FOR

 Retirement

 Frequently Asked Questions about Roth 403(b)

  1. What is a "Roth" feature?
  2. What's the difference between current retirement salary deferrals and Roth salary deferrals?
  3. Do you have a quick comparison?
  4. Which retirement plan providers for ISU will allow Roth contributions?
  5. How do I know if I will benefit more from using pre-tax contributions or after-tax (Roth)?
  6. What is the main restriction for Roth distributions?
  7. Can required contributions to a required retirement account be done with the Roth feature?
  8. If I have a supplemental retirement account, can I choose to have my contributions split between pre-tax and after-tax?
  9. I currently have IPERS as for my basic retirement plan. Can I participate in Roth?
  10. Will I be able to view my Roth contributions on-line?
  11. What is the difference between a Roth IRA and a Roth 403(b)?
  12. What are the investment options available for Roth contributions?
  13. If I currently have a Supplemental Retirement Account through ISU, will I need to enroll in a new contract in order to participate in Roth?
  14. Can I transfer existing pre-tax balances in my retirement account to Roth after-tax?
  15. What is the maximum Roth contribution I can make?
  16. Will ISU Retirees be eligible to participate in Roth feature?
  17. Will ISU employees currently in Phased Retirement be eligible for Roth?
  18. Will ISU C-Base and D-Base employees be eligible to participate in Roth feature?
  19. I currently have a Roth IRA. Can I roll over my Roth IRA into the new Roth feature to my supplemental retirement account at ISU?
  20. If I leave ISU at a later date, can I transfer my retirement account to Roth IRA?
  21. I'm contemplating retirement in the next 5 years. Because of the 5-year rule, will Roth benefit me?
  22. If I make Roth contributions to a supplemental retirement account, can I later make those contributions pre-tax?
  23. I know my current 403(b) plan requires that I take distributions no later than 701/2 (Minimum Required Distribution - MRD). Does Roth account also require an annual MRD?
  24. What is the contact information for TIAA-CREF and VALIC to get additional information on Roth 403(b) accounts?

What is a "Roth" feature?
The Roth feature to a supplemental retirement account provides the capability to make after-tax contributions to your retirement savings. These savings and any earnings are not taxed when qualified distributions are made.

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What's the difference between current retirement salary deferrals and Roth salary deferrals?
Currently, salary contributions to a supplemental retirement account are made on a pre-tax basis. Contributions and earnings grow over time and are taxed when you make a withdrawal. Roth contributions are made after-tax and contributions and earning grow and are tax-free when withdrawn (subject to certain restrictions).

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Do you have a quick comparison?

  Traditional
ISU 403(b)		 Roth 403(b) feature to
ISU 403(b)
Tax Status of
Contributions		 Pretax contributions
reduce current
taxable income.		 After-tax contributions do
not affect current taxable
income.
Tax Status of
Distributions After
Age 591/2		 Taxed as current
income.		 Tax free and penalty free
for investors who have had
the account for at least five
years
Rollovers to Roth
IRAs		 Not permitted. May be rolled over directly
to a Roth IRA with no tax
payment.

Which retirement plan providers for ISU will allow Roth contributions?
TIAA-CREF and VALIC are the only retirement providers currently authorized by ISU to provide the Roth 403(b) feature under a supplemental retirement plan (SRA or GSRA)

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How do I know if I will benefit more from using pre-tax contributions or after-tax (Roth)?
Your individual tax situation is unique and you should thoroughly review Roth information, attend various seminars offered, and/or discuss participating in the Roth feature with your tax professional or accountant to determine whether Roth is right for you.

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What is the main restriction for Roth distributions?
There must be a "qualified distribution" for distributions to be tax-free. Generally, this requires that an employee wait 5 years after making an initial Roth contribution before taking a distribution (5-year rule) and the distribution must occur after reaching age 591/2 or older, or if disabled or deceased.

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Can required contributions to a required retirement account be done with the Roth feature?
No. The Roth feature will only be available if you have a supplemental retirement account. Required contribution (yours and ISU's contribution) are not eligible to Roth.

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If I have a supplemental retirement account, can I choose to have my contributions split between pre-tax and after-tax?
Yes. You can elect any combination of salary deferrals pre-tax and after-tax. Example: 60% to Roth after-tax and 40% to pre-tax.

I currently have IPERS as for my basic retirement plan. Can I participate in Roth?
Yes. You will need to enroll in a supplemental retirement plan (through TIAA-CREF or VALIC) to participate.

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Will I be able to view my Roth contributions on-line?
Yes. Your quarterly statements from TIAA-CREF will show pre-tax and post-tax contributions separately.

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What is the difference between a Roth IRA and a Roth 403(b)?

Roth IRA contributions are limited in 2009 and 2010 to $5,000 ($6,000 for persons age 50 or older). 403(b) plan contributions in 2009 and in 2010 (inclusive of Roth and pre-tax) are allowed up to $16,500 ($22,000 for persons age 50 or older).
Some individuals are not allowed to participate in a Roth IRA due to income limits. There are no income restrictions under a 403(b) plan.
Roth 403(b) contributions can be made via payroll deduction. Roth IRA contributions are not permitted via ISU payroll deduction.

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What are the investment options available for Roth contributions?
All current investment options provided under the ISU supplemental retirement plans are eligible under the Roth feature.

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If I currently have a Supplemental Retirement Account through ISU, will I need to enroll in a new contract in order to participate in Roth?
No. You will not have to enroll in a new contract. However, you must complete a new Elective Payroll Reduction Agreement and return it to the ISU Benefits Office (3770 Beardshear Hall). The link to the form is: http://www.hrs.iastate.edu/hrs/files/EPRFormInstructions.pdf

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Can I transfer existing pre-tax balances in my retirement account to Roth after-tax?
>No. Any contributions that have already been made cannot be re-declared or reclassified as Roth contributions.

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What is the maximum Roth contribution I can make?
Your maximum contributions to a 403(b) supplemental retirement account (combined pre-tax and Roth after-tax) are subject to IRS limits which may change each calendar year. For 2009 and 2010, the limit for employees less than age 50 is $16,500. Employees age 50 or older have a limit of $22,000.

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Will ISU Retirees be eligible to participate in Roth feature?
No. Traditional pre-tax contributions and Roth contributions can only be made using payroll deductions.

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Will ISU employees currently in Phased Retirement be eligible for Roth?
Yes. Employees on Phased Retirement can elect to have salary contributions made to Roth through payroll deduction.

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Will ISU C-Base and D-Base employees be eligible to participate in Roth feature?
Yes. C and D-Base employees (with 9-month appointments) can elect to have salary contributions made to Roth through payroll deductions. You must first enroll in a Supplemental Retirement Account with TIAA-CREF or VALIC.

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I currently have a Roth IRA. Can I roll over my Roth IRA into the new Roth feature to my supplemental retirement account at ISU?
No. Roth IRAs cannot be rolled over into a Roth 403(b). However, Roth 403(b) can be rolled over into a Roth IRA.

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If I leave ISU at a later date, can I transfer my retirement account to Roth IRA?
The Roth contributions in your retirement account can be rolled over to a Roth IRA. However, your pre-tax retirement account balances cannot be rolled into a Roth IRA.

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I'm contemplating retirement in the next 5 years. Because of the 5-year rule, will Roth benefit me?
This is a personal decision and you may want to consult with your tax professional or accountant. Remember that you are not required to begin withdrawals from your retirement account immediately upon termination or retirement. Benefits can be delayed until a later date which may enable you to satisfy the 5-year rule.

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If I make Roth contributions to a supplemental retirement account, can I later make those contributions pre-tax?
No. Once a contribution has been made after-tax (Roth), you cannot re-declare or change the contribution type. However, you can change the amount or type of future contributions.

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I know my current 403(b) plan requires that I take distributions no later than 701/2 (Minimum Required Distribution - MRD). Does Roth account also require an annual MRD?
Yes. Roth contributions and earnings are subject to the same Minimum Required Distribution requirements. However, participants may elect to roll over existing Roth 403(b) balances to a Roth IRA account and avoid required distributions. Please consult with your tax professional for additional guidance.

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What is the contact information for TIAA-CREF and VALIC to get additional information on Roth 403(b) accounts?
TIAA-CREF
Ames Office Telephone: 515-268-8600
National Office Telephone: 800-842-2776
On line at: http://enroll.tiaa-cref.org/iastate/

VALIC
Kerry Ferguson, Financial Advisor
kerry.ferguson@valic.com
515 290 9879 Cell
Telephone: 800-892-5558 ext. 89828

On line at: http://www.valic.com/Home_82_8630.html

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