The Economic Growth and Tax Relief Reconciliation Act of 2001 has substantially simplified 403(b) and 457(b) compliance. Participants may enroll once and their contribution will carry over from year to year, eliminating the need to complete a new enrollment each calendar year. Under the new law, 403(b) and 457(b) participants are able to contribute 100 percent of compensation up to the annual deferral limit of $18,000 for 2015.
An employee may take advantage of both accounts, so that the 2015 calendar combined maximum, for example, would be $36,000. Two opportunities to contribute in addition to the deferral limit are available to participants:
- Catch-up contributions for employees reaching age 50 or older are allowed. The catch up amount for 2015 is $6,000, for a total of $24,000 per plan or a combined maximum of $48,000.
- Special exclusion allowance for employees with 15 years of service or more at OU up to $3,000 annually may be possible. Please call the benefits office to request a special exclusion allowance to determine your eligibility.
To establish a tax-deferred voluntary retirement savings plan, you must enroll at Fidelity Online. Your paycheck will be reduced by the amount you designate.
Changes & Deadlines
You may stop or change your enrollment and contribution amounts at any time at Fidelity Online. Actions made to a 403(b) plan by the 3rd of a month will be applied to your next paycheck. Actions made to a 457(b) plan by the 3rd of the month will be applied to your paycheck in the next month.
Contributions in the Current Calendar Year
You must enroll or make changes online before October 3 to ensure that your contributions are saved from your paychecks in the current calendar year. Changes made after October 3 will not be processed in time for paychecks in the current calendar year.
Termination of Employment
If your employment terminates, you may take a lump sum distribution. However, the distribution would be calculated as income for that year, taxed as income and in the case of a 403(b) account, a 10 percent penalty for early withdrawal applies. You may continue contributing, if your new employer participates. You may leave your present contract in place (some restrictions may apply). You may transfer your present contract to a new company.
There are a number of payout options to choose from at retirement. You may also choose a lump sum distribution. The IRS requires that participants begin receiving retirement benefits from a tax-deferred annuity no later than April 1st following the year in which the participant reaches age 70 1/2. You can begin receiving benefits as early as age 59 1/2 without any penalties. A 403(b) or 457(b) tax deferred annuity allows you to supplement other retirement plan benefits.
You can choose a Roth 403(b) or Roth 457(b) plan in the Voluntary Retirement Savings Plans. In a Roth plan, you make after-tax contributions during your career and use the money tax-free in retirement. The same rules apply as described above for 403(b) and 457(b) Voluntary Retirement Savings Plans. Your contributions to a regular plan and a Roth plan are cumulative and together must not exceed the annual contribution limits described above for 403(b) and 457(b) plans. You should consider whether a Voluntary Retirement Savings Plan is right for you. Get more information from a Fidelity representative
or enroll here