403(b) & 457(b) Payroll Deductions

With the final few paydates for 2008 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 How Much You Have Contributed So Far This Year

Vist the At Your Service website in Related Information. After you sign-in, click on Income and Taxes, Earnings Statement, View Statement and then scroll down to see Year-to-Date Totals.

2008 Maximum Annual Contribution (MAC) for Each Plan

The MAC for each plan is $15,500, or $20,500 if you are age 50 by 12-31-08. Payroll deductions automatically stop when these limits are reached. (If you have 15 years of service with UC as of 12-31-2007, you may be eligible to contribute an additional $3,000 in 2008 under the Lifetime Catch-up provision. Contact Fidelity for details.)

  Processing Windows for Final Paydate(s) of 2008

*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 1-866-682-7787, Monday thru Friday, 5:00 am to 9:00 pm (Pacific Time)
2. Go to the Fidelity Retirement Services website in Related Information, 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 “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. 2008 is unusual in that 12-10-2008, is also a Benefits Holiday which means that no flat-dollar deductions will be taken from that paycheck even though there are only two bi-weekly paydates in December. See article in Related Information for more details.

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 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%. 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.

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 payroll system will then deduct what it can from your remaining pay up to the elected percentage.

What about 2009?

At press time for this memo, the Internal Revenue Service had not announced what next year’s Maximum Annual Contribution limits will be. Just as soon as the 2009 limits are officially announced, they will be widely communicated.

If you want to change your payroll deductions for the first paydate in 2009, mark your calendar as follows:

  Processing Windows for First Paydate of 2009

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 4-0830, or Health System Human Resources at extension 4-0500.

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

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