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Frequently Asked Questions - 457(b) Deferred Compensation Plan

The following reflect some of the more commonly asked questions regarding the 457(b) Deferred Compensation Plan (DCP). We hope this quick reference is helpful.


What is a 457(b) Deferred Compensation Plan (DCP)?
This is a non-qualified tax-deferred compensation plan that allows you to increase your savings toward retirement. You determine the pre-tax amount that you want to defer (up to the IRS maximum) and how it is to be invested. Assets are held in one or more group annuity contracts for the exclusive benefit of you and your beneficiaries.

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Can I contribute to both the 403(b) Supplemental Retirement Program (SRP) and the 457(b) Deferred Compensation Plan?
Yes. The plans have separate enrollment, both are voluntary (optional), and you may participate in either one or both plans.

Will enrolling in the 457(b) DCP affect the University match on my 403(b) Base Retirement Program (BRP)?
No.

Is there a University contribution to the 457(b) DCP?
No. Similar to the 403(b) SRP, the 457(b) DCP is designed for employee contributions only.

What investment options are available?
Two investment vendors are presently available: Fidelity Investments and TIAA-CREF. You should contact the investment vendor of your choice regarding the funds that are offered for the 457(b) DCP.

How do I enroll?
Follow these steps to enroll:

  • Access the EBS Login, then use the Employee Self Service (ESS) tab, to select your plan, investment vendor and contribution amount.
  • MSU will automatically provide the necessary information to the investment vendor to open your account.  The investment election will default to an age appropriate Target Date Retirement fund.
  • You will need to access your account with the investment vendor to name your beneficiaries.
  • If you prefer, you can open the account yourself, select your investment elections and name your beneficiary by choosing the appropriate investment vendor microsite to enroll.
  • Step by Step tutorial to Enroll with New Investment Vendor.
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I already have a 403(b) SRP with the investment vendor that I will use for my 457(b) DCP. Do I need to open a new account?
Yes. The 457(b) DCP will be a new account and you will need to complete a new online salary deferral.  Follow the enrollment instructions for a new account.

Can I enroll in the 457(b) DCP at anytime?
Yes. Enrollment will be effective the next available pay period after completing your online salary deferral.

How much can I contribute or defer to the 457(b) DCP?
You may contribute up to the maximum as defined by the Internal Revenue Code (IRC). The maximum is determined each calendar year. The voluntary limit for 2014 will be $17,500.

Will the 457(b) Plan provide any catch-up provisions for employees?
Yes. If you are over the age of 50 you may contribute an additional amount, in accordance with the law. The Age 50 Catch Up for 2014 is $5,500.  If you are between the ages of 62 and 65 you may also be eligible for an additional catch-up provisions. Contact MSU Human Resources Benefits for additional information at 517-353-4434, 800-353-4434 or retirementinfo@hr.msu.edu.

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How often can I make a change to the 457(b) DCP?
You may submit an online salary deferral change (through the EBS Login) as often as you like. You may change your deferral amount, investment vendor selection, or cancel your contributions.

When can I take a distribution from my 457(b) DCP account?
Distributions are only available at separation from service, for an unforeseeable emergency, or at age 70 1/2 years of age. For definitions of unforeseeable emergency refer to the Retirement Plan Information.

Will MSU allow loans against the 457(b) DCP?
Yes. MSU will allow loans from the plan but not all investment vendors offer this option. Please check directly with the investment vendor you select regarding availability, payment schedules, interest rates and criteria.

What happens to my 457(b) DCP account if I leave MSU?
Your account is always fully and immediately vested. You will have several distribution options to choose from. You will need to contact your investment vendor for information and the proper forms.

Can I rollover my 457(b) DCP account if I go to a different employer?
Yes, if your new employer accepts rollovers. If your new employer does not offer a 457(b) DCP, rollovers into other types of plans (i.e. 403(b), 401(k), or IRA) are permitted. If you are considering a rollover to a non-457(b) program, consult your tax advisor concerning early withdrawal penalties.

When do I pay income taxes?
The 457(b) DCP is funded through pre-tax contributions, so applicable federal and state taxes are not due until funds are withdrawn from the account.

If I take a distribution from my 457(b) DCP account prior to age 59 ½, due to an unforeseeable emergency, is there a penalty?
No. The 457(b) DCP is not subject to a 10% early withdrawal penalty, regardless of your age.

What effect does enrolling in the 457(b) DCP have on my Social Security?
Enrollment in the 457(b) DCP does not reduce your current Social Security taxes or your future Social Security benefits. This is also true for the 403(b) Plan.

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