Human Resources

Texas Woman's University Staff Handbook
Employee Benefits: Tax Sheltered Income Programs

Whether the employee participates in the Optional Retirement Program (ORP) or the Teacher Retirement System (TRS), most employees are eligible to place additional pre-tax contributions into a Tax Deferred Account (TDA) or a Deferred Compensation Program (457).
The TDA is a supplemental investment that may be made in addition to the mandatory retirement program. The TDA receives no state contribution. The TDA enables the employee to shelter up to 100% of gross annual income each year with a maximum limit each year.
The 457 is also a supplemental investment that may be made in addition to the mandatory program. The 457 receives no state contribution, and also enables the employee to shelter up to 100% of gross annual income each year with a maximum limit each year.

There is a Maximum Allowable Contribution Calculation that must be individually calculated for each employee participating in the TDA and/or 457. Employees can participate in a TDA and 457 at the same time. Doing this would allow the employee to shelter up to a maximum amount each year.

The advantages of a TDA or 457 are (1) a portion of current income can be sheltered from income tax; and (2) interest or earnings on the annuity accumulate tax-free until the participant makes withdrawals. Withdrawals cannot be made until the employee turns age 59 1/2, separates from service or retires. The TDA and 457 should be regarded as a program for funds to help supplement retirement. Taxes are due on the money during the year in which the withdrawals are made.

For more information concerning the Tax Deferred Account or the Deferred Compensation Program, or to calculate your maximum allowable contribution, visit the TWU HR Benefits-Retirement web page.

Return to Table of Contents