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Exactly What is a TSA?

By Amir Zaman
WEA Insurance
employee benefits specialist

October 1998

It's a way to get government's help in saving money

sk anyone who has a tax-sheltered annuity to comment on it and you will inevitably hear the same thing: “It’s the best thing I ever did,” and, “I wish I had started it sooner.” What are TSAs, and why are so many members so enthused about them?

A TSA is a close cousin to the 401(k) plans that are used by many private, for-profit companies to provide for or supplement their employees’ retirement needs. Unlike 401(k) plans, TSAs are only available to employees of not-for-profit entities, such as public schools and hospitals. At times, you will hear TSAs referred to as 403(b) plans. That’s a reference to the section of the Internal Revenue Code where the language authorizing the creation of tax-sheltered annuities appears. So, if someone is talking about 403(b) plans, they’re talking about TSAs.

Both 401(k) plans and TSAs allow you to save a portion of your earnings on a pre-tax basis. This means that the federal and state governments are putting away money for your retirement with every TSA contribution you make. Here’s how it works:

Let’s say you decide to contribute $100 per month. Your employer will reduce your gross pay by the $100 and send it to your TSA account, but because this is done pre-tax, your paycheck is only reduced by $67* or so. The other $33 is put into your account from dollars you’d otherwise have paid in state and federal income taxes. This is the tax-sheltering advantage. Of course, the government fully expects to collect these taxes later on when you begin withdrawing money from your TSA account. But, chances are, you may be in a lower tax bracket then and would have had the advantage of having that money earning interest for years.

Starting early

Almost as important as starting a TSA, is starting it early in your career even if all you can afford to save is a few dollars a week. This is where the power of compounding kicks in. Compounding, as any of your colleagues who teach math will be happy to tell you, is a saver’s best friend. It means your money starts snowballing over time. So, the earlier you start, the more time this snowball has to get bigger, and the more money you end up with.

It’s relatively simple to start a TSA. Your school office should have the forms you need. And, with the WEA Tax Sheltered Annuity Trust (WEAC’s program), you can contribute as little as $9 a pay period (if you’re paid 26 times a year).

If you’d like more information on TSAs, call the WEA Tax Sheltered Annuity Trust at 1-800-279-4030 and ask for a retirement consultant.

* assumes a 33% combined federal and state income tax bracket

Introducing the Smart Plan

Ever have one of those days? You think all your bills are paid and in the mail. And then, in comes another whopper. If it’s the insurance bills that always surprise you, the WEAC Member Benefit Trust can help ease some of the pain.

The Trust has just introduced a program called Smart Plan to help you with your auto and home insurance bills. In very simple terms, the Smart Plan allows you to to consolidate your auto and home insurance premiums and spread the payments out over the year instead of paying the whole amount in one lump sum when the bill arrives. It allows you to make monthly payments which are automatically deducted from your checking account, so you don’t even have the hassle of writing a check.

Smart Plan is presently available only to those members who currently have an auto or home insurance policy with the WEAC Member Benefit Trust. If you have a policy with the Trust, and are interested in this program, call 1-800-279-4010 and have your payment plan converted to the Smart Plan at your next policy renewal. Or, you can simply call and get more information about it.

If your policies are with another insurance company, you are welcome to call one of the personal insurance consultants at the WEAC Member Benefit Trust (1-800-279-4010) to find out more about WEAC’s personal insurance program and to receive objective advice about how to protect your assets affordably. If our plans are right for you, we’ll enroll you and set you up on the Smart Plan.

Posted October 2, 1998