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MSU Human Resources >> Documents >> Supportstaffpolproc >> Support Staff Deferred Compensation Plan Policy

Support Staff Deferred Compensation Plan Policy

Policy Statement

(Revised 01/11)

The University provides a voluntary Deferred Compensation Plan for eligible employees.

Eligibility: An eligible employee working half-time (50%) or more for nine months or longer.

Effective date of benefit: Eligible employees may elect participation upon employment or any time during employment.

Summary of benefits:

  • The benefit provides income during retirement and benefit payments to the beneficiary in the event of death prior to retirement, subject to vendor, contract or Internal Revenue Service (IRS) restrictions.
  • Pursuant to Section 457(b) of the Internal Revenue Code of 1954 as amended and at the specific request of an employee of MSU, the University will purchase an annuity contract on behalf of that employee from available fund sponsors:
    • AIG VALIC
    • AXA Equitable
    • TIAA-CREF
  • The employee assumes sole responsibility for the selection of a vendor and any investment results and tax consequences of such a selection.
  • Withdrawals are allowed on or after retirement, termination or resignation, regardless of age or length of service.
  • In-service withdrawals are subject to IRS guidelines and are permitted due to "unforeseen emergency"
  • Loan options may be available. Contact the fund sponsor of your choice for specific information on loans.

Premium contribution:

  • The employee designates the amount of salary to be deferred.
  • The maximum contribution level by the employee must be in accordance with Section 457 of the IRS Code.
  • The employee's contribution is made on a tax-deferred basis. The deferred portion is not reported as earned income on the Employer's Statement of Earnings form (W-2) to the IRS.
  • Deferred compensation contributions may be remitted to only one vendor at any given time.
  • The level of contribution may be changed as often as once a month, effective the first of the following month.

Distribution options:

If separated from service, employees may choose one or several of the following distribution options:

  • Lump sum distribution - If you have separated from employment at the University (i.e., resigned, terminated or retired), you may withdraw up to and including 100 percent of your accumulations, subject to fund sponsor limitations. The amount you withdraw will be taxed as ordinary income in the year in which it is distributed, and may be subject to early withdrawal penalties.
  • Rollover - Rollover means to transfer accumulations from one retirement plan to another while maintaining the accumulations' tax-deferred status. Rolling over your accumulations will continue the tax deferred status and you will not have to pay income tax or early withdrawal penalties.
  • Annuity distribution - An annuity is a stream of payments for life from a retirement plan and may provide income for the life of one person (single-life annuity), or two people (joint-life annuity). Joint-life annuities provide income ranging from full payment in the event of the death of either person, to payment of two-thirds or even one-half in the event of either person's death. Investment sponsors provide information about available annuity options.
  • Fixed-period distribution - In addition to the various annuity options, you may elect to receive distributions for a fixed time period. Under this option, regular payments are dispersed over the number of years selected. When the fixed period is complete, payments stop.
  • Interest/dividend only distribution - This option allows you to draw only the interest or dividends generated from your accumulations. Contact the investment sponsor to inquire as to which funds have this option.
  • Systematic/installment withdrawal distribution - This option allows you to specify a dollar amount you would like to withdraw at specific intervals, such as monthly or quarterly.
  • Minimum distribution - This option allows you to receive the smallest amount that meets the federal minimum distribution rules.
  • Do nothing - You can maintain your Deferred Compensation Plan account balance for continued growth. In general, however, your distributions must begin minimum required distribution at age 70 1/2.

For a more detailed description of these and other distribution options, contact the investment sponsor(s).

Termination date of benefit:

  • The employee's contribution ceases with the last day of paid employment, change to an ineligible employment status, or designation by the employee to stop future contributions, whichever occurs first.
  • Employees on an unpaid leave of absence may not continue deferred compensation contributions. Upon return from leave, the employee will automatically be reinstated in the program.
  • Employees receiving benefits under the University's Long-Term Disability plan may not continue deferred compensation contributions.

Procedure

Application for enrollment:

  • Employees may enroll at any time after becoming eligible. Enroll online at the EBS Portal.  Review the Enrollment Instructions for more detail.
  • The enrollment process will be effective either the current pay period or the next pay period, depending on the payroll processing date.  
  • Retroactive enrollment is not permitted.

Changes in coverage or personal information:

Refer questions to: MSU Human Resources Benefits (telephone 517-353-4434 or e-mail benefitsinto@hr.msu.edu)


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