A 403(b) TSA is a salary reduction contribution plan available to public school employees and employees of other specific 501(c)(3) tax-exempt organizations. Similar to a 401(k), a 403(b) TSA plan offers tax-deferred growth on pretax contributions from your paycheck.

Advantages

Flexibility
Within limits, an eligible employee can elect how much to contribute to a 403(b) TSA.

Pretax contributions
Eligible employees are allowed to make pretax contributions by deferring part of their compensation.  Employees can contribute up to $15,500* to their 403(b) plan.  Employees turning age 50 or older before the end of the year may contribute an additional $5,000* "catch-up" contribution.  Certain qualifying employees who have at least 15 years of service with their current employer may be eligible to contribute an additional $3,000.  Employer contributions are not allowed with a 403(b) TSA through Modern Woodmen.

Tax-deferred earnings
Contributions and earnings grow tax-deferred until you take a withdrawal.  Compounded, tax-deferred growth allows your retirement savings to accumulate more rapidly than it would in an account that is subject to tax.

No annual fees
Modern Woodmen does not charge an annual fee for a 403(b) TSA administration.

Additional information

Participation
Modern Woodmen of America provides 403(b) TSAs for employees of public school districts and 501(c)(3) tax-exempt organizations that have included Modern Woodmen as an approved provider in their plan. If Modern Woodmen is not an approved provider for your employer’s plan, you may be able to add Modern Woodmen to your employer’s list of approved providers.

Withdrawals
You may be able to withdraw funds from a 403(b) TSA when you attain the age of 59½, become disabled, die, separate from the service of the sponsoring employer or suffer a financial hardship. (Earnings cannot be released under a financial hardship withdrawal, and a financial hardship withdrawal suspends elective deferral contributions for six months.) Your hardship withdrawal cannot exceed the need.

The ability to withdraw money from a 403(b) plan will be determined by the provisions listed in an employer's 403(b) plan document.  This document must be in place by Jan. 1, 2009.  Check with your employer for specific information regarding your ability to take withdrawals from your 403(b) plan.

Withdrawals are taxed as ordinary income. If you withdraw money before age 59½, you may be charged a 10 percent IRS premature distribution penalty. If the withdrawal is paid directly to you, 20 percent of the withdrawal will be automatically withheld for federal income taxes.

Transfers / Exchanges

Effective Sept. 25, 2007, Modern Woodmen will be able to accept 403(b) transfers/exchanges only if an Information Sharing Agreement has been signed by Modern Woodmen and the qualifying employer and the qualifying employer's plan document provides for transfers/exchanges with a retroactive effective date of Sept. 25, 2007.