403(b) & 457(b) Payroll Deductions

With the final few paydates for 2009 approaching, now is the time 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. This bulletin contains helpful information about when and how to process changes for the next few paydates. Note: Any changes you make now will continue in 2010 so you may want to readjust your contributions in January 2010.

Impact of the Furlough Plan

If your pay is reduced and you are contributing to the 403(b) and 457(b) plans using the “percentage method,” then your contributions to these plans will also be reduced. If you are contributing using the “flat dollar” method (for example, $100 per month), then those contributions will continue unchanged even though your pay is less. Questions and Answers about the Furlough Plan are available in Related Information.

Determining Your Year-to-Date Contributions

To determine how much you have currently contributed, go to At Your Service in Related Information. After you sign in, click on “Earnings Statement” in the “Income and Taxes” section. Select the most recent paydate and click on “View Statement” in the right-hand column and then scroll down to see Year-to-Date Totals.

2009 Maximum Annual Contribution (MAC) for Each Plan

The MAC for each plan is $16,500 or $22,000 if you are age 50 by 12-31-09. Payroll deductions automatically stop when these limits are reached. (If you have 15 years of service with UC as of 12-31-2008, you may be eligible to contribute an additional $3,000 in 2009 under the Lifetime Catch-up provision; contact Fidelity for details.)

Processing Windows for Final Paydate(s) of 2009

 Monthly PayrollBi-weekly Payroll 
 10-1-0910-14-0910-28-09
457(b)8-1 thru 8-318-1 thru 8-318-1 thru 8-31
403(b)8-26 thru 9-219-25 thru 10-110-8 thru 10-16
 10-30-200911-10-2009*
benefits holiday*
11-25-2009
457(b)9-1 thru 9-309-1 thru 9-309-1 thru 9-30
403(b)9-26 thru 10-1910-23 thru 10-2911-5 thru 11-13
 12-1-2009
(final paydate)
12-9-200912-23-2009
(final paydate)
457(b)10-1 thru 10-3110-1 thru 10-3110-1 thru 10-31
403(b)10-24 thru 11-1611-20 thru 11-2712-4 thru 12-11

*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.

How to Make Changes

  1. Call Fidelity Retirement Services at (866) 682-7787, Monday thru Friday, 5 a.m. to 9 p.m. (Pacific Time). After the prompts, enter your Social Security Number and PIN, or your User ID and PIN. When you hear “Main Menu,” say “Representative.”

    OR
  2. Go to Fidelity's website in Related Information, login, select the applicable Plan, select “Contribution Amount” under “Act” in the left-hand column and then follow the prompts. Online transactions can be processed 24 hours a day, 7 days per week.

Payroll Deduction Methods

You may select either the “percentage” or “flat dollar” payroll deduction method for the 403(b) and 457(b) deductions. There is one important frequency difference between these methods as outlined below.

  1. Percentage (%) Payroll Deduction Method
    If you use this method, a payroll 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, etc.
  2. Flat Dollar Payroll Deduction Method
    If you use this 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 403(b)/457(b) deduction is NOT taken from any special payments.

    * 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 Benefits 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 payroll system will NOT 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%. For example, 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, elect the “flat dollar” method to one plan and the “percentage” method to the other. Or, if you have reached your 403(b) MAC for the year, you may want to reduce or cancel the percentage for that plan and increase your 457(b) percentage to 70%, or vice versa.

Affect on After-Tax Benefit Plan Payments

If you have other “pre-tax” payroll deductions such as for medical, parking, flexible spending account(s), etc., these deductions will come out of your pay BEFORE the 403(b)/457(b) contributions are applied. However, any “after-tax” payroll deductions such as for disability, life insurance, legal, etc. are deducted AFTER 403(b)/457(b) plan contributions are applied, so be sure sufficient funds remain for those payments. While missed insurance payments are held in suspense for a short period of time, if your payment is missed for two months or more, your insurance plan will be cancelled. We encourage you to monitor your paychecks to be sure that all after-tax benefit deductions have been taken and if not, make arrangements for direct payment of those premiums with your benefits office.

What about 2010?

At press time for this memo, the Internal Revenue Service had not announced what next year’s Maximum Annual Contribution limits will be. As soon as the 2010 limits are officially announced, they will be widely distributed.

If you want to change your payroll deductions for the first paydate in 2010, mark your calendar as follows:
 

Processing Windows for First Paydate of 2010

 Monthly Payroll Bi-weekly Payroll 
First 2010 Paydate1-4-101-6-101-20-10
457(b) 11-1 thru 11-3011-1 thru 11-3011-1 thru 11-30
403(b)11-21 thru 12-1412-18 thru 12-24
(short window due to holidays)
12-31-09 thru 1-10-10

If you want to make any changes, call Fidelity at (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 at extension 40830, or Health System Human Resources at extension 40500.

 

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