Take a Good Look at That Letter You Received, Then Read This
Additional Material From Campus's Benefits Unit
UC administers a tax-deferred retirement plan described in section 403(b) of the Internal Revenue Code. The Tax-Deferred 403(b) Plan allows participants to make pre-tax contributions and thereby lower their taxable income. The contributions, plus the interest or gain, remain tax-sheltered until the participant takes a distribution.
The IRC contains many rules which must be followed by 403(b) plan administrators to maintain favorable tax treatment of plan accumulations.
If plan administrators are found to be out of compliance with the IRC rules for 403(b) plans, there can be serious consequences for both the employer and the employees who participate in the plan.
The IRC also sets contribution limits and imposes penalties for over-contributing to tax-deferred plans.
Annual monitoring of voluntary tax deferred contributions is now required by federal tax law.
Beginning in 1996, UC Benefits is systematically calculating the maximum annual amount that employees can contribute to the Tax Deferred 403(b) Plan.
On May 1, 1996, a maximum annual contribution amount (MAC) will be entered into UC's Payroll/Personnel System for each employee who was on active payroll during January. The Payroll/Personnel System will automatically stop contributions to the 403(b) Plan if the employee's maximum is reached during the current tax year.
The systematic calculation is being performed for nearly 190,000 university employees. Recently a Statement of Maximum Annual Contribution was mailed to home addresses for only those who contributed to the 403(b) Plan during 1995 showing the 1996 maximum contribution limit.
The maximum annual contribution to the 403(b) Plan is the LEAST of the following:
* The section 415 limit. This amount is 20 percent of your adjusted gross university salary; or
* The Tax Reform Act limit. The 1996 limit is $9,500; or
* The maximum exclusion allowance. The maximum exclusion allowance (MEA) generally is 20 percent of your net adjusted university salary for the current tax year, multiplied by your years of university employment, minus prior contributions to university sponsored plans. Prior contributions include former university contributions to the 403(b) Plan, your own contributions made to defined contribution plans while employed by the university, imputed value for the university-paid portion of your retirement plan benefit and Capital Accumulation Provision (CAP) allocations.
If you were hired before Jan. 31, 1996, you can find out your maximum annual contribution by calling UC Benefits automated telephone service, At Your Service, at 1-800-888-8267 and pressing 1.
In addition, you can call At Your Service to order a personalized description of the applicable IRS limits and the data elements used in your calculation. Employees who want to begin participating in the 403(b) Plan should find out the maximum amount they can contribute annually before completing a Salary Reduction Agreement form available in their departments.
If you were hired (or rehired) on or after Feb. 1, 1996, you must request a calculation and obtain a signature from a Benefits Representative in the campus Benefits Office before completing a Salary Reduction Agreement available in your department to begin participation in the 403(b) Plan. Employees who do not have a maximum annual contribution in the Payroll/Personnel System will not be allowed to participate in the 403(b) Plan until a maximum is established.
Certain data elements used in the maximum annual contribution calculation were projected and/or estimated and assume that current appointments and salary rates will continue through the end of 1996.
You will need to review the data elements used in your MAC calculation to determine if they are correct. Your MAC calculation may not be correct if:
* you are a participant in Fidelity or Calvert funds, because your total 403(b)(7) contribution amount used in the calculation includes earnings;
* you have rolled over contributions from a previous employer's plan into the DCP or 403(b) Plan, because your total contribution amount used in the calculation includes the rollover amount as well as your own contributions;
* you have an outstanding 403(b) loan balance, because it includes interest;
* you have an academic appointment and you will be earning summer salary, because your salary projection is based on your appointment data as of January 1996.
* you worked in a casual appointment, because your total years of employment may not be correct.
If you suspect that your MAC is incorrect, you should take the following steps:
* Obtain the data elements used in your calculation by calling UC Benefits' automated phone system, At Your Service, at 1-800-888-8267. You will need to provide your personal identification number (PIN) and your social security number to retrieve your data. If you have lost or forgotten your PIN call 2-7053 and press 1 to request a PIN reset.
* Review your data elements to determine whether incorrect numbers were used. If so, the appeal process will allow you to request a recalculation of your 1996 maximum annual contribution.
* Request an appeal packet:
--If you have had a break in service, call the Campus Benefit Unit at 2-7053 and press 1.
--If you have had continuous UC employment, call At Your Service 1-800-888-8267.
* Complete the forms in the packet and submit them to the Campus Benefits Unit, 247 University Hall, Mail Code 3540 for review and sign off. Please enclose a self-addressed 9" x 12" envelope so your packet can be returned to you.
* Forward the completed packet to UC Benefits, 300 Lakeside Dr., 4th Floor, Oakland, CA 94612, Attention: Regulatory Coordination. Recalculations will take 30 to 60 days for a response.
If a recalculation increases your MAC:
* You will be notified of the revised MAC and it will automatically be set in the payroll system. Your contributions will continue until you reach the new MAC.
* If your contributions stop because you reach your initial MAC before the appeal is processed, contributions will automatically resume when the revised MAC is set in the payroll system. You will be able to recover missed deductions by re-questing an administrative correction.
* Campus Benefits will automatically send you the form necessary to request an administrative correction once your revised MAC has been sent to the campus by UC Benefits. (An administrative correction is not considered a change.) Your request for an administrative correction must occur within 30 days of notification of your revised MAC.
* If you have not already made a change to your contribution amount in 1996, as an alternative to requesting an administrative correction, you may submit a new Salary Reduction Agreement (form UPAY 801) to have the remaining contribution amount spread out equally over your paychecks for the rest of the year. If you believe your calculation is correct, or if a recalculation does not increase your MAC:
* If your limit is less than $9,500 you may want to consider an Alternative Election. The alternatives are very complex and have many restrictions; therefore, you should discuss them with a tax adviser before making the election. To request an Alternative Election Factsheet, contact the Campus Benefits Unit at 2-7053 and press 1.