Tax-Sheltered Annuity
From WEA Trust Insurance Coordinators Handbook
Next section: TSA Forms
The information contained in this section of the handbook is for informational purposes only and not intended to be personal legal or tax advice. Consult your tax advisor or attorney regarding your individual situation.
WEA Tax Sheltered Annuity (TSA) Trust program
The TSA program offered by WEA Trust Member Benefits provides a tax-sheltered investment opportunity for all your employees. We administer all accounts in accordance with Section 403(b) of the Internal Revenue Code and give careful attention to eligibility, contribution limits, post-employment contributions, exchange, transfer, rollover, and withdrawal rules.
For your employees to participate in our TSA program, an authorized representative of your school district (the employer) must have signed a Joinder Agreement with us. By this agreement, the employer becomes a grantor of the WEA TSA Trust and is eligible to offer this program to its employees, including teachers, administrators, office staff, and their union and nonunion employees. We have Joinder Agreements with nearly all Wisconsin school districts. Eligibility for the WEA TSA Trust program requires WEAC membership or employment at an organization that has a WEAC bargaining group.
Employees who are interested in opening a new account with us should call 1-800-279-4030, Extension 8577, to request an enrollment booklet or visit our Web site at weabenefits.com to enroll online. Our Web site and enrollment booklet contain enrollment forms and current investment information. We encourage employees to coordinate enrollment with their employer so that all forms are completed and sent to us before contributions are remitted. Contributions cannot be credited until we receive and process a signed
403(b)Tax-Sheltered Annuity (TSA) Application or a Web enrollment.
Legal and tax regulations
In general, universal availability provisions require that all statutorily eligible employees be allowed to participate. Some exceptions for excluding employees are allowed and should be discussed with your legal counsel to ensure compliance. Among some of the violations found in Internal Revenue Service (IRS) audits were employers who were not making TSA programs available to substitute teachers who normally worked more than 20 hours per week and other part-time or seasonal employees.
The IRS mandates that employers be involved in supervising their TSA programs. You may wish to confer with your employer’s legal counsel regarding your responsibilities. We will work to assist you in meeting compliance responsibilities.
We offer a comprehensive contribution limit calculation service to help you comply with the rules governing TSA contribution limits (see the "Contribution limit calculation form" section below). If employees have questions about how the contribution limits apply to their particular situation, they may wish to consult a professional tax or legal advisor.
Contribution sources
Employers may remit both after-tax (Roth TSA) and before-tax elective (employee-paid) or nonelective (employer-paid) contributions on behalf of their employees and under post-employment agreements on behalf of retirees.
- Elective contributions (subject to FICA)—At the direction of the employee, the employer withholds before-tax or, if offered, after-tax (Roth) money from an employee’s salary through payroll deduction according to the Salary Reduction Agreement (SRA) that the employee has signed (see the "Salary reduction agreements" section below). This includes payroll amounts received from an IRS Section 125 cash option plan that is deferred to a TSA. All elective contributions should be stated on a single SRA form.
- Nonelective contributions (not subject to FICA)—Active Employers—The employer contributes money on behalf of the employee as a retirement benefit, sometimes in lieu of another bargained benefit. IRS rules that became effective January 1, 2002, gave employers a new option when negotiating retirement packages that include post-employment nonelective contributions (up to five years).
- Post-employment nonelective contributions derive from two sources:
- Employer nonelective contributions can be made for five years following an employee's severance from service. Contributions can be made each year up to the total contribution limit of the lesser of 100% of compensation or $49,000 (2009). The final regulations clarify that any contribution to a 403(b) plan under this rule on behalf of a former employee must be an employer contribution and that post-employment contributions cannot continue after the employee's death.
- Former employees can electively defer compensation up to the later of 2½ months after severance from service or the end of the year in which they separate from service, but only to the extent that the compensation is either regular pay or accumulated unused sick or vacation pay. Elective contributions cannot be made from severance pay received after separation from service.
Note: Employees may not be given a choice between cash and nonelective contributions. The 403(b) plan is the only type of retirement plan to which post-employment contributions can be made.
Opening and making changes to an account for elective contributions
Employees who wish to open an elective account are required to complete a 403(b) Tax-Sheltered Annuity (TSA) Application. Elective contributions require a TSA-403(b) Salary Reduction Agreement before the employer remits contributions.
- 403(b) Tax-Sheltered Annuity (TSA) Application
- TSA-403(b) Salary Reduction Agreement if offering Roth TSA
Please send employee TSA applications and a copy of the employer-approved SRAs to our office immediately; please do not hold them or send them in with the remittance reports.
On occasion, we have found that an employee’s initial contribution is sent to us before we have received the application or Web enrollment. If this occurs, please realize that these contributions cannot be invested for the employee until we receive the completed application or Web enrollment. If the signed TSA application or Web enrollment is not received within 60 days of the initial contribution, such monies will be returned to the employer.
Your office may request a supply of enrollment booklets, or an employee may obtain an enrollment booklet by calling our staff directly or visiting our Web site at weabenefits.com. You may substitute the employer’s SRA for our SRA; and as most employer SRAs are available to print when completing a Web enrollment, it is wise to provide us with any updates. If you choose to use the employer’s SRA, we ask that you indicate the employee’s Social Security number, the number of pay periods, and the contribution amount. We prefer that you submit a copy of the SRA to us before you begin deductions from an employee’s salary.
A new employee who already has a TSA account with us will not need to complete an application or Web enrollment for your plan. The SRA must be signed by both the employee and employer before withholding the employee’s elective contribution.
Opening and making changes to an account for nonelective contributions
Before sending nonelective contributions, the employer should complete and submit the necessary information to us on the
Group Enrollment and Remittance Data form. Please call 1-800-279-4030 to request the form. We must receive a signed 403(b) Tax-Sheltered (TSA) Application or a Web enrollment for new participants before nonelective contributions can be invested for the employee.
If the employee already has an account with us, simply add him or her to the nonelective remittance report. Existing participants must call our office to instruct us regarding their nonelective investment allocations.
Nonelective post-employment contributions are based on 100% of an employee’s compensation during his or her last working year, up to a maximum of $49,000 in 2009. Only employers can make before-tax contributions up to this limit for each of five years following the retirement year. The post-employment period starts the tax year after the employee terminates employment (e.g., payments start in 2007 for termination in 2006).
To learn more about post-employment 403(b) employer contribution plans or about adding employees and/or retirees to this type of plan, you may call our retirement and investment service consultants at 1-800-279-4030.
Salary reduction agreements
IRS regulations require that a written SRA be in place before withholding elective contributions. An SRA is required whenever an employee:
- Opens an elective 403(b) account.
- Increases an existing annual elective contribution amount, defers all or part of a Section 125 cash option benefit, or adds a lump-sum amount.
- Decreases an existing annual elective contribution.
- Resumes elective contributions after terminating a previous SRA.
An employee may change the amount of contributions by completing a new SRA as many times as the employer will allow. (Many employers allow employees to start or change his or her SRA a minimum of monthly or quarterly.) When the SRA states that the contribution will be a percentage of salary or an amount equal to all or part of an employee’s Section 125 cash option benefit, a new SRA is not required each time these factors cause a contribution variance.
Contribution limit calculation form
Employers should monitor their employees’ annual contributions to assure that employees are not exceeding their contribution limits. To assist you with this responsibility, we offer a contribution limit calculation service for all of our participants. We recommend that a participant with 15 or more years of service with his or her current employer and who wants to make elective contributions more than the annual base limit ($16,500 in 2009 and as indexed in succeeding years) take advantage of this service, especially if he or she is age 50 or over and eligible for the $5,500 (2009 limit and as indexed in succeeding years) catch-up contribution. You may order a supply of CLC forms for your employees or an employee can call us at 1-800-279-4030 to request a form or print one from our Web site at weabenefits.com. Employees are always welcome to call our staff for assistance in completing the CLC form. The results of these calculations are sent to the employee (participant). It is the employee’s responsibility to provide you with copies of this information.
We provide contribution limit calculations (CLCs) for our participants. If your district requires employees to obtain a CLC, a Contribution Limit Calculation Form should accompany the application and SRA.
How do you know when an employee should complete a Contribution Limit Calculation Form?
First, check your plan document to make sure these catch-up options are available. If you answer “Yes” to any of the questions below, you should require the employee to complete the form and forward it to WEA Trust Member Benefits for processing. If the answer is “No” to all of the questions, an employee does not need to complete the form.
- Does the employee have 15 or more years of service with the same employer and would like to know if he or she is eligible for the 15-years-of-service catch-up contribution?
- Does the employee receive employer contributions to your 403(b) plan?
- Does the employee make salary deferral contributions to another 403(b) plan, 401(k) plan, SIMPLE plan, or SEP plan?
- Do you require him or her to provide you with written documentation of the contribution calculation results?
The elective (aggregate total of before-tax and after-tax) contribution limit base for 2009 is $16,500. In addition, if an employee will be age 50 or older in 2009, he or she may contribute an additional $5,500 without completing a contribution limit calculation. However, if an employee is eligible for the 15-years-of-service catch-up, the age 50 catch-up amounts will be designated to any available 15-years-of-service catch-up before the age 50 catch-up amounts. Please note all limits shown are for 2009 only. These limits may be indexed for succeeding years.
When and where to send contributions for employees’ accounts
Remittance reports (yours or ours) must accompany the payment, which should be made payable to the WEA Tax Sheltered Annuity Trust. Remittance reports and payments should be mailed to our bank deposit address:
- WEA Tax Sheltered Annuity Trust
- P.O. Box 689515
- Milwaukee, WI 53268-9515
We can create remittance reports for your use. Simply choose one of the three payment schedules listed below:
- Once each month (12 times per year)
- Twice each month (24 times per year)
- Once each pay period (26 times per year)
Remittance reports
We create and send a TSA Remittance Report to employers each month. These reports list the contribution source (before-tax elective, Roth [after-tax] elective, and/or nonelective), names and Social Security numbers of employees enrolled in our TSA program, and the corresponding contribution amounts. If the employer remits both elective and nonelective contributions, the employer will receive separate remittance reports for each contribution source. We ask that you review each remittance report to ensure that it is complete and accurate. Because of the tax implications of before-tax and Roth contributions, it is very important that employees are listed correctly on the appropriate remittance report. If it is not accurate, make the appropriate edits using the list of reason codes located in the upper right-hand corner of the remittance report. After making your edits, recalculate the total amount of contributions so it equals the payment you are remitting with the report.
Whenever employees start, increase, decrease, split, or restart either type of elective contributions (before-tax and Roth), employees should first provide the employer with an SRA. Deferrals from an employee’s salary must not predate the effective date of the SRA.
Examples of possible edits would be:
Increase/Decrease
Increases or decreases in elective contributions should be noted on the remittance report with Reason Code 3. Please include a note if the amount involves a mid-month change or a one-time change.
Splitting contributions
Introduced in January 2006, Roth TSA contributions are a second source of elective contributions. If your district offers the Roth TSA (check your plan's adoption agreement or summary plan description), employees have the option of contributing to one or both sources of elective contributions.
New Participant
If an employee’s name does not appear on the report, add the name, Social Security number, contribution amount, and Reason Code 8. To enable us to record the appropriate monthly amount, please indicate the contribution effective date and note if it is for a partial month.
Address/Name Change(s)
Occasionally, your edit is our first notice of a participant’s name change. Because a name change is a legal change, we will not change our records until we receive written notification (which may require a signature guarantee) from the participant. Your edit will alert us to send an Address/Name Change(s) form to the participant authorizing the name change. We can send you a supply of these forms, or you may have participants print the form from our Web site at weabenefits.com. You and/or your participants can also call us at 1-800-279-4030 to request this form.
Stopping Contributions
Please edit the amount and note a reason code on the remittance report. This information allows us to better serve and advise our participants regarding IRS requirements and options. Remember, if an employee is stopping their 403(b) contributions, they will need to provide the employer with a new SRA that indicates a zero contribution amount. Please contact us at 1-800-279-4030 if an employee retires or terminates service so we can update our records.
Refunds and/or Contribution Corrections
Please call our office before making an adjustment to a remittance report that is related to refunds or past contributions made in error.
Electronic contribution processing
In addition to paper copy remittance reports, WEA Trust Member Benefits offers employers electronic processing of 403(b) plan contributions. This service enables an employer to submit 403(b) remittance reports over the Internet on our secure Web site.
Electronic processing eliminates hard copy remittance reports sent through the postal service, so the time it takes to review, edit (if needed), and return the report is drastically reduced. With the new requirement of remitting employee contributions by the 15th day of the month following the month the salary reduction was done, utilizing electronic processing will help in your efforts to be compliant.
In addition, the human error factor will be reduced since the information will travel between the employer’s computer and our computer. The less human intervention in the process, the less chance there is for error. Reconciliation of the remittance report will no longer be needed. No check writing will be required with the ACH transfer of funds from your bank to ours.
Getting set up on electronic TSA processing is easy. The following four steps are necessary to set up electronic contribution processing, and WEA Trust Member Benefits will assist you through the entire process.
- We will first need to know if you have Skyward as your payroll system. If yes, please call our office for further information. If not, you will need to create an Excel spreadsheet (see example below) with the information indicated.
- We will fax a form called ACH Authorization. Please return a completed copy to us when you are ready to begin electronic remittances.
- To send us the file, you will log onto our Web site and send us the file. You will be able to specify the date that we draw the remittance from your district's bank account.
- E-mail your completed spreadsheet to Jess Pape at jpape@weatrust.com or Carrie Yun at cyun@weatrust.com. They will test the file to make sure it is okay. When the file test is okay, either Jess or Carrie will call you and give you the assigned password and Web site address to submit future spreadsheets.
| WEMSSN | Last_Name | First_Name | School_No | Ded_Code | LOB | Ded_Amount | Pay_Date |
| 009180463* | SMITH | JOE | 0045 | TRUST | 00 | 250 | 02282009 |
| 999783741 | DOE | JOHN | 0045 | TRUSTA | 00 | 77.84 | 02282009 |
| 999567405 | SMITH | LISA | 0045 | TRUSTH | 00 | 30.34 | 02282009 |
| 333306665 | BROWN | SUSAN | 0045 | TRUSTU | 00 | 11.24 | 02282009 |
(*Do not drop leading zeros)
Explanation of fields needed in Excel Spreadsheet
WEMSSN
Employee's Social Security number
Last_Name
Employee's last name
First_Name
Employee's first name
School_No
School number is the WEA health unit number without decimals, with leading zeros to fill four digits (i.e., unit=45.0, field shows 0045; unit=8.0, field shows 0008; unit=504.0, field shows 0504)
Ded_Code
Deduction code from payroll system
LOB
Leave blank
Ded_Amount
Deduction amount
Pay_Date
Pay date formatted as mmddyyyy
Important points about the file in general
- Column heading for the Social Security number must be WEMSSN.
- You can modify all other column headings.
- Neither file names nor sheet names should have spaces. If necessary to separate words, use the underscore.
- Your deduction codes can be difference (Ded_Code column). If so, we will need a list or key of your deduction codes.
Exhanges/transfers/rollovers
A participant who wants to exchange/transfer/rollover funds to us from another retirement account should call us for a TSA Transfer/Exchange/Rollover form. He or she may also print the form from our Web site at weabenefits.com. If the employee does not already have an account with us, he or she must also submit a 403(b) Tax-Sheltered Annuity (TSA) Application form or enroll online at weabenefits.com.
Participants who wish to exchange/transfer/rollover funds from their WEA TSA Trust account to an account with another vendor must complete our exchange/transfer/rollover form provided when the participant calls us.
If the employer has hired a third party administrator (TPA), participants wishing to exchange/transfer/rollover funds to us (or from us) will follow a different procedure based on the TPA you are working with; however, each TPA will authorize any type of financial transactions requested for participants’ accounts. Please verify the procedure for financial transactions directly with your TPA firm.
Withdrawals
Participants who wish to take a withdrawal may request a withdrawal form by calling us. Because there are important IRS rules regarding distributions, withdrawal forms are not available on our Web site. When certain distributable events occur, withdrawals are not subject to penalties. The two most common penalty-free distributable events are reaching age 59½ and retirement or separation from service at age 55 or later. Generally, if a retired employee age 55 or older returns to work at the same employer they retired from and seeks to take a withdrawal from that employer’s plan, the availability of such withdrawal is subject to the terms of the employer’s plan. Even though it may be a permissible withdrawal under the plan, it could be subject to penalties.
Roth TSA distributions require that the account be held for five years and the employee is age 59½, deceased, or disabled. The five-year taxable period begins on the first day of the tax year in which the employee first contributed to the plan. When early withdrawals are allowed, they are generally subject to federal and state tax penalties. A participant who requests a withdrawal for hardship purposes while still an employee of the school district must submit a TSA—403(b) Hardship Withdrawal Request form. This form is available by calling us at 1-800-279-4030. Check your plan’s adoption agreement or plan document to verify that hardship withdrawals are available in your plan.
When retired participants reach age 70½, they must take a required minimum distribution (RMD) no later than April 1 of the year following the year in which they reach age 70½ or
April 1 of the calendar year in which the employee retires. We will notify participants in this age group of this requirement and provide them with appropriate information. Please advise us of any employee who is age 70½ or older and still working. We encourage participants to seek professional tax advice before taking a withdrawal.
Contact us
Please inform us if our data about your employer is not correct (new address, new TSA payroll person, etc.). We want our services to be as helpful as possible to you and your employees. Because we constantly strive to improve our services, we hope you will call us whenever you have questions or comments. You can reach us at 1-800-279-4030, e-mail us at memberbenefits@weatrust.com, or visit our Web site at weabenefits.com.
