403(b)/ TAX-SHELTERED ANNUITY PLAN
A 403(b) is a tax-deferred retirement plan available to employees of public schools and section 501(c)(3) organizations. Eligible employees include teachers, administrators, personnel, etc. of school districts, charter schools, Delaware State University and Delaware Technical and Community College. The Universal Availability Rule states that if a 403(b) plan is offered to one employee, it must be offered to all employees. Therefore, any employee that works in any of the above institutions is eligible to participate as long as they work more than an average of 20 hours per week.
Contributions are made through payroll deductions on a pre-tax basis and grow tax-deferred. For 2008, the IRS deferral limit is $15,500. In addition, if you are 50 or older by the end of 2008, you can defer an additional $5,000. These limits are the same for the 457 Deferred Compensation Plan and an eligible employee can contribute the maximum to both the 403(b) and the 457 plan in the same calendar year.
In addition to the above deferral limits, a 403(b) plan also has a "special catch-up." To qualify, the employee must have at least 15 years of service with the State. This provision is a $3,000 deferral for a 5-year period.
To enroll in a 403(b) plan, the employee must contact the vendor of your choice from the State's approved vendor list, complete a salary reduction form and return it to their payroll office. Changes to contribution amounts are also made by completing a salary reduction form and returning it to your payroll office.
403(b) distributions can be made when the participant:
- Attains age 59 1/2;
- Separates from employment;
- Becomes disabled; or
- Has a hardship, if applicable under the Plan
SPECIAL ALERTS
- Current list of vendors
- The IRS has issued final 403(b) regulations, the first in over 40 years. These new regulations can be viewed here.
- State Treasurer Jack Markell informs eligible employees of the issuance of these federal regulations and the importance of awareness. This letter can be viewed here.
- Notice sent to all eligible employees of the 403(b) Plan notifying them of the changes to 90-24 transfers and life insurance contracts. These provisions in the federal regulations become effective after September 24, 2007.
- Notice to employees regarding eligibility to participate in the 403(b) Plan. The notice can be viewed here.
- Salary Reduction Agreement for the State of Delaware 403(b) Plan.
- Plan participants may also be eligible for a Tax Credit for Plan Contributions.
- Notice to plan participants and vendors requiring they report information regarding incidental life insurance contracts
- Notice to employees regarding current investment providers exiting 403(b) market due to recent IRS regulatory requirements. The notice can be viewed here.
Other helpful websites on 403(b)Plan Information:
