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403(b) Tax Sheltered Account
What is a 403(b) plan?The 403(b) is a tax deferred retirement plan available to non-profit organizations. 403(b) refers to a section of the Internal Revenue Code that allows employees of these non-profit institutions plan such as AURA, to set aside money in retirement savings accounts. When may I participate in the plan?All regular full-time and part-time employees who are scheduled to work at least 20 hours per week are eligible to participate in the plan at any time. How does the plan work?You decide the amount of money you want to set aside for retirement on a pre-tax basis through a salary reduction agreement. You can choose either TIAA-CREF or Fidelity as you investment company. Each company provides a wide selection of investment options where your contributions are invested. Income taxes on your contributions and any earning on those contributions are paid when you withdraw your funds from the plan. Why should I participate in a Tax Sheltered retirement account?A healthy retirement, lower taxes and tax savings. You have access to a full range of investments with TIAA-CREF and Fidelity and you can maximize your retirement savings while reducing your federal and state taxes. How much of my salary can I contribute?The yearly maximum you can set aside on a pre-tax basis into your 403(b) is $13,000* or up to 100% of compensation (if less than $13,000) for 2004 and increases incrementally each year until 2007 when the maximum will be $15,500 annually. *Certain "catch-up" provisions allow extra amounts to be contributed for those over age 50 at any time in 2004. An additional $5000 can be contributed making the maximum contribution $15,500 annually. Under the Economic Growth and Tax Relief Reconciliation Act (EGTRRA)of 2001, the maximum yearly contribution increases on an established schedule each year. When there is an increase in the allowable maximum you will need to complete a new authorization form to change your deduction to the new maximum if your current percentage does not meet the maximum. You will need to complete the authorization for the catch-up provision each year. How is a 403(b) different from a 401(k)?Basically, the 401(k) is a tax-deferred retirement plan for private sector employees, while the 403(b) is a retirement plan of educational and certain non-profit organizations. How will my state and federal taxes be affected?Your federal and state taxes will be decreased by your contributions. The larger your contribution, the greater the tax reduction. Do I have to pay social security taxes?Yes, FICA taxes are not affected by your tax-deferred contributions to your 403(b). I didn't start my deductions at the beginning of the year. May I still contribute the maximum?Yes. If you designate the maximum contribution on your authorization form, the payroll department will determine the percentage of your income you will need to reach the current year maximum provided your remaining income covers the maximum (less FICA and other deductions). I am married. Can I name my children or others as beneficiaries?Rules under ERISA require that your spouse be named for at least 50% unless they sign a waiver of consent. May I combine my other retirement account from a previous employer with my AURA account?The plan does allow rollovers from qualified plans; however the Plan Administrator must approve the rollover. You can contact your investment company to find out the compatibility between the plans. Both TIAA-CREF and Fidelity maintain customer service centers that can be accessed toll-free and web sites where you could obtain information.
Is there a plan document that I can review?The plan document is available for inspection in the Human Resources Office.How can I find out how much has been contributed to my account?Every payday, your pay stub should have the amount of your current and year-to-date contributions listed. You will also receive a quarterly statement from the company that you set up your account with. You may also access this information on the respective companies web site Fidelity netBenefits or TIAA-CREF Web Center once you establish a pin. Please review your paycheck stub and statement for accuracy. Can I change my investment allocation at any time?You can change your investment allocation choices within the same company to any that are available through the AURA plan. Can I stop contributing?Yes. You may stop contributions at any time. How many funds are available?There are currently two funds TIAA-CREF and Fidelity. Upon determining your company of choice, you may choose any number of available funds from within that company. You cannot contribute to both TIAA-CREF and Fidelity. May I switch from one Investment Company to another?Yes, you may stop your investments in one company and invest in the other. What happens to my account when I terminate?You may leave it in your 403(b) plan account until decide what you want to do with it. If you decide to withdraw it and take it in cash, you may be subject to a 10% penalty and a 20% tax-withholding requirement. The only way to protect your full investment and the accrued interest is to move your funds into a direct rollover account. By doing this, you will not be subject to any taxes or penalty at that time. You should consult with a qualified tax advisor before purchasing any other investment for your retirement time. What should I consider when I retire?As you near retirement you will need to consider your immediate as well and long-term financial needs. Who can I contact if I have further questions?
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