Deferred Compensation

Internal Revenue Code (IRC) Section 457

Purpose:

· Establishment of a supplemental retirement program.

Benefit of Program:

· Participation is voluntary

· Decreases current federal and state income tax.

· Additional income at retirement to supplement Social Security and other retirement benefits.

· Will not decrease IPERS, POR, Judicial, and Social Security benefit payments.

· Income deferred until retirement when taxation may be lower than during working years.

· No 10% Internal Revenue Service (I.R.S.) penalty for withdrawal prior to age 59 ½.

· Employer matches 50% of contributions up to a maximum.

Eligibility:

· Any non-temporary executive, Judicial or Legislative Branch employee of the State of Iowa who is regularly scheduled for 20 or more hours of work per week or who has a fixed annual salary is eligible to defer compensation under this rule except employees of the Board of Regents institutions.

Enrollment Period:

· Employees allowed to enroll anytime during the year.

Deferral Amounts:

· Maximum annual deferral is 100% of includible compensation up to a maximum.

· Minimum monthly deferral is $25.00.

Investment Options:

· Fixed Annuities

· Variable Annuities

· Mutual Funds

Investment Providers:

· Annuities and mutual funds available through approved investment providers.

· A current list of investment providers can be obtained from your Personnel Assistant.

Program Provisions:

· Funds are not disbursed unless employee terminates employment, retires, dies, or the State approves an unforeseen emergency or cash-out.

· Funds can be transferred into a Individual Retirement Annuity (IRA).

· Funds are considered earned income and taxable in the year distributions are received.

To obtain forms and additional information see your Personnel Assistant or check the DAS-HRE website.

Tax Sheltered Annuity (TSA)

Internal Revenue Code (IRC) Section 403(b)

Purpose:

· Establishment of a supplemental retirement program.

Benefit of Program:

· Participation is voluntary

· Decreases current federal and state income tax.

· Additional income at retirement to supplement Social Security and IPERS benefits.

· Income deferred until retirement when taxable income should be lower than during working years.

Eligibility:

· A permanent employee of the Department of Education or the Board of Regents who is regularly scheduled to work 20 or more hours per week.

Deferral Amounts:

· Maximum annual deferral is 100% of monthly gross income minus pre-tax and dependent care deductions, up to a maximum limitation.

· Special limits apply for employees with more than 15 years of service.

Investment Options:

· Fixed Annuity

· Variable Annuity

· Mutual Funds

Investment Providers:

· An Insurance company, brokerage firm, etc., licensed to do business in Iowa.

Program Provisions:

· 10% penalty if funds are withdrawn prior to age 59 ½.

· Employee owns the contract and names a personal beneficiary.

· Employee cannot participate in a Deferred Compensation program when participating in a TSA.

· TSA contributions will be terminated when an employee transfers to an ineligible State Department.

To obtain required forms see your Personnel Assistant.