Additional Ways to Save for Retirement
As an MUS employee, there are a variety of investment options available to you to continue to help you save for retirement. These options are voluntary supplemental retirement plans that allow you to contribute and invest pretax dollars. As MUS employees, you can invest in the MUS 403(b) supplemental plan(s) (tax sheltered/deferred annuities) and/or the Montana Public Employees’ Retirement Administration’s (MPERA) 457(b) Deferred Compensation Plan. Although there is not an employer contribution to any of the supplemental plans, adding even one of these additional options is a great way to help build your retirement savings.
Sponsored by the Montana University System Board of Regents (BOR), the 403(b) plans allow you to save above and beyond what you and your employer are contributing toward your retirement through either the MUS-RP, PERS or TRS. Any MUS employee who is required to contribute to one of the retirement plans is eligible to participate in the 403(b) plan(s). The plan(s) allows you to contribute a portion of your compensation on a pre-taxed basis. The amount invested, plus interest credited on any fixed options, and any gain on the variable options, is not taxable until you withdraw the funds at a future date. Values may increase or decrease based on the investment performance of the mutual fund(s) you select.
The 403(b) providers offer a wide range of investment options to help meet the retirement needs of our employees. Please contact your human resource office for the enrollment paperwork and visit the MUS 403(b) providers listed below for more information on your 403(b) retirement investment options.
- ING (Aetna)
Sponsored by the Montana Public Employee’s Retirement Board (MPERB) and held in trust for the exclusive benefit of public employees and their beneficiaries, the 457(b) plan allows you to voluntarily contribute a portion of your compensation on a pretax basis. The 457(b) also offers a Roth IRA investment option, which allows you to invest a portion of your compensation post-tax. The amount invested, plus interest credited on any fixed options, and any gain on the variable options, is not taxable until you withdraw the funds at a future date.
The plan offers a wide range of investment options which are separated into two categories.
- Fixed Option: The Montana Fixed Fund guaranties your principal and has a guaranteed interest rate. The guaranteed interest rate is set each calendar quarter and may change each calendar year.
- Variable Options: These are an assortment of mutual fund options selected by the MPERB with the assistance of the Employee Investment Advisory Council (EIAC) according to the criteria established in the Board’s adopted Investment Policy Statement (IPS). The mutual funds do not guarantee either principal or investment results. Value may increase or decrease based on the investment performance of the mutual fund(s) you select.
Please visit the MPERA website or call 1-877-275-7372.
How does the plan(s) work?
You elect the amount you wish to defer from your gross salary each pay period and choose investment options. The amount you elect to defer is withheld from your paycheck before taxes unless you are participating in the 457(b) Roth IRA investment option. Because pre-taxed investments reduce the amount of federal and state tax withheld, your net salary is not reduced by the total amount you defer.
How much can I defer?
Under the Internal Revenue Code (IRC), the annual deferral limit is the less of 100% of “includable compensation” or the applicable dollar limit. The applicable dollar limit for 2013 is $17,500. As an MUS employee you can contribute up to the limit for both the 403(b) and 457(b) plans, which means for 2013 you could have contributed a total of $35,000. Your 403(b) account limit may need to be coordinated with other certain retirement options.
“Regular” Catch-up Provision allows you to defer amounts you could have deferred in prior years, but did not. The maximum amount that may be deferred under the regular catch-up provision is twice the applicable dollar limit. For 2013, the maximum is $35,000 (applicable dollar limit of $17,500 x 2). You can take advantage of the regular catch-up provision for any, or all, of the last three calendar years ending before the year in which you attain your selected normal retirement age, as defined by your retirement plan, but not later than age 70 ½.
“Additional” Age 50+ Catch-up Provision allows those that are 50 or older to make additional catch-up contributions except during years when regular catch-up contributions are being made. The additional catch-up amount that may be deferred is $5,500 for 2013.
When can I join the plan(s)?
You can join at any time. Your deferral becomes effective as of the first day of the month following the filing of your application and Salary Deferral Agreement (SDA). Please contact your human resource office for more information and the appropriate paperwork.
Can I change my deferral amounts? Can I stop deductions?
Yes. You can request increases, decreases or cessation of you referrals at any time. Requested changes become effective as of the first day of the month following your filing of an SDA. Please contact your human resource office for further assistance.
What happens if I leave the MUS?
The IRC allows distributions of funds only upon retirement, separation from service with the participating employer, or attainment of age 70 ½. At the time you sever employment, you may:
- Keep your money invested in the plan(s) and, if desired, continue to manage your money within the offered investment options. However, you will not be able to continue to make contributions.
- Roll your money into another qualified retirement plan. Be sure to confirm that the new plan will accept your rollover. If you are under 59 ½ years old, you may also have to pay a 10% additional income tax for early distributions depending on the retirement vehicle. Please contact a tax professional before making a final decision.
- Withdraw your money in an elected and defined method, subject to ordinary income tax.
What if I need to withdraw some of my funds while still working?
The 403(b) plans allow for in-service distribution for: age 59 ½, hardship and/or disability. Loans may also be allowed. Loans are subject to being repaid with interest by you to your investment account and usually must be repaid within five (5) years. A hardship withdrawal may be subject to tax. All loans and hardship withdrawals must meet specific criteria and be approved by the plan administrator. For more information, please contact your human resources department. We also recommend contacting your financial or tax advisor before making a final decision.
The 457(b) does not permit loans, but contains two limited provisions that allow withdrawal of funds while still employed. These provisions have strict requirements that must be met before an in-service withdrawal can be taken.
- An unforeseen emergency, which must be documented, meet the IRC definitions and criteria, and be approved by the Board.
- A “de minimis” withdrawal, which allows a withdrawal while employed if your balance is $5,000 or less, you have not deferred for the last 24 months, and you have never before used this provision.
Please note, in-service withdrawals are not allowed from the MUS-RP, PERS Defined Benefit Retirement Plan, the PERS Defined Contribution Retirement Plan or the Teachers’ Retirement System.
When can I withdraw my money without penalty?
With a 403(b) plan, you can withdraw your money when you retire or when you turn 59 ½ even if you are still working. You must begin taking withdrawals by age 70 ½. Federal and state taxes will apply.
The same rules apply for the 457(b) except you cannot take withdrawals from the plan while still working, with the exception of the above provisions, unless you are age 70 ½.
Take advantage of the guidance, education, and tools that each of the 403(b) providers have to offer to help you maximize your retirement savings. Please contact your human resource office or the individual providers for more information or to schedule a one-on-one consultation.
For more information regarding the 457(b), please visit the MPERA website or contact Empower Retierment (formerly Great-West Retirement Services), the recordkeeper for the 457(b) plan. Empower Retierment can also provide information about the plan, help with enrollment, and one-on-one consultations.
- Empower Retierment
Disclaimer: If there are any discrepancies between this website and the provisions of Supplemental Retirement plans, the Plan Documents will prevail.