February 14, 2003
Good News! As a result of the tax law changes in 2001, the University has adopted, through TIAA-CREF, a 457(b) Deferred Compensation Plan - a tax-deferred compensation plan that allows employees to save even more for their retirement, while lowering their current taxable income even further. Contributions to the 457(b) plan can be made in addition to amounts contributed to the 403(b) plan (retirement and supplemental retirement annuity). The SVSU 457(b) Deferred Compensation Plan was effective May 1, 2002.
For 2003, employees can contribute up to $12,000 on a before-tax basis to the 457(b) Deferred Compensation Plan. This annual limit is in addition to the limits in the 403(b) plan. This means that in 2003, an employee who participates in both the 403(b) plan and the 457(b) plan may generally contribute up to $24,000 (up to $12,000 to each plan). The annual contribution limit for each plan will increase by $1,000 per year, until the annual limit per plan reaches $15,000 in 2006. The limit for each plan will increases by $500 annual increments after 2006. In addition, each plan has a catch-up provision for employees age 50 and over.
Under the Internal Revenue Code, funds in the 457(b) plan can be made available to the participant upon severance from service, retirement, attainment of age 70 ½, death, or an "unforeseeable emergency" as defined by the regulations issued under IRC Section 457. Distributions from the 457(b) plan prior to age 59 ½ are generally not subject to the 10% early withdrawal penalty. There are no loan provisions available with the 457(b) plan.
If you are interested in learning more about the 457(b) plan, please call Human Resources at 989.964.7100 to request a brochure providing more information about the new plan.