In addition to the primary retirement plans that are offered at the University, employees are eligible to participate in supplemental tax-sheltered investment programs through the payroll deduction method as authorized under Section 403(b) and Section 457 of the Internal Revenue Code. These investment plans allow employees to save for retirement either on a tax-deferred basis or after-tax (Roth). When contributing on a tax-deferred basis, when employees eventually receive benefits from their tax sheltered investment, the payments will be reportable as income for tax purposes. Since the reportable income received at retirement is likely to be less than their income while working, they usually gain a tax advantage. If contributing on an after-tax basis (Roth), in general and under certain conditions employees do not pay taxes when receiving benefits since taxes have already been paid. Therefore, the Roth IRA's principal difference from most other tax advantaged retirement plans is that, rather than granting a tax break for money placed into the plan, the tax break is granted on the money withdrawn from the plan during retirement. Employees may participate in both a 403(b) program and the State of Missouri Deferred Compensation Plan (457 Plan).
The attached chart provides a comparison between the 403(b) and the 457.
403(b) – Deferred Compensation
Missouri State University offers employees (with the exception of certain student workers) the option to contribute to a 403(b).
What is a 403(b) plan?
A 403(b) plan is a tax-deferred retirement plan available to employees of public educational institutions and certain tax-exempt organizations. A 403(b) plan allows employees to make pretax contributions by convenient payroll reduction and save that money for retirement.
403(b) plans were created to encourage long-term savings, and so distributions generally are available only when reaching age 59½ or leaving a job, or upon death or disability. However, distributions may also be available in the event of financial hardship. Bear in mind that distributions before age 59½ might be subject to federal restrictions and a 10% federal tax penalty. Short-term needs can sometimes be met by nontaxable loans. This type of loan makes it possible to access accounts without permanently reducing the balance. Remember that defaulted loan amounts will be taxed as ordinary income and might be subject to a 10% tax penalty if individuals are under age 59½.
Why contribute to a 403(b) plan?
Participating in the plan can provide a number of benefits, including the following:
Lower taxes today
Employees contribute before income taxes are withheld – which means they are currently taxed on a smaller amount. This can reduce the current income tax bill. For example, if the federal marginal income tax rate is 25% and employees contribute $100 a month to a 403(b) plan, federal income taxes are reduced by roughly $25. In effect, the $100 contribution costs only $75. The tax saving increases with the size of the 403(b) contribution.
(NOTE: Employees can also contribute to a Roth 403(b), however, these contributions are after tax.)
Tax-deferred growth and compounding interest
In a 403(b) plan, interest and earnings accrue tax deferred. That means interest on the interest also grows tax deferred. The compounding interest can allow the account to grow more quickly than saving in a taxable account where interest and earnings may be taxed each year.
Employees should take the initiative
Contributing to a 403(b) retirement plan can help employees save for their future. Other sources of retirement income, including state pension plans and, if applicable, Social Security, rarely replace a person’s final salary upon retirement.
When can I contribute and how often can I make changes?
Employees interested in participating in a tax-sheltered investment program must first contact an agent from one of the approved companies below. Additional information about investment options can also be obtained from each of the vendors listed below.
Employees can begin to contribute at any time subject to an agreement with a selected vendor (below). Changes may be made once during each calendar year quarter, i.e., change participation election, the amount of elective deferral, investment direction, and designated Beneficiary. A change in the investment direction shall take effect as of the date provided by the Administrator on a uniform basis for all Employees. A change in the Beneficiary designation shall take effect when the election is accepted by the Vendor.
(A written Plan Document contains additional information.)
COMPANIES APPROVED TO WRITE
SECTION 403(b) PROGRAMS
For quick access to a specific company's web site, simply click on the company's name if it is underlined.
|Company Name||Phone Number|
|Kansas City Life Insurance||Phone: 417-883-1551 (Mike Morris & Scott Lassley)|
|VALIC||Phone: 913-402-5000 or 1-800-892-5558 Extension 88205 (Butch Purvis)
|Ameriprise||417-877-0252 or 1-866-505-5623 (Paula Dougherty)|
|ING Life Insurance and Annuity Company||Enroll by Phone: 1-888-311-9489
Investor Services (Questions):
|Lincoln Financial||417-881-7595 or 888-881-7595 (Rodney K. Pennington)
Customer Service: 1-800-254-6265 or 1-800-348-1212
|Met Life||417-848-8993 (Thelma Ruff)|
|Teachers Insurance and Annuity Association (TIAA/CREF)||1-800-842-2776|
To START a 403(b)
As stated above, employees wishing to start a 403(b) should first contact an approved company (above) to establish an account .
To help us manage the 403(b) and provide easy access for employees, we use “Retirement Manager”, a convenient, secure, Web-based access point to help employees manage their retirement 403(b) plan accounts anytime and anywhere, 24 hours a day, seven days a week. To gain access employees must enroll in the Retirement Manager. See instructions in "How to Enroll in Retirement Manager." The "Employee Unique ID" referred in the instructions is the M#. Simply go to https://www.myretirementmanager.com/.
After enrolling in Retirement Manager, employees can initiate contributions (via payroll deduction). In addition to starting or changing your 403(b), you can use the Retirement Manager site to:
- Learn about your retirement savings plan
- Request loan and hardship withdrawal certificates
- Request an in-service exchange or severance of employment certificate.
- Change your Retirement Manager account password
- Read educational articles on a range of financial planning topics
- Calculate what you will need to stay on track for retirement with easy-to-use financial calculators.
Retirement Manager is also used to CHANGE or STOP a 403(b).
Section 457 Deferred Compensation
Information on the Section 457 Plan can be found at: http://www.modeferredcomp.org/
Section 457 Deferred Compensation General Information and Policies:
The Section 457 State of Missouri Deferred Compensation Plan is administered by MOSERS. ICMA-RC acts as third party record keeper for the Plan.
Contributions to a 457 Plan are limited by the Internal Revenue Service (IRS) to the lesser of $17,000 (2012) or 100% of gross annual salary.
The rules for exceeding the deferral on the 457 plan differ from the 403(b) plan. ICMA-RC, the Plan’s third party record keeper, will be responsible for calculating and monitoring contributions that exceed the general limit.
An employee who qualifies for a “Catch up” provision should direct his/her questions to the Plan office in Jefferson City, Missouri, at (800) 392-0925, option 2.
Employees may participate in a 457 and a 403(b) plan.
To START a 457:
Employees can visit www.modeferredcomp.org and click the Enrollment button or contact the Plan office in Jefferson City, Missouri at (800) 392-0925 (Opt 2). Employees can also call (573) 392-0925 (Option 3) to speak with our service area’s Education Specialist, Ms. Deborah Taylor.
The Education Specialist will assist the employee in completing the appropriate forms and will forward the forms to Jefferson City for processing.
ICMA-RC will forward documentation to the University's Payroll Office indicating the amount and the date to start the salary deferral.
Without the confirming documentation, the University will not initiate any salary deferrals.
To CHANGE or STOP a 457:
Log on to Account Access at www.modeferredcomp.org and adjust your contributions, or contact the Plan at 800-392-0925.
ICMA-RC will forward documentation to the University's Payroll Office indicating the amount and the date to start the new salary deferment.
Without the confirming documentation, the University will not change or stop any salary deferments.