Can my employer make contributions to my TSA?

The majority of TSA plans are established primarily as a payroll deduction for the employees, allowing the employees to shelter a portion of their income from taxes. However, TSA plans can be designed so that the employer can contribute to the plan. In this type of arrangement, the employer must have a plan document on file and provide a summary plan description to each employee. The plan document must be adopted by the board of directors of the organization. An employer-funded TSA may be designed according to one or a combination of the following designs: 1. The plan can be designed so that the employer contributes the same percentage of salary for each eligible employee. This choice eliminates the need for most nondiscrimination testing and reduces administrative costs. 2. The plan can be designed so that the employer matches a percentage of the employee's deferral up to specified amounts. The employer chooses a matching amount from 0 to 100 percent. This type of plan design requires nondiscrimination testing and a third-party administrator. 3. A matching plan can be designed to allow the employer to have discretion on the amount of annual contributions. This allows the employer to decide on an annual basis the amount of contribution, depending on affordability. A TSA plan offers employees the ability to take payroll deductions that result in tax savings. If the employer contributes to the plan, the employee has the added benefit of employer participation. An employer-contribution TSA gives many of the benefits of a 401(k) plan without many of its complexities.