Retirement Savings Plan for Faculty and Staff
The information on this page is based on the benefits chapter of the UVM Handbook for Non-Represented Staff. It generally applies to all faculty and staff, though relatively minor differences are to be found in each of the collective bargaining agreements. For specific details, represented faculty and staff should consult their collective bargaining agreement.
The University of Vermont helps staff plan for a secure retirement by offering a program to save pretax dollars and invest them in a 403(b) retirement savings plan. This arrangement allows income to grow tax-deferred and and ensures that current federal and state income taxes are calculated based on a reduced income figure. Benefits-eligible staff may begin funding their UVM retirement savings plan immediately upon employment by completing an application and agreeing to contribute the required minimum amount by payroll deduction.
After an individual has been employed by UVM at 75% FTE or greater for three years, UVM will begin to contribute an amount equivalent to 10% of their base salary to their retirement savings plan—as long as they are personally contributing a minimum of 3% of their base salary (2% for staff) to the plan. Contributions are made with pretax dollars and are immediately vested, meaning that employees own them and have a non-forfeitable right to their current value, even if they decide to leave UVM before retirement.
The three-year waiting period for receiving University contributions (4 consecutive semesters for faculty) may be waived for those who demonstrate that they have a vested interest in the retirement plan of their immediate past employer, if that employer is a nonprofit company or governmental agency.
When an individual retires, contributions and earnings may be withdrawn in cash (except in the case of TIAA-CREF's traditional annuity) or they may be used to purchase a guaranteed or variable rate annuity.
When an individual retires or their employment terminates, and they opt to withdraw cash rather than an annuity prior to reaching age 59½, withdrawals will be subject to IRS penalties. (Staff may rollover the balance of their personal contributions into another qualified retirement savings vehicle or purchase an annuity in order to avoid IRS penalties.)
Faculty and staff who are not yet eligible for University contributions are nevertheless strongly encouraged to enroll in the retirement savings plan. If they do, the University's 10% contribution will begin automatically as soon as an individual becomes eligible to receive it.
Individuals not enrolled in the plan at the time they become eligible for University contributions may enroll at any time thereafter, but the University contribution will not be retroactive—it will begin with the payroll following the processing of enrollment forms.
Maximum Contributions and Catch-Up Options
Federal guidelines allow plan participants to contribute up to 100% of their compensation minus their benefits costs (i.e., FICA and Medicare taxes, medical and dental deductions, etc.) up to a maximum elected deferral amount of $17,500 in calendar year 2014. Those wishing to maximize their contributions should submit payroll reduction forms annually (ideally in January) in order to spread the maximum contribution over the greatest number of paychecks.
Participants who wish to contribute more than the maximum elected deferral amount have two programs they can use:
- Special Section 403 (§403) years-of-service catch-up and
- Age 50+ catch-up
The Special §403 years-of-service catch-up option is only available to employees with 15 or more years of full-time equivalence service with UVM and elective deferrals averaging less than $5,000 per year of credited service. Under this Special §403 years-of-service catch-up, staff are eligible for the smaller of the following: (a) a $3,000 annual catch-up, or (b) the balance of the $15,000 that is allowed as a lifetime catch-up. The Special §403 years of service catch-up calculation worksheet must be submitted to HRS along with the salary reduction form.
The Age 50+ catch-up option is only available to those employees who will reach age 50 by December 31 and have elected to contribute the maximum elected deferral amount. The Age 50+ catch-up is limited to $5,500 for 2014.
Individuals can use both the Special §403 years-of-service catch-up and the Age 50+ catch-up options during the same year, but they must use the ordering rule. Individuals must apply all catch-up to the Special §403 years of service rule first, then apply excess contributions to Age 50+ catch-up.
The combined limit for the overall employer-employee contribution to a 403(b) (including catch-up options) is $52,000 for 2014, not to exceed 100% of compensation, minus benefits costs.
Contributions to a 401(k) or 403(b) plan through a previous employer during the same calendar year must be combined with contributions made through UVM when determining maximum contributions for the year. The sum of contributions in 2014 cannot exceed $17,500 for those who are 49 years of age or less on December 31, or $23,000 for those who are 50 years of age or more. These amounts are subject to change annually in accordance with IRS regulations.
Available Investment Alternatives
Employees have access to a wide variety of investment alternatives, providing flexibility for risk, growth, or security. Staff may set up their UVM retirement savings plan using products available from the following investment groups:
- The Fidelity Group/The Calvert Group/Ariel Funds
- Prudential Financial Services
Enrollment in the UVM Retirement Savings Plan
Faculty and staff may enroll in the UVM Retirement Savings Plan at any time. Monthly workshops are offered by HRS to explain enrollment options and offer enrollment assistance. These sessions are normally held in Waterman 230 from 9:00 to 11:00 AM. See the Retirement Savings Sessions page on the HRS website for a schedule of upcoming workshops.
Enrollment in the Retirement Savings Plan is not automatic. Individuals must contact HRS to enroll in the plan. When enrolling, individuals must stipulate the amount of salary they wish to defer and choose how the contributions will be invested. They must also name a beneficiary to receive the value of the account if they die.
Eligibility for the UVM Retirement Savings Plan
Benefits-eligible faculty and staff may join the Retirement Savings Plan at any time by contributing at least 3% of their base pay per paycheck (2% for staff) by payroll reduction.
To receive University contributions to the plan, an individual must be employed as a regular employee in benefits group A, B, C or D with at least three continuous years of qualifying service, (or be in one of those groups and qualify for a waiver of the waiting period as described below). Faculty and staff will receive notice from Human Resource Services that they have attained three years of qualifying service as they arrive at their eligibility date.
Waiver of the Waiting Period for the Retirement Savings Plan
The three-year waiting period for receiving University contributions may be waived for those who demonstrate that they have a vested interest in the retirement plan of their immediate past employer, if that employer is a nonprofit company or governmental agency. It may also be waived for former UVM employees who terminated with three or more years of continuous regular employment in benefits group A, B, C or D who are re-employed by UVM in a continuous regular position in one of these same benefits groups within two years of termination. (This last provision does not apply for those who were terminated for just cause.)
Faculty of the rank assistant professor, associate professor or professor, and all staff, who are participating in the plan and voluntarily reduce their full-time equivalency so that they no longer qualify for benefits group A, B, C or D, cease to be eligible for University contributions, but may continue to participate in the plan if they so choose.
If staff have their full-time equivalency involuntarily reduced for a period of four months or less, UVM contributions will continue. Staff who are involuntarily terminated during the waiting period (except for just cause) and return within two years, will be credited with prior service toward the waiting period. (See also Partial Leave for the Purpose of Caring for Members of the Immediate Family.)
Restrictions to the Retirement Savings Plan
Once faculty and staff have begun to receive University contributions, they cannot reduce the level of their own contributions below 3%, (2% for staff) except to avoid exceeding the maximum contribution allowed by law.
Individuals cannot drop out of the plan after University contributions have begun.
Faculty and staff cannot withdraw the University's contributions from their retirement plan while they are employed by UVM, and they cannot borrow against them. In the case of severe financial hardship, they may be able to withdraw their own personal contributions (see below), subject to IRS restrictions and penalties.
Under current rules, if a cash withdrawal is made prior to age 59½, the IRS assesses a 10% penalty in addition to income taxes.
Loans Against Personal Contributions to the Retirement Savings Plan
Faculty and staff may borrow from their own personal contributions (not UVM's) if their retirement plan is invested with Fidelity, Prudential or TIAA-CREF. For details and current interest rates, contact each company (Fidelity: 800-343-0860; Prudential: 800-458-6333; TIAA-CREF: 800-842-2776).
Changes to the Retirement Savings Plan Contribution
Faculty and staff may increase or decrease their retirement plan contribution as often as they wish as long as the contribution goes no lower than 3% (2% for staff) and does not exceed the annual contribution limits.
Retirement Options and the Retirement Savings Plan
When individuals retire, they may select from a wide range of distribution options with payout plans that suit their personal needs. For example:
- A joint life annuity guarantees individuals a regular, stable income for themselves and their spouse or civil union partner for as long as they or their spouse or civil union partner live
- A single life annuity guarantees individuals a regular, stable income for themselves for as long as they live
- A periodic distribution plan allows individuals to receive a specific amount distributed periodically
Faculty and staff do not choose distribution options until they retire.
Termination and the Retirement Savings Plan
Faculty and staff immediately own both their personal contributions and UVM's contributions—even if they leave UVM—though they cannot prematurely take a hardship distribution against UVM's contributions. Upon termination of employment, UVM's contributions will cease, but accounts will still participate in investment gains or losses and individuals may continue to transfer their investments among funds as long as they remain a participant.
If individuals wish, they may choose to cash in their account or roll over the proceeds to another tax-deferred retirement savings plan. (Ask plan vendors about restrictions.)
Military Service and the Retirement Savings Plan
Former staff and faculty who return to UVM after leaving to fulfill their military service requirement as defined by the Veterans' Re-employment Rights Act, who maintained their vested interest in their UVM Retirement Savings Plan during their absence may, after one year of re-employment, regain the amount of retirement money the University would have contributed on their behalf during their obligated military service. After one year of re-employment, individuals must contribute the minimum required percentage of base pay at the time of separation, for the period of obligated service as defined by the Veteran's Re-employment Rights Act. (For example: individuals making $35,000 who were on military leave for 365 days would contribute $35,000 times two percent—or $700 to the plan.) They will then receive UVM's contribution (in this example, $3,500) for the period of their absence, based on their pay at the time of separation. Eligibility requires that their absence and re-employment meet UVM's military leave policy and the provisions of the Veterans' Re-employment Rights Act.
Re-Employment Rights and the Retirement Savings Plan
When faculty and staff have three or more years of continuous service with UVM and are re-employed by the University in a continuous regular position within two years of separation (except when terminated for just cause), the waiting period for retirement savings plan contributions from the University will be waived.
In addition, if staff were involuntarily terminated during the waiting period (except for just cause) due to University financial difficulty, reorganization or loss of restricted funds, and they return within two years, their former length of service will be credited toward their waiting period. See Re-employment Rights.
Section 457(b) Voluntary Excess Retirement Savings Plan
The University offers a voluntary employee-funded 457(b) Deferred Compensation Plan to employees who have contributed the maximum under the University's 403(b) Retirement Savings Plan.
The annual maximum contribution limit to the 457(b) Plan is $17,500 for 2014, (over and above contributions to the 403(b)—but there is a catch-up provision in the 457(b) Plan. Under the catch-up, employees who are within 3 years of their employer's normal retirement age may contribute a catch-up amount equal to the annual limit (i.e., $17,500 + $17,500). The Plan's normal retirement age is 65. Thus, in 2014, employees who are age 63 through 65 may contribute a total of $35,000 to the 457(b) Plan in addition to $23,000 under the 403(b) Plan, for a total of $58,000.
The investment options available under the 457(b) Plan are the same as those under the 403(b) Plan.
In order to enroll, employees must first agree to contribute the maximum to the 403(b) Plan, either through UVM or in combination with contributions through another employer (e.g., Fletcher Allen Health Care).
Eligibility for Benefits
Unless noted in specific plan documents, the following description of eligibility for employees and their dependents applies to all UVM benefits.
The following six groups of employees are eligible for UVM benefits:
|Benefit Groups Defined|
|Months of Year Worked||Full-Time Equivalency (FTE)|
|Group A||12 months||100%|
|Group B||9, 10, 11 months (academic year)||100%|
|Group C||12 months||75 - 99%|
|Group D||9, 10, 11 months (academic year)||75 - 99%|
|Group E||12 months||50 - 74%|
|Group F||9, 10, 11 months (academic year)||50 - 74%|
For benefit eligibility, there is a difference between full-time and part-time employees.
For benefit eligibility purposes, a full-time faculty or staff member is employed in a regular capacity of at least 75% of a 12-month work year of 37-1/2 or 40 hours per week (Groups A and C) or in a regular capacity of 100% of an academic year of 9, 10, or 11 months for 37-1/2 or 40 hours per week (Group B).
A part-time staff member is employed in a regular capacity of 50 - 74% of a 12-month work year of 37-1/2 or 40 hours per week (Group E) or 50 - 99% of an academic year of 9, 10, or 11 months for 37-1/2 or 40 hours per week (Groups D and F).
Note: An employee is considered to be employed in a regular capacity if (1) the position is continuing, not temporary, (2) it appears on UVM's position inventory or is an approved hourly position included in the department's wage budget, and (3) a completed and approved position description exists. An employee is considered to be temporary when s/he is paid by an electronic payroll system for temporary employees, whether full-time or part-time, or by time sheets that are designated as temporary.
The terms and conditions of employment for postdoctoral fellows and trainees and for postdoctoral associates are not covered here.