Dear Colleagues,
On May 6, President Krislov sent a memo to the Pace Community about the financial impact of COVID-19 and measures that the University is taking now to mitigate them. One of the cost-cutting measures is the suspension of the 403(b) plan employer contribution effective June 1, 2020.
This information below serves to provide the Pace Community with information related to the 403(b) plan and the employer contribution suspension.
Q. Why is the University suspending the employer contribution to the 403(b) plan?
A.
The University is projecting substantial losses in tuition and student-related revenues in the fall. Pace leadership is considering all options to reduce expense and preserve jobs while we continue the University’s mission and secure our long-term financial well-being. Leadership is prioritizing strategies, such as this retirement contribution suspension, that will have significant financial impact to the University while causing the least day-to-day hardship for the majority of Pace faculty and staff.
Q: Is the suspension of the employer contribution permanent?
A:
No. This is a temporary measure, intended to address the financial challenges that are projected in the fall as a result of the COVID-19 pandemic. As previously stated, the University will revisit the decision later this year with the possibility of reinstating some or all of the employer contribution in 2021.
Q: Why didn’t the University give faculty or staff the choice to either take an equivalent pay reduction or suspension of the 403(b) employer contribution?
A:
403(b) plans are subject to qualifications to the plan design, so as not to discriminate in favor of Highly Compensated Employees (
as defined by the IRS
). It would be considered discriminatory to allow a plan to have the provision that allows participants the option to elect the form of payment—most Highly Compensated Employees would choose to take the plan contribution (because they could most afford to do so) while Non-Highly Compensated Employees would opt to forgo the employer contribution (as they would most likely not afford a salary reduction). Our 403(b) plan is subject to annual discrimination testing to prevent Highly Compensated Employees from benefiting more than Non-Highly Compensated Employees.
If you prefer to see your take-home pay reduced in favor of greater retirement contributions, you have two options potentially available to you. In calendar year 2019, while almost 1,400 faculty and staff received employer contributions, fewer than 170 elected to make their own maximum pre-tax contribution. As such, there are a large number of faculty and staff who can elect to increase their own pre-tax contributions to the 403(b), thus having a similar impact as a reduction in salary. Furthermore, of the 170, it is estimated that about half of those might be
eligible to make a deductible IRA contribution
, based on their AGI (further reducing their taxable income and while directing income toward savings for retirement). You should speak to your tax advisor for more information related to the tax implications of these options.
Q: Is it discriminatory to suspend the 403(b) employer contribution, since there are different employer contribution levels (9, 10, and 12%) depending on when we were hired?
A:
No. Because the suspension impacts the entire plan, that action is not considered discriminatory. Many universities have different contribution percentages based on hire dates and years of service, and many have suspended their contributions during this financial crisis due to the COVID-19 pandemic.
Q: Many faculty and some staff earn their salaries over a period of time (e.g., September 1 to May 15) but are paid over a 12-month period (e.g., September 1 to August 31). Would those who are paid under this type of arrangement be entitled to the employer contribution on the amount that was earned but not yet paid?
A:
No. The 403(b) plan recognizes
compensation when it is paid not earned.
Q: Can I still contribute to the plan? Contribute more? Contribute less?
A:
Yes, your participation in the employee portion of the plan has not been impacted, so you can start, stop, or continue to contribute pre-tax dollars to the plan. The annual limit for employee contributions for the calendar year 2020 is $19,500. If you are age 50 and over (at any time in 2020), you can contribute an additional $6,500, for a total employee contribution of $26,000. If you’re interested in changing your contribution, please click
here
and complete and return to the form to
benefits@pace.edu
.
If faculty or staff are interested in knowing what their contribution percentage is, here are the steps:
- https://portal.pace.edu (log in)
- Click on Faculty or Staff (on the left)
- Click on Employee Information and Pay Advice
- Click on Benefits
- Click on Retirement Plans
- Look for "Employee Percentage" to see how much, as a percentage of your pay you are contributing
If faculty or staff are interested in knowing how much they contributed last year, here are the steps:
- https://portal.pace.edu (log in)
- Click on Faculty or Staff (on the left)
- Click on Employee Information and Pay Advice
- Click on Employee Information and Pay Advice (again)
- Click on Pay Advice
- Select 2019 from the drop down
- Click on Display
- Click on DEC 31, 2019
- Scroll to section "Benefits, Deduction, and Taxes"
- Look for TIAA contribution line (some might have 2 lines, one for employee contribution and another for employer contribution)
- Look under Employee YTD amount—this is the amount the faculty or staff member contributed for 2019
Q. How can I review my account and/or make adjustments?
A.
You can review your current plan and make changes online at
www.tiaa.org/pace
. This online portal allows you to view your plan balances, to select investments, change your beneficiary, and manage your account on an ongoing basis. If you need assistance, contact TIAA by calling 1 (800) 842-2776.
Q. Is there any relief provided to the 403(b) plan participants from the CARES Act?
A.
Yes. Pace immediately adopted the following CARES Act provisions to our plan:
- Penalties and mandatory withholding are waived for qualified distributions from retirement plan accounts
- Until December 31, 2020, qualified members can withdraw up to $100,000 from retirement plans without the 20% mandatory federal tax withholding or the 10% early withdrawal penalty. Participants spread taxes on the distribution over three years. To withdraw money, participants must self-certify their eligibility with their retirement plan carrier that they will not withdraw more than $100,000 across all plans.
- Retirement plan loan limits have been increased
- Through September 23, 2020, eligible loan amounts will increase from 50% to 100% of a participant’s vested balance, up to $100,000 across all their retirement plans. Through December 31, 2020, participants may request a suspension of new or existing loan repayments for up to one year. Participants must request a repayment suspension from TIAA.
- Optional suspension of required minimum distributions (RMDs) for 2020
CARES Act Eligibility for Retirement Plan Withdrawals and Loans:
You are considered eligible to take advantage of the enhanced distribution or loan options from your retirement plan if any of the below conditions are met:
- You have been diagnosed with COVID-19 by a test approved from the Centers for Disease Control and Prevention (CDC).
- You have a spouse or dependent who has been diagnosed with COVID-19 by a test approved from the CDC.
- You suffer financial consequences as a result of quarantine, employment furlough, layoffs, reduced work hours, or cannot work due to lack of child care as a result of coronavirus.
- You experience a financial loss to an individually-owned or -operated business that is caused by a closing or reduction of hours due to coronavirus.
Q. Are there any other retirement plans that Pace sponsors that faculty or staff can contribute to?
A.
No.
Q. I want to change my contribution percentage to either contribute the maximum amount ($19,500, $26,000 if 50 and over, or some other target dollar amount), how do I calculate that?
A.
You’ll need some information such as your annual salary, your current contribution percentage and the amount you’ve contributed to date. All of these values can be found in the “Employee Information and Pay Advice Section” in the Pace Portal.
To access your annual salary:
- https://portal.pace.edu (log in)
- Click on Faculty or Staff (on the left)
- Click on Employee Information and Pay Advice
- Click on Employment Summary
- Click your current position
- Locate your salary under “Job Salary or Job Hourly Rate”
To access your current contribution percentage:
- https://portal.pace.edu (log in)
- Click on Faculty or Staff (on the left)
- Click on Employee Information and Pay Advice
- Click on Benefits
- Click on Retirement Plans
- Look for "Employee Percentage" to see how much, as a percentage of your pay you are contributing (make sure to look for the most recent/Active record).
To access the amount you have contributed to date:
- https://portal.pace.edu (log in)
- Click on Faculty or Staff (on the left)
- Click on Employee Information and Pay Advice
- Click on Employee Information and Pay Advice (again)
- Click on Pay Advice
- Select 2020 from the drop down
- Click on Display
- Click on the most recent pay date
- Scroll to section "Benefits, Deduction, and Taxes"
- Look for TIAA contribution line (some might have 2 lines, one for employee contribution and another for employer contribution)
- Look under Employee YTD amount—this is the amount the faculty or staff member contributed for 2020
Now that you have the amount of your salary and your contribution to date
, use the formula below to calculate the (whole number) percentage that will get you to your desired annual contribution goal.
