
IS - 2048 Tax Deferred Annuities	Human Resources Release Date: 3/23/01 Revision 1: 8/17/06
Policy

Administrative Directive

Introduction

Central New Mexico Community College (CNM) employees have the option of establishing a tax deferred annuity as provided by Section 403(b) of the Internal Revenue Code. Annuity payments are made through a bi-weekly payroll deduction. A tax deferred annuity enables participating employees to postpone paying income tax on the annuity portion of their earnings until retirement, at which time their income and tax rates may be lower.

A list of participating companies may be obtained from the Human Resources Department. The College
will act only as a collector of the premiums without endorsing any of the participating companies.

1. Employee Eligibility

All employees are eligible to participate in tax deferred annuities with the exception of student employees.

2. Contributions

The maximum amount an employee may contribute to the tax deferred annuity is defined by the
Internal Revenue Code. The Internal Revenue Code rules are subject to change without notice and
are complex; therefore, employees who wish to participate in a tax deferred annuity should consult
with an annuity agent.

2.1 During a calendar year, an employee is eligible to make voluntary employee contributions
of as much as 25% of his or her compensation as defined by the Internal Revenue Code, up
to $10,500 each calendar year.

2.2 Employees must be aware of the penalties and taxes that may apply to premature distributions and withdrawals from tax deferred annuities. In general, the same tax rules apply to distributions from tax deferred annuities that apply to distributions from other retirement plans.

2.3 Employees who are contemplating early distributions or withdrawals may wish to seek advice from a tax advisor before making such distributions or withdrawals.

3. Enrollment

Employees select a vendor from the list provided by the Human resources Department. After arrangements are made with the selected vendor, the employee provides the vendor with a completed Salary Reduction Authorization form.

4. Discontinue or Change Contributions

The employee needs to contact the vendor to discontinue or change the amount of a contribution. A Salary Reduction Authorization is completed by the employee and then sent to Payroll for processing to change the amount currently being deducted.

5. Catch-Up Provision

5.1 In certain instances, employees with service equal to fifteen (15) years or more at the College may be
eligible for the "catch-up provision" and can contribute up to $13,500 in a calendar year

5.2 To participate in the catch-up program, an employee must submit a Tax Deferred Annuity
Contract and a Maximum Exclusion Allowance (MEA) calculation (provided by the employee's annuity company) to the Payroll Department.

The employee selects a vendor from the list provided by Human Resources to determine eligibility criteria. If eligible, the employee provides the vendor with a Salary Reduction Authorization form.

5.3 This calculation requires that prior years’ contributions be taken into consideration.

6. Modification to Individual Contracts

6.1 The College allows employees to change existing contracts whenever necessary in compliance with the Internal Revenue Code.

6.2 The employee's request must include a current MEA calculation from the employee's annuity company.

7. Definitions

Tax-Deferred Annuity	A tax-deferred annuity is a contract between an individual and an insurance company for a guaranteed interest bearing policy with guaranteed income options.
Tax-Deferred	Postponing taxes on interest earnings until a future point in time.
Third Party Administrator	An outside agency employed to manage and maintain the processes and records of a defined system. In this case, Tax Deferred Services manages and maintains CNM employees’ annuities plans.


Forms:	Tax Deferred Annuity Contract Salary Reduction Authorization
Support Materials:	Tax Sheltered Annuity Vendor List
Reference Materials:	Internal Revenue Code