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Retirement Home | Salaried | Hourly | Voluntary TDA | Voluntary 457(b)

 

403(b) and 457(b) Eligibility Notice


Voluntary Tax-Deferred Annuities (TDA)

The University of Maine System offers employees the opportunity to supplement basic pension benefits by tax deferring on a voluntary basis. Contributions may be made up to the maximum permitted by the Internal Revenue Code (Section 403(b) and 415) with either TIAA-CREF or any of the three alternate vendors listed above.  (TDA Guidelines) 

Current approved vendors are:



Before you can contribute to an approved vendor, you must set up an account with that vendor.

To contribute voluntarily to an alternate vendor, follow these easy steps: 

  1. Contact your chosen vendor and set up an account.
  2. Complete a new University Salary Reduction Agreement.  The new Agreement will replace any previous Agreement you submitted; therefore, you must restate the amount you want to tax-defer on the new Agreement.
  3. Fax the completed form to the Employee Benefits Center at (207) 561-3454 or mail to 16 Central Street, Bangor ME  04401.  Your new investment options will begin once your form has been processed.

403(b) vs. 457(b)

How does the new 457(b) plan differ from other tax-deferred options currently offered through the University of Maine System 403(b) plan? Although both plans operate similarly regarding the ability to tax-defer retirement contributions, there are some differences. First, EGTRRA permits you to tax-defer under both the 403(b) and 457(b) plans at the same time. This means that you can contribute the annual maximum to each plan, thus doubling the amount that you can tax-defer during the calendar year. Second, the 457(b) plan does not contain the early retirement withdrawal penalty applicable to the 403(b) plan for someone who separates from employment under age 59 1/2 and wishes to withdraw their accumulation. Finally, the 457(b) plan might work better for someone who wants to contribute substantially more as s/he nears retirement, because of the more generous catch-up provisions.

Your basic retirement plan contributions and the corresponding University matching contributions MUST continue to be directed to the 403(b) plan – they may not be directed to the 457(b) plan. Only voluntary sheltered contributions above your basic retirement plan contributions may be directed to the 457(b) plan.

The 457(b) plan is a tax-deferred plan that functions much like the 403(b) tax-deferred plan -- it provides an opportunity to set retirement monies aside that are deferred for federal and state taxes. All University employees who are eligible to shelter under the 403(b) plan will also be eligible to also shelter under the 457(b) plan.  EGTRRA permits you to participate in both the 403(b) and 457(b) plans up to the calendar year maximums for each plan.  The 457(b) maximums are the same as the 403(b) maximums. Therefore, you are allowed to contribute the maximum possible to both plans.

For calendar 2012, the 403(b) and 457(b) maximums are the lesser of 100% of pay or $17,000; if you are age 50, you are eligible for an additional $5,500 catch-up, for a total of $22,500.  

For calendar 2013, the 403(b) and 457(b) maximums are the lesser of 100% of pay or $17,500; if you are age 50, you are eligible for an additional $5,500 catch-up, for a total of $23,000.

When an employee leaves University employment, the 457(b) plan will have the same cash-out/transfer provisions as the 403(b) plan and applicable in-service hardship withdrawal provisions, subject to IRS guidelines.

The chart below (adapted from one prepared by TIAA-CREF) provides a comparative overview of the key features of 403(b) and 457(b) plans:


Features 403(b) Plan 457(b) Public Plan
Taxability Amounts are taxable when distributed Amounts are taxable when distributed
Contribution Coordination There is no coordination between 403(b) and 457(b) plans.  Employees can contribute the maximum to both. There is no coordination between 403(b) and 457(b) plans. Employees can contribute the maximum to both.
Age 50 Catch-Up Amounts An additional $5,500 is permitted, for those age 50 and over, with higher amounts in future years. Can use the age 50 catch- up amount in both 403(b) and 457(b) plans. An additional $5,500 is permitted, for those age 50 and over, with higher amounts in future years. Can use the age 50 catch- up amount in both 403(b) and 457(b) plans. If within three years of plan’s normal retirement age, employee is eligible for the greater of the age 50 catch-up or an enhanced limit (not both) – see next feature.
Other Catch-Up Amounts   For those within three years of plan’s normal retirement age, additional amount up to twice the applicable limit or unused amounts from prior years, whichever is less. Employees are eligible for greater of enhanced limit or age 50 catch-up contributions, but not both.
Triggering Events To Access Funds Separation from employment, age 59 1/2, retirement, disability, or death. Hardship distributions may also be available. Employer contributions will be restricted under the terms of the plan. Separation from employment, age 70, retirement, or death. Distributions due to unforeseeable financial emergency may also be available.
Early Withdrawal Penalty Yes. 10% before age 59 1/2, unless due to death, disability, or separation from service after attainment of age 55. None.
Loans Yes, but loans are subject to the employer’s plan and there may be restrictions. Typically, you can borrow between $1,000 and $50,000 per plan. The amount you can borrow depends on the amount in your annuity account that is available for loans. Yes, but loans are subject to the employer’s plan and there may be restrictions. Typically, you can borrow between $1,000 and $50,000 per plan. The amount you can borrow depends on the amount in your annuity account that is available for loans.



Reminder: There are inherent risks in investing in securities. Past performance is no guarantee of future results. Because investment return and principal values will fluctuate, an investor’s accumulation, when redeemed, will be worth more or less than the original value.


Related Information

403(b) Tax Deferred Annuity Plan Description - PDF Version

Faculty & Professional Retirement Plan Description

Hourly-Paid Basic Retirement Plan

(Plan Description - PDF Version)

Optional Retirement Plan for Classified Staff (Formerly Defined Benefit Plan NCRP)

(Plan Description - PDF Version)

Salary Reduction Agreement for Faculty & Professional Employees

Salary Reduction Agreement for Hourly-paid Employees

Social Security Retirement Estimator

 

UMS Question logoContact the Employee Benefits Center

The above is a brief summary of benefits offered by the University of Maine System.  If you have a question about benefits enrollment, call toll-free 866-269-9635 (or 973-3373) or email benefits@maine.edu.  Have your Employee ID number for faster service.

 

Last Updated:  April 18, 2013