What is a TSA

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Basics
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Everything You Always Wanted to Know About TSAs
and More!
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What Is a TSA?

• Public Law Passed by Congress in 1958 to

• equalize benefits between profit and non-profit
  organizations
• provide a method of saving on a pre-tax basis
• be funded by salary reduction with employer
  approval
• defer current taxes on deposits and earnings

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Who Can Participate in a TSA?

• Employees of certain healthcare and non-profit
  organizations as well as employees of public
  education systems

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Why Should I Participate?

• Seek retirement security
• Defer taxes
• Loans and withdrawals - subject to IRS guidelines

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When Should I Begin Saving For Retirement?

• As soon as you begin earning a salary!

- the effects of procrastination can be
staggering
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When Should I Begin Saving for Retirement?

• As soon as you begin earning a salary

- the effects of procrastination can be staggering
Saving 2400 per year at various rates of return
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Less Now Is More Later
Everyday you wait to invest in your retirement,
the cost goes up.
1st Case

• Person puts off saving until 40 years of age,
  saves 200 per monthly pay to age 65 2400/yr.
  for 26 years (i.e., 62,400)
• Person saves 200 per monthly pay from age 26-40
  2400/yr. for 15 years (i.e., 36,000) and
  saves nothing beyond that
• Who has more at age 65?

2nd Case
Assumptions 8 annual return, contribution
monthly. Earnings tax deferred. No withdrawals.
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Less Now Is More Later

• When investing for your future, time is your best
  friend and lack of time is your worst enemy!

267,254
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How Does a TSA Work for Me?
Assumptions
Current Savings method is after taxes
Tax Rate 28 Saving/Pay 200
Current Pay w/o TSA
Current Pay with TSA
By saving with a TSA you have increased
your spendable income by 56 per pay 672 per
year!
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How Does a TSA Work for Me?
What happens when you keep your spendable income
the same, butsave through a TSA instead of after
taxes?
Assumptions
Tax Rate 28 Saving/Pay 200
Current Pay w/o TSA
Current Pay with TSA
You have increased your savings by 77 per pay
924 per year, by saving through a TSA instead
of saving in an after tax plan all without
changing your spendable income!
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Will My Money Grow Faster in a TSA Than in an
After Tax Investment?

• Sure

Saving after taxes you must report your earnings
as taxable income at the end of the year. With a
TSA, you do not report your earnings as taxable
income on an annual basis. Instead, you will
only pay taxes when the money in the plan is paid
out to you.
For withdrawals prior to age 59 1/2 a 10
federal income tax penalty may apply
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Will My Money Grow Faster in a TSA Than in an
After Tax Investment?

• Sure! Let me show you how

277 (TSA) 28 7.00 (
tax-deferred)
Saving Per Pay Marginal Tax Rate Interest Rate
200 (after tax) 28 7.00 (5.04 after tax)
OR
After Tax (at year-end 35)
230,211
361,298
Increased savings of 131,087 after tax!

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What Are My Investment Options?
There are 3 basic types of TSA investment options
available

• Guaranteed fixed annuities
• Variable annuities
• 403(b)(7) mutual funds

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You May Choose . . . . . . .
Guaranteed Fixed Annuities
Mutual funds
Variable Annuities
Investment Options No Guarantee of Principal May
or May Not Have a Loan Provision Switch Between
Funds No Guaranteed Death Benefit No Annuity
Options
Guarantee of Principal Guarantee of
Interest Current Rate Loan Provision Annuitization
Lump Sum Withdrawal Partial Withdrawal Death
Benefit
Investment Options No Guarantee of Principal
(except in the fixed account) Loan
Provision Switch Between Funds Death
Benefit Annuitization Lump Sum Withdrawal Partial
Withdrawal
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What TSA Investment Choice Should I Make?

• Your financial service representative will assist
  you in making the appropriate choice

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Is This Like an IRA, Where My Savings MUST Stay
Until Retirement?

• No. A TSA permits you access to your savings by
  loans, and in some instances you may take a
  withdrawal

Withdrawals subject to income tax and may be
subject to IRS 10 penalty if taken before age
59 1/2. Product withdrawal charges may also
apply.
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How Much Can I Save?

• Generally, up to 25 of your income not to
  exceed 10,000. You may be eligible for an
  additional 3,000 increase in your maximum
  allowable contribution after 15 years of service.
  All contributions subject to IRS guidelines. Your
  financial representative can assist you in
  determining your personal maximum.

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What About TSA Withdrawals?

• Any funds deposited in a TSA prior to 12/31/88
  may be withdrawn without qualification (10
  penalty may apply)
• Deposits after 12/31/88 may be withdrawn under
  these guidelines
• No Penalty
• - 59 1/2 or older
• - death
• - disability
• - separation from service after attainment of
  age 55
• 10 Income Tax Penalty
• - separation from Service prior to attainment
• of age 55
• - financial hardship

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What Constitutes a Financial Hardship?

• Purchase of the participants principal residence
• Payment of the next 12 months of post-secondary
  tuition and related educational fees for the
  participant, the participants spouse or
  dependents
• Medical expenses incurred by the participant, the
  participants spouse, or dependents
• Prevention of eviction from the participants
  principal residence or foreclosure of a mortgage
  on the principal residence

IRS guidelines may require that you cease
contributions for 12 months and then reduce
contributions for remainder of calendar year.
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What About TSA Loans?

• Maximum loan permitted by the IRS
• Account Balance Loan Amount
• 0-9,999 100 of loan value available
• 10,000-19,999 10,000
• 20,000 50 up to 50,000
• Loan repayment
• 5 years repayment on a general loan and up to 30
  years repayment on a loan to acquire principal
  residence
• Missing payment may default entire loan

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May I Make Changes to My TSA Program?

• Change savings amounts (subject to employer)
• Stop and start the program (subject to
  employer/IRS limitations)
• Transfer funds between TSA accounts
• Re-direct current deposits
• Your TSA is portable - it can follow you when
  you change employers

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Do I Have Choices As to How I Receive My Money at
Retirement?

• Lump sum withdrawal
• Life with period certain
• Period certain
• IRA rollover

• Partial withdrawals
• Systematic withdrawal
• Life income

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Your Financial Service Representative

• A professional who is qualified to assist you
  with financial and retirement planning
• Will help you
• calculate your Maximum Allowable Contribution
  (MAC)
• do paycheck comparisons
• project future values
• do retirement calculations
• complete risk profile analysis
• provide asset allocation modeling

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How Do I Set Up a Meeting With a Financial
Service Representative?

• Indicate you want an appointment on your TSA
  basics attendance card
• Included in your packet

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What Do I Need to Bring When I Have a
Confidential Meeting With My Financial Service
Representative?

• Your most recent paycheck stub
• Previous TSA statements
• Your spouses most recent paycheck stub
• Most recent employer retirement benefit statement
• Most recent other savings/investment statements
  (i.e. CD, Mutual Funds, Savings Accounts, etc.)

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