403(b)/457(b) Payroll Deductions

With the final paydate for 2006 quickly approaching, now is the time to plan if you wish to maximize your pre-tax contributions to the UC Retirement Savings Program’s 403(b) and 457(b) plans for this calendar (taxable) year, or to make changes. Below are the processing-window dates, along with helpful information about when and how to process changes for the next few paydates.

How to Determine Year-to-Date Contributions

To determine the amount contributed to the 403(b)/457(b) plans year-to-date, refer to your most recent paycheck stub, which can be conveniently accessed through At Your Service Online. After you sign-in, click on Income and Taxes, Earnings Statement and View Statement.

2006 Maximum Annual Contribution for Each Plan

The Maximum Annual Contribution for each plan is $15,000 or $20,000 if you are age 50 by 12-31-06. Payroll deductions automatically stop when these limits are reached. (If you have 15 years of service with UC as of 12-31-2005, you may be eligible to contribute an additional $3,000 in 2006 under the Lifetime Catch-up provision. Contact Fitsco for details.)

What is the Final Paydate for 2006?

*Bi-weekly Payroll Cycle—The two regular bi-weekly paydates in December are 12-13-2006 and 12-27-2006. The final 2006 paydate is 12-27-06.

How to Make Changes

1. Call Fitsco at 1-866-6UC-RSVP (1-866-682-7787), Monday thru Friday, 5 a.m. to 9 p.m. (Pacific Time), press 3 and then the pound sign (#) to talk with a representative, or
2. Go to Fitsco's web site, login, select Plan, select Payroll Deductions under “Act” section on the left and then follow prompts.  Online transactions can be processed 24 hours a day, 7 days per week.

Payroll Deduction Methods

You may select either the “flat dollar” or “percentage” payroll deduction method, depending on your preference. There is one important frequency difference between these methods as outlined below.

If you use the “percentage” payroll deduction method, a deduction will be made from ALL paychecks, including special payments such as, Staff Achievement Awards, Health Sciences Special Compensation Plan payments (commonly known as “Z” payments), terminal vacation pay, and others. The “flat dollar” deduction method is NOT taken from special payments.

If you use the “flat dollar”* payroll deduction method, a deduction will be made from paychecks you receive on your “primary” pay cycle only. This means that if you receive a special paycheck other than the one for your “primary” pay cycle, or other special payment (such as Staff Achievement Awards, “Z” payments, terminal vacation pay), a deduction for 403(b)/457(b) is NOT taken from the special payment if the flat dollar payroll deduction method is in place.

*For monthly paid employees, typically paid on the first of the month, a "flat dollar" deduction is one monthly deduction. For bi-weekly paid employees, the "flat dollar" monthly amount is evenly divided between two bi-weekly pay periods ending in the month, excluding any third bi-weekly pay period in the month, which is typically a deduction holiday.

For employees enrolled in BOTH the 403(b) and 457(b) Plans, the following applies:

Situation:  If you use the “percentage” payroll deduction method for the 403(b) and 457(b) plan, AND the overall total to be deducted from BOTH plans is 100% or more, the PPS system will NOT CALCULATE AND TAKE EITHER ONE. For example, NO DEDUCTION will occur for either plan if you elect a 70% deduction for each plan, 50% for each plan, 70% for one plan and 30% for the other plan, or any other combination where the overall total of the “percentage” to be deducted for both plans equals 100% or more.

Solution: Be sure that the overall total to both plans combined is less than 100%. An example is to deduct 49% to one plan and 50% to the other (99% total), or 25% to one plan and 70% to the other plan (95% total). Or, you could elect the “flat dollar” method to one plan and the “percentage” method to the other. Or, if you have reached your 403(b) maximum contribution for the year, you may want to reduce or cancel the percentage for that plan and increase your 457(b) percentage to 70%.

Keep in mind that if you have other payroll deductions such as for medical, parking, DepCare, HCRA, etc., these deductions will come out of your pay BEFORE the percentage for 403(b)/457(b) plans are applied. The system will deduct what it can from your remaining pay up to the elected percentage.

What about 2007?

At press time for this memo, the Internal Revenue Service had not announced what next year’s Maximum Annual Contribution limits will be. While we can assume the limits will be at least the same as they were for 2006, we can’t be certain until the official announcement is made. Just as soon as the 2007 limits are known, they will be widely announced.

If you want to change your payroll deductions for the first paydate in 2007, mark your calendar as follows:

*Benefits Holiday means that only percentage (%) deductions will be taken from this paycheck and flat dollar deductions such as for medical, parking and credit union will NOT be taken, including flat dollar deductions for 403(b) and 457(b) plans.

If you want to make any changes, contact Fitsco at 1-866-682-7787, or go online as outlined above. If you have any other questions or don’t know what your “primary pay cycle” is, contact the person in your department who handles benefits/personnel issues or call Campus Human Resources, Benefit Services, or Healthcare Human Resources.

Campus Human Resources, Benefits Services
Phone: (310) 794-0830 | Fax: (310) 794-0835

Healthcare Human Resources
Phone: (310) 794-0500 | Fax: (310) 794-0620