What statement is correct regarding TSAs and Section 457 plans?

The statement that both plans may be funded entirely by participant contributions is accurate. Tax Sheltered Annuities (TSAs), also known as 403(b) plans, are often fully funded by employee contributions through salary reduction agreements. This allows employees in certain nonprofit and educational organizations to set aside a portion of their salary for retirement on a tax-deferred basis.

Similarly, Section 457 plans, which are designed for certain state and local government employees, may also allow participants to contribute 100% of their allowable deferral limit through payroll deductions. This flexibility enables employees to take charge of their retirement funds by making contributions from their earnings.

Focusing on the other options, the claim that both plans are exclusively funded by employer contributions is incorrect. While there are situations where employers contribute, participants can also contribute significantly. The requirement for minimum distributions at age 70½ is not applicable to both plans since certain participants may not have to take required minimum distributions from their 457 plans if they are still actively employed. Lastly, the restriction regarding contributions to employees earning over $100,000 does not apply; both plans have specific limits that are not based solely on income levels.