VU Tax Deferred Annuity 403(b) Plan - Highlights
- IRS Code Section 403(b) defined contribution plan
- Employees make all contributions to the Plan
- Plan contributions are always 100% vested
- Participant directed investment – daily valuation plan
- Distributions upon termination of employment with Vincennes University or after attainment
of age 59½.
All employees are immediately eligible to make voluntary salary deferral contributions
to Vincennes University’s tax-deferred voluntary retirement plans. Vincennes University
offers a 403(b)/Group Supplemental Retirement Annuity (GSRA) which allows employees
to contribute money toward retirement on a pre-tax basis. The University also offers
a 457(b) Deferred Compensation Plan for employees who have maximized their 403(b)
plan limits.
Advantages
There are several advantages to the tax-deferred plans. First, because your contribution
is deducted from your salary before taxes, you are taxed on a smaller amount of total
salary. In addition, your contributions will grow tax deferred. You do not pay taxes
on your contributions or its earnings until you receive the money.
Eligibility
All employees are eligible to begin making pre-tax contributions to the GSRA immediately
after your date of employment with the Vincennes University. A participant is always
100 percent vested in his or her Plan account.
Enrollment
To begin making contributions you must complete a SALARY REDUCTION AGREEMENT and TIAA-CREF application. Completed paperwork must be submitted to the Payroll department.
Contributions
Contributions to the tax-deferred plans are solely financed by the employee and are
immediately 100% vested. Please keep in mind that your accounts are subject to investment
risks and will fluctuate with the market value of the investment options you make.
A participant may elect to defer from one to 100 percent of his or her compensation
to the Plan each calendar year up to the maximum percentage allowable by law not to
exceed the limits of federal tax code sections 402(g), 403(b), or 415.
You may elect to make pre-tax contributions any time throughout the year. Changes
to the contribution amount may be made by completing a new salary reduction agreement.
Requests to change or discontinue contributions cannot be made retroactively.
Please note that employment taxes (i.e., Social Security taxes) and premiums for employer-provided
benefits will be deducted from a participant's compensation prior to salary deferrals
and catch-up contributions.
Federal law limits the amount of salary deferrals that can be contributed to the Plan
and to all 403(b) plans, 401(k) plans and other similar type of plans in which an
individual participates in any calendar year.
Age 50 or Older Catch-Up Contributions
For participants who are at least age 50 before the end of the calendar year, the
current dollar limit on salary deferrals is increased. The additional amount of salary
deferrals that are permitted to be made by an eligible participant is the lesser of
(i) the participant's compensation for the year reduced by any other salary deferrals
of the participant for the year or (ii) the "applicable dollar amount."
Catch-up contributions will not be taken into account when applying the salary deferral
contribution limit described above or the maximum contribution amount limit (415 limit)
described below.
Maximum Contribution Amount (415 Limit)
VIEW THE 415 LIMIT FOR THE CURRENT YEAR
Federal law limits the total amount of contributions that may be contributed to Vincennes
University retirement plans on behalf of an employee for any calendar year. The total
amount contributed cannot exceed the lesser of 100 percent of the employee's compensation
for the year or the "applicable dollar amount." (The IRS adjusts the contribution
limit periodically for increases in the cost-of-living.) However, age 50 or older
catch-up contributions will not be taken into account in applying the maximum contribution
amount.
The maximum contribution amount limits the total amount of employer contributions
and salary deferrals that can be made to the Plan and the VU Defined Contribution
Retirement 403(b) Plan, or the VU Supplemental Retirement Plan for Faculty and Professional
Staff 403(b) Plan, on behalf of an employee.
Taxes on Contributions
Salary deferrals and catch-up contributions will not be included in a participant's
income reported to the federal government for income tax purposes. However, the participant
and Vincennes University must pay employment taxes (i.e., Social Security taxes) on
salary deferrals and catch-up contributions when they are made to the Plan.
Contributions Will Not Reduce Social Security Benefits
Employment taxes are deducted from a participant's compensation before salary deferrals
and catch-up contributions are contributed to the Plan. Therefore, making salary deferrals
and catch-up contributions to the Plan will not reduce a participant's compensation
for purposes for calculating Social Security benefits.
Investments
The Plan is a participant directed plan. Each participant is responsible for directing
the investment of his or her Plan account. A participant may direct the investment
of his or her Plan account among any investment funds provided under the Plan. A participant
may also transfer monies from one investment fund to another.
You may change the investment election of your future contributions or existing contributions
at any time by contacting TIAA-CREF. You will receive annual and quarterly statements
directly from TIAA-CREF showing your accumulation of benefits.
Each of the investment options offers certain advantages and risks. Depending upon
your personal savings goals - and the level of risk you want to accept - you can create
your own investment strategy. The value of your accounts may fluctuate upward or
downward as a result of changes in the market price of the assets in the investment
options you select.
Please read the investment options carefully before selecting. Contributions invested
in the plans are subject to certain transfer restrictions.
Receiving your Benefits
Generally, you will begin to receive your benefit when you retire. You will pay income
tax on the taxable portion of your benefit as you receive it. Upon terminating your
employment from Vincennes University any distributions from the plan will be subject
to regular income tax. Depending on your age of termination you could be subject
to an early distribution tax of 10% in addition to regular income tax.
If you die before distribution of your account begins, your designated beneficiary will receive the
balance in your accounts under a payment option available TIAA-CREF.
If you die after distribution of your account begins, any remaining account balance distributed to
your beneficiary will be determined by the form of payment you selected prior to your
death. Under some forms of payment, your beneficiary may elect to receive a lump
sum payment or another form of payment available under the Plans. However, if your
accounts have been used to purchase an annuity, any remaining payments will be made
under the terms of the annuity.
Federal law places limits on the maximum time period when benefits must be paid and
on the minimum amount that must be paid after your death. TIAA-CREF will notify your
beneficiary(ies) if any of these limits apply.
Distributions and Withdrawals
A participant may only withdraw funds from his or her Plan account upon:
- Attainment of age 59½ or older while employed at Vincennes University; or
- Termination of employment with Vincennes University.
Minimum Required Distributions
Federal law requires that distribution of a participant's Plan account, regardless
of the form, must begin on or before April 1st of the calendar year following the
calendar year in which he or she attains age 70½ or the calendar year in which the
participant retires, whichever is later.
Forms of Distributions
Participant s may elect to receive a distribution of his or her Plan account in any
one of the following forms or combination of forms:
- Single sum distribution of cash
- Systematic Withdrawal
- Annuity
- Any legally permissible form of distribution permitted by TIAA CREF
Taxes on Distributions
Plan distributions are generally subject to a 20% mandatory federal income tax withholding
rate. This mandatory withholding will reduce the amount a participant actually receives
upon withdrawing funds from the Plan. However, the amount withheld will be credited
against any taxes the participant owes for the year when the participant files his
or her annual tax return.
There are exceptions to the mandatory federal income tax withholding rule, including
receiving the Plan distribution as a life-time annuity payment or directly rolling
over the Plan distribution to an eligible retirement plan (e.g., an IRA).
In addition, Plan distributions made prior to attainment of age 59½ are generally
subject to a 10% early withdrawal penalty tax.
There are exceptions to the 10% early withdrawal penalty tax, including: receiving
the Plan distribution as a life-time annuity payment, receiving the Plan distribution
after terminating employment at age 55 or older, or receiving the Plan distribution
after terminating employment due to a permanent disability.
Direct Rollover Distributions
A direct rollover of an eligible rollover distribution may be made at the participant's
election. A direct rollover is a payment of an eligible rollover distribution from
the Plan directly to another eligible retirement plan, such as a 401(a) plan, 403(b)
plan, 401(k) plan, governmental 457(b) plan, or IRA. However, certain types of distributions,
such as life-time annuity payments, are not eligible for direct rollover treatment.
Leaving Employment with the Vincennes University
If you have a complete severance from employment from the Vincennes University, you
are entitled to receive a distribution of your accounts. If you decide to have your
distribution paid to you, TIAA-CREF is required by federal law to withhold 20% from
your distribution to be applied against your federal income tax liability for the
year.
You may also retain your accounts if you leave employment with Vincennes University.
Your accounts will continue to earn interest and dividends. If you are later employed
by an organization that offers eligible plans through TIAA-CREF, you may be able to
enter into a salary reduction agreement through the new employer.
Taxation of Benefits
The general rules described in this Section are complex and contain many conditions
and exceptions that are not included in this summary. Therefore, you should discuss
your situation with your tax advisor before you apply for the payment of your accounts
from the Plan.
Additional information
The information contained in this section is a general overview. You may contact
TIAA-CREF directly at 800-842-2776 or online at WWW.TIAA-CREF.ORG/VINU.
