88)
- Employer Contributions (including earnings)
For 403(b)(1) fixed or variable annuities, employee deferrals (including earnings) may generally be distributed only upon your: attainment of age 59½, severance from employment, death, disability, or hardship. Note: Hardship withdrawals are limited to employee deferrals made after 12/31/88. Exceptions to the distribution rules: No Internal Revenue Code withdrawal restrictions apply to ’88 cash value (employee deferrals (including earnings) as of 12/31/88) and employer contributions (including earnings). However, employer contributions made to an annuity contract issued after December 31, 2008 may not be paid or made available before a distributable event occurs.
Such amounts may be distributed to a participant or if applicable, the beneficiary: upon the participant's severance from employment or upon the occurrence of an event, such as after a fixed number of years, the attainment of a stated age, or disability. For 403(b)(7) custodial accounts, Employee deferrals and employer contributions (including earnings) may only be distributed upon your: attainment of age 59½, severance from employment, death, disability, or hardship. Note: hardship withdrawals are limited to: employee deferrals and ’88 cash value (earnings on employee deferrals and employer contributions (including earnings) as of 12/31/88).
- One Loan is allowed every 12 months.
- For non-residential loans, the required minimum individual account value is $2,000. The minimum loan amount is $1,000.
- For residential loans, the required minimum individual account value is $5,000. The minimum loan amount is $2,500.
- Amounts to satisfy the loan will not be taken from the Guaranteed Accumulation Account (GAA) or Voya U.S. GET Core Portfolio (GET). However, GAA or GET funds may be transferred to other 403(b) investment options to qualify for a loan.
Please note: loans will reduce account balances, may impact your withdrawal value and limit participation in future growth potential. Other restrictions may apply.
There are several distribution options to choose from including:
- Lump sum
- Systematic distribution options
- Variety of fixed and/or variable lifetime-based or period certain payout options
Distributions will be taxed as ordinary income in the year the money is received, and will be subject to a 10% federal tax penalty if received prior to age 59½. Keep in mind, the IRS requires that you begin receiving Required Minimum Distributions (RMD) at the later of when you attain age 70 ½ or retire.
Your benefits will be distributed according to the payment method in effect at your death (consistent with the provisions of the plan, contract, and applicable Required Minimum Distribution) if you die while receiving benefits.
If you die before a payout starts, your beneficiary may elect to receive the value of your account or select one of several settlement options.
Mutual funds under a custodial or trust account agreement are intended as long-term investments designed for retirement purposes. Money distributed from a 403(b) plan will be taxed as ordinary income in the year the money is distributed. Account values fluctuate with market conditions, and when surrendered the principal may be worth more or less than the original amount invested. A group fixed annuity is an insurance contract designed for investing for retirement purposes. The guarantee of the fixed account is based on the claims-paying ability of the issuing insurance company. Although it is possible to have guaranteed income for life with a fixed annuity, there is no assurance that this income will keep up with inflation. Early withdrawals, if taken prior to age 59½ will be subject to the IRS 10% premature distribution penalty tax, unless an exception applies. An annuity does not provide any additional tax deferral benefit; tax deferral is provided by the plan. Annuities may be subject to additional fees and expenses to which other tax-qualified funding vehicles may not be subject. However, an annuity does offer other features and benefits, such as lifetime income payments and death benefits, which may be valuable to you.
Neither Voya Financial® nor its affiliated companies or financial professionals provide tax or legal advice. Please consult a tax adviser or attorney before making a tax-related investment/insurance decision.
Insurance products, annuities and retirement plan funding issued by (third party administrative services may also be provided by) Voya Retirement Insurance and Annuity Company (“VRIAC”), Windsor, CT. VRIAC is solely responsible for its own financial condition and contractual obligations. Plan administrative services provided by VRIAC or Voya Institutional Plan Services LLC (“VIPS”). VIPS does not engage in the sale or solicitation of securities. All companies are members of the Voya® family of companies. Securities distributed by Voya Financial Partners LLC (member SIPC) or third parties with which it has a selling agreement. Custodial account agreements or trust agreements are provided by Voya Institutional
Trust Company. All products and services may not be available in all states.