Treasurer's Office

Frequently Asked Questions

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Treasurer's Office


Treasurer's Office

Who is eligible to participate in the University's 403(b) Plan?

All University employees are eligible to participate in the plan; except that students of the University whose employment is incidental to their education at the institution are not eligible.

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How does the tax deferral work?

Federal and Massachusetts income taxes on your 403(b) contributions are deferred until you draw benefits from your account. You benefit from the tax savings each payday. For example, someone earning $25,000 per year and saving 5% ($1,250 per year) of salary, would pay Federal income taxes on only $23,750.

Annual Salary: $25,000
minus 5% 403(b): $ 1,250
Taxable Salary: $23,750

The annual tax savings on this $1,250 403(b) contribution is $188 (assuming a 15% Federal tax bracket). While $188 may not seem significant on its own each year, look at the difference it makes over time. This chart illustrates the additional growth attributable to the tax deferral under the 403(b) plan.

The chart compares tax-deferred and after-tax investments, assuming that you are in a 15% Federal tax bracket and that you make contributions of $1,250 per year to each plan. The chart assumes that payments are made in equal monthly installments and earn a 7% interest rate. You will owe taxes on the tax-deferred accumulations when you receive them as income, but you would still be ahead of a taxable plan.

This example is for illustrative purposes only and does not project the actual performance of your investment choices, which will fluctuate with changes in the market. Results of the tax-deferred investment do not reflect deduction of charges and expenses. Some federal restrictions and tax penalties apply to withdrawals from a tax-deferred annuity before age 59 1/2.

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Why is it better to start early?

Your savings grow faster because of compounded earnings.

Who's better off?

Say you open a 403(b) account when you're thirty years old and contribute $1,250 a year until you're forty-five, then stop. Your friend decides to wait until he's forty and contributes $1,250 a year until he retires at age 65. As this chart shows, your fifteen years of contributions from early in your career will yield substantially more at retirement than your friend's twenty-five years at the end of his career.

This example assumes that 1/12 of the annual contribution was applied each month and that it earned a 7% interest rate. The chart shows accumulation values at age 65.

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Is there a maximum tax-deferred contribution I can make?

Yes. The IRS limits the amount of your tax-deferred contribution each year. In 2014 the general limit increased to $17,500.

You are responsible for making certain that all of your tax-favored retirement contributions do not exceed the IRS's limits. Your failure to comply with the prescribed limits can result in taxes, penalties, and interest charges from the IRS.

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Is it possible to contribute more than the general limit?

Employees who are age 50 by December 31, 2014 may also contribute up to an additional $5,500 in 2014.

Employees may contribute to the State's Deferred Compensation Plan in addition to their 403(b) contributions.

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Can I defer my accumulated vacation and sick pay when separating from service?

Yes, if certain conditions are met, the IRS allows for the deferral of some types of post-severance compensation, including accumulated vacation and sick pay. Please click here for details concerning the deferral of accrued sick and vacation pay and the conditions which such deferrals are allowed.


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Can severance pay be deferred when separating from service?

No, the IRS does not allow for deferral of severance payments made after termination of employment.

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When may I change my University 403(b) Contribution Amount?

You may stop or restart the amount of your contributions anytime during the year by signing a new UMass Salary Reduction Agreement form.  Click here for instructions on how to change your contribution amount.




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Which companies are the University's 403(b) plan providers?

The three approved providers for the University's 403(b) Plan are as follows:



These "carriers" represent a combination of insurance and investment companies. They provide a wide variety of investment funds in which to invest your 403(b) contributions. Since "where" you invest is as important as "how" you invest your contributions, you should learn about each company's offerings before choosing one. You need to compare each firm's strengths, reputation, experience, product features, expenses (of all types), and services. Each of the carriers will provide detailed descriptions of their products and services for you as a participant in the University's plan.

While you must choose your carrier carefully, you should expect all three carriers to have these common features:

  • professional investment management for your contributions;

  • variety of investment funds and the ability to change your allocation among these funds;

  • quarterly financial statements about your 403(b) account;

  • personal counseling services; and

  • a variety of distribution options.

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How were the three University approved providers selected?

In January 2007, the University completed a competitive bid process through which the three above referenced vendors were selected as the primary providers for the University's 403(b) plan. The change in approved providers was effective March 7, 2007.

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What is a University grandfathered provider relationship?

The University has allowed certain employee/provider relationships to continue even though the providers are no longer approved providers for the University's 403(b) plan. The three "grandfathered" or "Legacy" providers/products are: Met Life (formerly CitiStreet products only), Amerprise (formerly American Express) and Vanguard. The University's policy concerning these relationships has been to allow an employee to make contributions to a grandfathered 403(b) provider for as long as they maintain an active 403(b) account with the grandfathered provider. The University considers a 403(b) account as being active as long as a 403(b) payroll deduction for that account is currently being taken out of the employee's pay check. Once the 403(b) payroll deduction is discontinued, the 403(b) account is no longer considered an active account and the relationship with the provider is no longer considered grandfathered.

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May I change providers after I join the University's 403(b) Plan?

Yes. You may change your provider to one of the other University approved providers (Fidelity, TIAA-CREF or VALIC) for future 403(b) contributions at any time by sending a new account application and a new UMass Salary Reducation Agreement Form to the University Treasurer's Office. You should identify this as a new account.

You may transfer your account balances between the three carriers at any time as well. However, you should check with your provider to determine if any withdrawal, transfer restrictions or charges will be imposed.

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What investments are available to me under the University's 403(b) Plan?

The 403(b) carriers offer different "funding vehicles." These vehicles may be Fixed Annuities, Mutual Funds, or Variable Annuities. Click here for a description of these funding vehicles which will help you understand their differences.

Each provider may offer several investment funds for your choice. For example, a provider may offer Money Market, Stock, and Bond investments under their funding vehicle. You allocate your 403(b) contributions among the funds provided by your carrier. This wide variety of investments means that you can select those investments, either variable or guaranteed, that best meet your personal financial goals.

Review the section on Before You Invest for basic investment concepts. The information will help you understand each carrier's funds to determine your investment choices and how to allocate your contributions. You may contact each carrier for assistance in helping you understand their funds and determining your allocation.

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What withdrawal restrictions apply to my University 403(b) accounts?

In general, distributions from the plan cannot be made until one of the following “triggering events” occurs:         

  • You terminate employment with the University;
  • You attain age 59 ½;   
  • You become disabled;
  • You encounter a financial hardship; or
  • Upon your death.

The University uses the IRS Safe Harbor method in administering financial hardship withdrawals.  Prior to taking a hardship distribution, you must first obtain all loans and any other distributions that may be available under the plan.  In addition, you must meet an eligible reason, as defined by the IRS under the Safe Harbor method, for requesting a hardship withdrawal.  You must provide documentation to the University to confirm the financial need; and except for allowing for taxes, the amount of the hardship withdrawal cannot exceed the amount of the documented need.  Lastly, you may draw only on your contributions from the plan for purposes of a hardship.  The investment earnings must remain in your account until the occurrence of one of the other triggering events referenced above.       

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What payment methods are available under the plan?

Each 403(b) plan provider offers a variety of distribution methods under our plan. The most common methods available are:

  • lump-sum payments;
  • installment or fixed-period payments;
  • income payable for either your lifetime or life expectancy;
  • "interest only" payments; and
  • systematic withdrawals.

Each carrier may offer more or fewer payment methods than these. You will need to carefully check each firm's features to be sure it offers the methods you expect to utilize. There may also be differences in withdrawal restrictions and fees imposed by each carrier.

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Are loans available under the University's 403(b) Plan?

Yes. All three of the University's approved providers currently offer a loan provision. The minimum loan amount under the University's 403(b) plan is $1,000 and you may maintain only two (2) loans with unpaid balances under the plan at any time.  If you default on your loan payments, then your loan will be considered a taxable distribution to you from the Plan.  A loan currently in default precludes you from taking another loan under the Plan.

Please contact the approved providers directly to obtain information on how the loan provision operates, as well as current interest rates and repayment schedules. 

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What taxes should I expect to pay when I draw my University 403(b) benefits?

Since Federal and Massachusetts* income taxes have been deferred on your contributions and the investment earnings in your 403(b) account, you should expect to pay this tax on your benefits.

While tax withholding is voluntary on benefit payments made over ten or more years, the IRS requires 20% withholding on any payments made to you for periods of less than ten years. For example, lifetime annuity income paid to you by the Plan is not subject to the mandatory withholding, but a lump-sum payment to you is subject to the mandatory withholding.

In general, the IRS also imposes a 10% Early Withdrawal Penalty on most distributions that are paid to participants who are younger than age 59 1/2. This also includes hardship withdrawals.

Although we have tried to identify the key tax issues most employees must consider, there can be other tax implications of drawing your benefits at a certain time and in a certain way. You should discuss this issue carefully with representatives of your carrier as well as qualified counsel.

*Note: Contributions made prior to 1998 were only deferred from Federal income taxes. Therefore employees have already paid Massachusetts state taxes on such contributions. Contributions made after January 1, 1998 are tax deferred for both Federal and Massachusetts income tax purposes.

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What death benefits are payable under the University's 403(b) plan?

Any death benefits under the Plan are payable to the beneficiaries you have named. The death benefit payable before you begin drawing benefits from the 403(b) plan will vary from carrier to carrier. Generally, your current account balance will be your "pre-retirement" death benefit.

The death benefit payable after you have begun drawing benefits from the plan also depends on your carrier's provisions, as well as the payment method you have chosen to receive benefits. Death benefits are often called "Survivor Benefits." Your 403(b) carrier representative can answer your questions about the Survivor Benefits payable from your account.

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Can I rollover other retirement accounts to the University's Plan?

Yes. The University's 403(b) Plan accepts rollovers (certain restrictions may apply).  You should carefully check with your prior carrier to identify any withdrawal restrictions and fees that may be applied to your rollover to this, or any other, 403(b) program.

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How do I enroll in the University's 403(b) Plan?

There are three approved providers under the University's 403(b) Plan:

Fidelity; TIAA CREF and VALIC.

To open a new 403(b) account in the University's 403(b) plan, there are two primary enrollment options available to you:
(1) enroll online; or
(2) complete the provider's paper enrollment form.

Click here for detailed instructions on how to enroll.

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