Comparison

Tax Deferred Retirement Saving Plan Comparison

-: Eligibility
TSA Section 403(b)**: Employees of schools, hospitals, and other charitable or educational organizations.
DCP Section 457(b)**: Employees of a state/local government, public school/college.
: No
: No
-: Salary Reduction
TSA Section 403(b)**: Yes
DCP Section 457(b)**: Yes
: No
: No
-: Established only with employer involvement
TSA Section 403(b)**: Yes
DCP Section 457(b)**: Yes
: No
: No
-: Tax treatment of contributions and investment income
TSA Section 403(b)**: Federal and State (Ohio) income taxes deferred.
DCP Section 457(b)**: Federal and State (Ohio) income taxes deferred.
: No
: No
-: Contribution Limit (2006) *Employees may contribute to both plans up to their respective limits, potentially allowing up to $31,000 per year.
TSA Section 403(b)**: Up to the lesser of 100% of compensation or $17,500.
DCP Section 457(b)**: Up to the lesser of 100% of compensation or $17,500.
: No
: No
-: Catch-Up Contributions (2006) *Only one catch-up provision per plan may be elected in any one tax year.
TSA Section 403(b)**: Employees who are age 50 or older are able to contribute an additional $5,500 per year. After 15 years of service with the same employer, employees who underutilized deferrals from previous years may be able to contribute an additional $3,000 per year for a lifetime total of $15,000.
DCP Section 457(b)**: Employees who are age 50 or older are able to contribute an additional $5,500 per year. During 1 or more of the 3 years prior to normal retirement age, the catch-up limit for employees who underutilized deferrals in previous years will be twice the dollar limit in effect for the year, subject to the other requirements applicable to the 457(b) catch-up limit.
: No
: No
-: Permitted Investments
TSA Section 403(b)**: Annuity contracts, mutual funds, money market funds, and unit investment funds.
DCP Section 457(b)**: Annuity contracts, mutual funds, and guaranteed return.
: No
: No
-: Ownership of Investments
TSA Section 403(b)**: Employee
DCP Section 457(b)**: Employer
: No
: No
-: Possible Distribution Events
TSA Section 403(b)**: Death, age 59-1/2, termination of employment, financial hardship.
DCP Section 457(b)**: Death, termination of employment, approved financial emergency.
: No
: No
-: Definition of Hardship/Emergency
TSA Section 403(b)**: College tuition, home purchase, eviction.
DCP Section 457(b)**: Accident or illness, catastrophic loss.
: No
: No
-: Tax-Free Loan
TSA Section 403(b)**: Available if offered by investment provider.
DCP Section 457(b)**: Available if offered by investment provider.
: No
: No
-: Penalty for Early Distribution
TSA Section 403(b)**: 10% IRS penalty may apply for distributions prior to age 59-1/2 in addition to normal income taxes.
DCP Section 457(b)**: Upon termination of employment, no early withdrawal penalty for distributions at any age. Normal income taxes apply.
: No
: No
-: IRS Required Minimum Distribution
TSA Section 403(b)**: Later of age 70-1/2 or termination of employment with eligible employer. Contributions permitted at any age.
DCP Section 457(b)**: Later of age 70-1/2 or termination of employment with eligible employer. Contributions permitted at any age.
: No
: No
-: Distribution Restrictions
TSA Section 403(b)**: Total distribution over lives or life expectancy of participant and named beneficiary.
DCP Section 457(b)**: Total distribution over lives or life expectancy of participant and named beneficiary.
: No
: No
-: Tax Treatment of Distributions
TSA Section 403(b)**: Taxed as ordinary income.
DCP Section 457(b)**: Taxed as ordinary income.
: No
: No
-: In-Service Transfers
TSA Section 403(b)**: To another 403(b) provider.
DCP Section 457(b)**: To another eligible 457(b) plan if both plans permit.
: No
: No
-: Rollovers
TSA Section 403(b)**: To an IRA after separation or age 59-1/2.
DCP Section 457(b)**: To an IRA after separation.
: No
: No

*403(b) and 457(b) funds can be used to buyback STRS, PERS, and SERS Service Years Credit beginning January 1, 2002

*This outline compares some, but not all provisions of these retirement plans. Because of the outline format, the information is simplified and cannot be fully accurate. To learn more, contact a Tax Deferred Annuity Representative of your choice.

**Information provided by J. Seckel of AIG VALIC (403(b)), and Ohio Public Employees Deferred Compensation (457(b)).