* What are the various methods of funding a tax sheltered annuity plan?
* What are the tax benefits of a tax sheltered annuity? Q 473
* Are amounts borrowed under a tax sheltered annuity taxable income?
* What nondiscrimination requirements must a tax sheltered annuity meet?
Under what circumstances may a participant roll over permitted distributions from a Section 403(b) tax sheltered annuity?
Rollover distributions from tax sheltered annuities may be made to another tax sheltered annuity, an IRA, a qualified plan, a Section 403(a) plan, and an eligible Section 457 governmental plan (provided the IRC Section 457 plan agrees to separately account for such funds).1 A rollover to a Roth IRA is generally a taxable event (see Q 223).
For tax years prior to 2008, no rollover contribution from a tax sheltered annuity or a qualified plan--other than a designated Roth account in a Section 401(k) plan (see Q 405)--could be made to a Roth IRA, and, thus, no rollover contribution could be made from a Roth IRA to a tax sheltered annuity or to a qualified plan (other than to a designated Roth account).
An individual may receive a distribution from his traditional IRA and within 60 days roll it over into a tax sheltered annuity to the extent that the distribution would be includable in income if not rolled over.11 After-tax contributions (including nondeductible contributions to a traditional IRA) may not be rolled over from a traditional IRA into a Section 403(b) tax sheltered annuity.
(4) Although teachers who are under a state teachers retirement system may also participate in a tax sheltered annuity plan, the employees of the retirement system itself are not eligible.
A tax sheltered annuity contract must be purchased by an eligible employer (see Q 474).
If a tax sheltered annuity plan is subject to Title I of ERISA, the Department of Labor requires that amounts an employee pays to the employer or has withheld from his salary by the employer for contribution to a plan become plan assets as soon as such amounts can reasonably be segregated from the employer's general assets.
(3) The effect of this requirement is that salary reduction contributions to a tax sheltered annuity must be immediately vested.