June 8, 2007
Tax-sheltered
annuity 101
A tax-sheltered annuity (TSA) is an optional retirement savings account
offered through the MGH. When employees enroll in a TSA, pre-tax deductions
are made from each paycheck, allowing them to save on taxes while saving
for the future.
The MGH offers TSAs through three investment providers Ð Fidelity,
TIAA-CREF and Vanguard Group. Employees can select one or more providers
and choose investment funds to help TSAs grow. Each vendor offers services
to help employees choose funds, or employees can contact a personal financial
adviser for selection advice.
The following is helpful information regarding TSAs offered through the
hospital:
- Employees can use eBenefits in PeopleSoft to enroll in a TSA at any time and can choose a dollar amount or percentage of each paycheck to contribute up to each plan's limits.
- Contributions take effect with the next payroll period and can be cancelled or changed at any time.
- New rules allow TSA savings of up to $15,500 in 2007. MGHers who will be age 50 or older by Dec. 31 can save up to $20,500 this year.
- Because TSAs are intended to help add to retirement income, withdrawals before age 69 1/2 are discouraged. Access to money before retirement is limited, and a 10 percent penalty tax will be applied to early withdrawals in addition to any ordinary income tax paid upon withdrawal.
- Employees who leave the hospital can keep money in the TSA, roll the investment over to another eligible retirement account or cash out the TSA with taxes applying.
- Beginning July 1, a Roth TSA will be available through the MGH. It differs from a traditional TSA in two ways:
— Contributions
to the Roth TSA come from after-tax paycheck dollars, so there
is no tax savings now.
— Withdrawals
from a Roth TSA are not taxable. By contrast, a traditional TSA
provides tax savings with each paycheck, but withdrawals are taxable.
The MGH will continue to offer a traditional TSA along with the Roth TSA.
Investment providers or personal financial advisors can guide employees
in choosing which would be better for each individual.
The TSA information page on the MGH Benefits Intranet site also has a brief online presentation and a downloadable booklet on TSA options. The site is located at http://is.partners.org/hr/New_Web/mgh/mgh_benefits_tsa.htm.
For more information, contact the Benefits Office at ibenefits@partners.org or call (617) 726-8133.