At Wright State University, two Supplemental Retirement Plans are available to all faculty (including adjunct faculty) and staff members to invest via payroll deduction on a pre-tax basis to either a 403(b) or a 457(b) account.
What is a 403(b) plan or a 457(b) plan?
403(b) and 457(b) plans are tax-deferred retirement plans available to employees of public educational institutions such as Wright State University. These plans allow you to make pretax contributions (“deferrals”) by convenient, payroll deduction in order to save money for your retirement. These deferrals are then deposited into the account that you set up with an approved provider.
Pre-tax amounts deferred into a 403(b) or 457(b) account, and any earnings on those deferrals, are generally not taxed until you make a withdrawal from the account following a distributable event as described below.
The 403(b) and 457(b) plans were created to encourage long-term savings. Distributions are generally available when you reach age 59 ½ and mandated at 70 ½ years of age. As you discuss the 403(b) or 457(b) with the vendors, you may wish to talk about distribution opportunities when you leave employment or loan opportunities. Distributions may also be available in the event of hardship, unforeseeable emergencies, death, or disability. Bear in mind that distributions before age 59-1/2 might be subject to federal restrictions and a federal tax penalty.
Why contribute to a 403(b) or a 457 (b) plan?
Participating in one or both of these plans can provide a number of benefits, including the following:
- Lower taxes today
You contribute before income taxes are withheld – which means you're currently taxed on a smaller amount.
- Tax-deferred growth and compounding interest
In these plans, your interest and earnings accrue tax deferred. That means interest on your interest also grows tax deferred. The compounding interest allows your account to grow more quickly than saving in a taxable account where interest and earnings are generally taxed each year.
- Take the initiative
Contributing to either one or both of these supplemental retirement plans can help you take control of your future. Other sources of retirement income, including state pension plans and, if applicable, Social Security, rarely replace a person's final salary upon retirement. That's why it's up to you to make sure you'll have enough money for retirement.
How do I get started?
If you are not currently participating in one of the plans, you may want to consider making pre-tax contributions to one of these plans.
In order to do so, you will need to determine which company you would like to invest your contributions with. You will need to contact the investment provider directly to obtain and submit all necessary paperwork to open the account. A list of approved investment providers can be accessed at https://www.wright.edu/human-resources/benefits/retirement/tax-deferred-annuities.
After establishing the account, you will need to make an election regarding how much of your compensation you wish to defer to the plan. In order to set-up your deferral, you need to register with the Retirement Manager System (WSU’s Third Party Administrator). Please review the information provided in the following section on how to contribute.
What do I need to do in order to contribute to one or both of these plans?
To start your contributions, or make a change to the amount you already contribute, you must submit deferral elections via the Retirement Manger System (WSU’s Third Party Administrator). The Retirement Manager System can be accessed at https://www.myretirementmanager.com/?wsu. Additional information including a customer service number and quick reference guide for registration with Retirement Manager is available at https://www.wright.edu/human-resources/benefits/retirement/retirement-manager.
Deferrals can be changed at any time throughout the year. However, all changes must be made in Retirement Manager System before the established deadlines. Per IRS guidelines, deferral changes to 457(b) plans must be made prior to the beginning of the month in which the contribution would be made. For a listing of 2013 deadlines for 403(b) and 457(b) changes, please visit http://www.wright.edu/administration/payroll/schedule.html.
How much can I contribute to the 403(b) and/or 457(b) Plan?
For 2015, you may elect to contribute up to $18,000 into both a 403(b) and/or 457(b). Additional catch-up contributions may be permitted if certain criteria are met. Specifically, if you attain age 50 at any time in 2015, you may make an additional contribution known as a “catch-up contribution.” The additional amount that you may defer is $6,000.
Where can I find contact information for the Wright State approved 403(b) and 457(b) providers?
A complete listing of all approved tax-deferred annuity vendors with contact information can be found on the Department of Human Resources website at https://www.wright.edu/human-resources/benefits/retirement/tax-deferred-annuities.
Questions regarding this information can be directed to email@example.com.
This notice is not intended as tax or legal advice. Neither your employer nor the investment providers offering retirement savings products under the 403(b) and 457(b) Plan can provide you with tax or legal advice. Employees are encouraged to contact their financial representative or tax professional with any questions.