Human Resources

Tax-Deferred Supplemental Retirement Account

What is an SRA

An SRA allows you to set aside a portion of your salary before federal and state income taxes are paid.  This deferred salary is placed into an investment account of your choice.  The amount you defer and any earnings are not taxed until you receive them.

Participation in an SRA is completely voluntary.  You are provided the opportunity to save part of your salary for future use.  At the same time, you delay payment of taxes on this money and any interest it has earned until later-usually at retirement.

Am I eligible?

You are eligible to participate on your first day of employment if you are a part-time or full-time employee (not a student or graduate assistant) of the University. 

What if I do not want to participate now?

If you do not participate when you are first eligible, you will be able to participate beginning the first pay period following your submission of an enrollment form.

What are the tax advantages of an SRA?

Tax advantages are an important part of an SRA. Unlike savings on an after-tax basis; your deposits to an SRA account are made on a before-tax basis.  They are called “before-tax deposits” because they are transferred directly into your account before federal and state income taxes are computed and withheld.


$100/MONTH ($1,200/Year Savings

With 403(b)

Without 403(b)

Annual Salary (Gross Pay)



Less 403(b) Savings



Less Retirement Contribution (8%)



Taxable Income



Less Federal Tax*



Less Medicare Tax



Less After Tax Savings



Remaining Spend able Pay



Additional Spend able Pay



*Assumes lowest federal tax bracket of 15 percent.  Savings will be even greater for person in higher tax brackets.

GSU provides the opportunity for you to participate in tax-deferred annuities [also referred to as tax-sheltered annuities (TSASs) or supplemental retirement accounts (SRAs) through payroll deduction.  GSU does not negotiate with or have control over the providers on the specific contract provisions of the SRA. GSU cannot guarantee the success of these products or the level of service.  We urge you to fully review the product before you participate.  We urge you to fully review the product before you participate.

Can I have an IRA and an SRA? 

You must be very careful not to over-shelter your income under the IRS regulations.  The determination of your maximum allowable amount for sheltering purposes is complicated and the applicable rules change often.  For this reason, we emphasize that you should consult a tax advisor before signing up for both an IRA and an SRA.

This is also true if you decide to participate in an SRA and the Cafeteria Plan.  With the passage of the Small Business Job Protection ACT (H.R. 3448) in September 1996, you are no longer limited to one change per year in the 403-(b) supplemental retirement accounts.  You may make multiple supplemental retirement account changes in the same tax year.

If you participate, you may make before-tax deposits to your account by signing an agreement that allows the University to set aside a specific amount for investment in an SRA.

Forms authorizing the University to set aside a portion of your salary for before-tax deposits into an SRA are available from agents representing the approved vendors.

How much may I deposit into an SRA?

The minimum amount you may place in your SRA account is $16.75 per month ($200 per year).

The maximum amount that may be tax sheltered, called the maximum exclusion allowance (MEA), is determined by federal law and calculated on an individual basis, based on your circumstances.  The MEA must be recalculated every year.

Since University employees participate in a public retirement system, the federal government may place further limits on the maximum you can actually set aside for investment in the SRA, based on your years of employment with the University.  Additionally, any amounts you have previously invested in an SRA will also limit the amount of before-tax deposits you can make into your account.

Under certain circumstances, if you have not taken full advantage of an SRA, there are special catch-up provisions that may allow a larger-than-normal contribution before retirement.

How are before-tax deposits invested?

The University forwards your before-tax deposits to the company you have selected to manage your SRA. Several companies have been authorized by the University to offer their programs.  This authorization does not constitute an endorsement of the companies by the University, nor odes the University assume responsibility for their investment performance.  You must choose the company you want to manage your SRA.

In what types of programs may I invest?

You may invest in either annuity contracts or mutual funds.

What are the features of an annuity contract?

There are two types of annuity contracts-fixed annuities and variable annuities.

The fixed annuities provide a guarantee of principal and a guaranteed rate of return.  Fixed annuities also provide for fixed periodic payments t retirement and a specific rate of return for a certain period of time.  At retirement, you can select from several payment options, depending on the investment contract or policy you have chosen.

The variable annuities invest mainly in stocks, bonds, and money market funds and do not have a fixed rate of return or a guarantee of principal, an amount of money you receive at retirement or your monthly retirement payments will vary, depending on the investment performance of the fund.  This type of investment relies on growth over a period of time to increase the value of the fund.  There are no guarantees.  The value of your account can go up or down with the investment performance of the fund.

Some of the companies offer a combination of both fixed and variable annuities.  You may specify the percent or amount of each deposit that is to be invested in each annuity.

How do custodial accounts differ from the annuity contracts?

The custodial accounts available through the mutual fund companies are very similar to the variable annuity option described above.  The value of your account can go up or down with the investment performance of the fund.

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How do I select a company to manage my SRA account?

Your situation and needs are very personal and require individual attention.  What is best for you is not best for everyone.  You or your investment adviser should compare the programs offered to decide which would be best for you.

Can I withdraw money while I am still employed?

The main purpose of the SRA is to help provide you with long-term financial security through current tax-efficient savings.  In exchange for the tax breaks the IRS gives you, government regulations limit withdrawals while you are employed.  In addition, some investment companies have policy or contract restrictions that may include fees or interest penalties for early withdrawal.  Be sure to review the company’s policy before making your decision.  Withdrawal forms may be requested from your investment company or its representative.

Are there any government restrictions applying to my withdrawal?

You must pay ordinary income taxes and a 10 percent penalty on any withdrawal taken from your SRA prior to attaining age 59 ½.

You cannot withdraw funds from your SRA before age 59 ½ except for the following reasons:

  • Termination of employment
  • Disability or death
  • Financial hardship

In order to qualify for hardship, you must have a verifiable, immediate, and heavy financial need.  The withdrawal must be necessary to meet the need; in other words, you are unable to meet the need from any other source.  In this case, you can withdraw only your contributions, not the earnings on them.

If you withdraw money from your SRA before age 59 1/2, you must pay a 10 percent penalty tax on the amount withdrawn unless the distribution meets one of the following requirements:
  • Is due to termination of employment on or after age 55.
  • Is the form of substantially equal payments for life or life expectancy, after termination of employment?
  • Is due to disability or death.
  • Is for non-reimbursable medical expenses to the extent allowed to be itemized on your income tax return (more than 7.5 percent of adjusted gross income).
  • Is a payment to an alternate payee directed by a qualified domestic relations order (QDRO)?

Minimum distribution must begin by April 1 of the year following the later of these two events- -you attain 70 ½ years of age or you retire.

If I make a withdrawal, can I return the money to the fund at a later time?

The law does not permit the plan to allow you to make extra or special deposits to replace previously withdrawn funds.

What happens if I leave the university?

If you leave the University, your deposits to the SRA will stop.  The deposits and earnings you have accumulated can be withdrawn and paid to you (or your beneficiary if you die).  Contract or policy withdrawal restrictions will apply.

Distributions made that are not part of a series of substantially equal payments made over a period of 10 years or more, or that are not required to be made under the IRS minimum distribution rules, may be rolled over to an IRA.  You may also elect not to withdraw your deposits and earnings, allowing you to further defer any tax liability.  Any withdrawals that are not directly rolled over to an IRA or another SRA will be subject to tax withholding of 20 percent.

In addition, if you are not yet 59 ½ and do not meet any of the criteria explained under the governmental restrictions outlined above, your distribution will be subject to a 10 percent penalty tax according to IRS regulations.  This penalty tax is in addition to any contract or policy withdrawal restrictions that may apply.  If you die, your beneficiary must contact the investment company or its representative 

Can I name a beneficiary for my account?

The choice of a beneficiary is yours.  When you enroll in an SRA, you will be given a beneficiary designation form that contains all the information for beneficiary election.  In the event you want to change your designation of beneficiary, you need to contact the investment company or its representative.