AIG / VALIC Retirement Services and TDS Present 403b Retirement Plan Services for Foothill - DeAnza Community College District

Agenda 403(b) Background 403(b) Plan Details Examples Questions and Answers

Key Issues  Have you ever wanted to defer more than the 403(b)/ 401(k) maximum?  Have you ever wanted to retire early and have access to your TSA money?

EGTRRA  Economic Growth and Tax Relief Reconciliation Act of 2001  Significant pension reform  Focused on individual income and estate tax provisions and retirement plan and IRA provisions

EGTRRA  Most provisions effective 2002 or later  Unless Congress acts, all provisions “sunset” on December 31, 2010

EGTRRA -- Pension Plan Summary  403(b) limits increased -- Lesser of 100% of salary or $13,000 in 2004, $14,000 in 2005, and $15,000 in 2006  Cap Expansion retained  Age-based Catch-up for participants age 50 and older -- $3,000 in 2004, $4,000 in 2005, and $5,000 in 2006

EGTRRA -- Pension Plan Summary (b)  457(b) Deferred Compensation Plans -- Group sponsored “retirement plan”  For Government and Not-For-Profits

457 (b) Plan Features  Nonqualified deferred compensation  Subject to IRC Section 457 since 1986 but prior to 2002 directly offset 403b contributions.  Assets Held in Trust for employees and not subject to claim of employer’s creditors  May be invested among different investments

Eligible Employees All Employees are eligible No further coordination with 403(b)/401(k) plans !

Benefits to Employees  Supplement retirement income  Defer current income taxation on contributions and earnings  Able to “double up” on contribution deferrals - Now can contribute to both 403b and 457 at the same time!

457(b) Contribution Limits  100% of compensation not to exceed $13,000 in 2004, and increasing $1,000 each year to $15,000 in 2006, then indexed  Age 50 + catch up is $3,000 in 2004, and increasing $1,000 each year to $5,000 in 2006, then indexed

457(b) Contribution Limits continued  “3-year” catch-up prior to normal retirement equal to 2 times the annual dollar limit ($26,000 in 2004)  Must have been eligible for this plan and must consider prior year pre-tax deferrals with this ER  Can not use age 50 and 3 year catch up together

457(b) Withdrawal Restrictions  Availability of funds generally subject to:  Attaining age 70½  Separation from service (any age with no pre-59 1/2 withdrawal penalty)  Unforeseen emergency*

457(b) Taxability  Pre-tax contributions  Tax-deferred earnings  Taxed as ordinary income when withdrawn*  Deferred amounts subject to FICA and FUTA withholding at time of deferral  Earnings not subject to FICA and FUTA  Subject to minimum distribution rules at age 70½

457(b) Minimum Distribution  Distributions must be taken beginning the year of attaining age 70½ or actual retirement, whichever is later  Initial distribution must be made by April 1 following such year; subsequent distributions must be made by December 31 of each following year*  Amount determined by dividing previous year’s account balance by your life expectancy or the joint life expectancy of you and your beneficiary

Other Plan Features  Loans are available  Portable to 403(b), 401(k) or IRAs at separation from service

Other Plan Features  Enrollment : enter into agreement with respect to compensation not yet earned  Contribution may be changed or modified in each subsequent calendar month  Unforeseen Emergency Withdrawals are available

Contribution Example  In a 403(b): $15,000 +3,000 (eligible employees with 15 or more years of service) +3,000 (eligible employees with 15 or more years of service) +5,000 (eligible employees who are age 50 or older) +5,000 (eligible employees who are age 50 or older)$23,000

Contribution Example  In a 457(b): $15, ,000 (eligible employees in the last three years ending before $30,000 normal retirement age under their plan) or$15,000 +5,000 (eligible governmental employees age 50 or older) +5,000 (eligible governmental employees age 50 or older)$16,000

Contribution Example  Combining your 403(b) and 457(b) $20, (b) using cap expansion and age-based catch up +30, (b) using last three years catch up $50,000 Total possible contribution using both plans or $20, (b) using cap expansion and age-based catch up +20, (b) using age-based catch up $40,000

Selecting a Retirement Plan Provider  Company Ratings  Expenses -- Fund Expenses, Charges, Fees  Service  Investment Choices  Flexibility  Experience  Reputation

Questions and Answers

Thank You!

Investment values will fluctuate and there is no assurance that the objective of any fund will be achieved. The original investment may be worth more or less than the original cost. Securities and Investment Advisory services are offered through AIG VALIC Financial Advisors, Inc., member NASD/SIPC. The information in this presentation is general in nature and may be subject to change. Neither VALIC nor its agents give legal or tax advice. Applicable laws and regulations are complex and subject to change. For legal or tax advice concerning your situation, consult your attorney or professional tax advisor. AIG VALIC Financial Advisors is a member of American International Group, Inc. AGFA Rev. 01/2002 © 2002 VALIC, Houston, Texas