403b Tax Sheltered Annuities (TSA)

If you haven’t already looked at the “How does a 403b work” do this before you read this section about the actual plans used for funding your 403b, you need to understand how the TSA works first then how your TSA is funded.

Your TSA is actually a law, not a product. Established in 1961 – PL 87-370 Section 403b was established for the employees of 501(c)(3) organizations, including schools, colleges and techs, to give them a pre-tax retirement plan.

Your TSA will be funded most commonly by Annuities – Fixed, Index and Variable and Mutual Funds (403(b)(7).

In todays financial world the Index Annuity is more than likely the popular choice because of the guarantees involved in market risk.This section we will discuss an Index Annuity, the various Index Options and how an Index Annuity works.

After a thorough analysis of the various annuity products that are available, we have decided to use the Performance Plus 8 product from North American Life. Although each client is different, we feel this product will greatly exceed the needs of most of our clientele. We have access to many more companies and products, but our decision is not reached because of just one reason such as interest crediting but a variety of reasons, some of which are not available in other products.

The 1 st reason:
Performance Choice 8 Plus is a deferred, flexible-premium, fixed index annuity. You’ll earn a 3% premium bonus on each contribution received in the first five years, providing an immediate boost to your savings.

The 2 nd reason:
You’ll get credit for some of the market’s growth in up times. In down times, when the market sees zero gains or loses value, your premium will never be at risk of decreasing due to those losses and with the added advantage of the Inverse Performance Trigger you could make money with the market is down. (we’ll go over this later)

The 3 rd reason:
Lock in interest credits each contract anniversary. With the annual reset, any interest credits are added, or credited, to your accumulation value on each contract anniversary. Once credited, they are locked in. That means they can’t be taken away due to negative index performance. At that point, they are included in your accumulation value, giving you the advantage of compounding interest in subsequent years.

The 4 th reason:
Set your strategy – You have total control over how your initial premium is allocated between our fixed account or index accounts. Choose from several crediting methods (more details in the brochure at the end):

  • Monthly Point-to-Point with Index Cap Rate
  • Annual Point-to-Point with Index Cap Rate
  • Annual Point-to-Point with Index Margin
  • Annual Point-to-Point with Participation Rate
  • Annual Point-to-Point with Threshol Participation Strategy
  • Inverse Performance Trigger
  • Fixed account

Each index and the index account options below may perform differently in various market scenarios.

  • S&P 500® Index
  • Russell 2000® Index
  • Hang Seng Index
  • Dow Jones Industrial Average™
  • Index (DJIA®)
  • Nasdaq-100® Index
  • S&P 500® Low Volatility Daily Risk Control 5% Index
  • S&P MidCap 400® Index
  • EURO STOXX 50® (Price) Index
  • S&P Multi-Asset Risk Control 5%
  • Excess Return Index (S&P MARC 5% ER)

(see brochure for information on each Index Account)

The Inverse Performance Trigger

The Inverse Performance Trigger is based on the S&P 500®. The S&P 500® index value from the beginning of your contract year is compared to the index value at the end of the contract year. If the ending S&P 500® index value is equal to or less than the starting value, the money allocated to this option will be credited interest at the declared performance rate. If the ending index value is greater than the beginning index value, the money allocated to this option will receive zero percent (0%) interest credit.

This method for determining any interest credit applies a declared performance rate of interest when the index value stays the same or goes down throughout the year. This declared performance rate may change annually, and it will never fall below the minimum guaranteed declared performance rate. The declared performance rate is set each year at the company’s discretion.

For more information Click Here for the Performance Choice 8 brochure

Click Here to contact a NMIN Advisor for a no obligation, no pressure consultation.