REMINDER: Important plan changes went into effect November 1, 2012. Visit www.fidelity.com/wwu to learn more, schedule a consultation with a Fidelity Workplace Planning and Guidance Consultant, view your investment options, and learn about the new Roth 403(b) option available to you.
The Voluntary Investment Program (VIP) is an optional, unmatched retirement savings plan, operating under Section 403(b) of the Internal Revenue Code (IRC). VIP participants may contribute to one or both of the following investment options:
Pre-tax 403(b) Contributions
- Contributions are deducted from your gross salary before taxes are calculated.
- Contributions and earnings grow tax-deferred until you take a distribution.
After-tax 403(b) Contributions (Roth)
- Contributions and earnings grow tax-free. This may be attractive to those who believe that their personal tax rates will increase over time and their tax rate may be higher in retirement.
- Withdrawals will not be subject to taxes if they are part of a "qualified distribution." A qualified distribution is one that is taken at least five tax years from the year of your first Roth 403(b) contribution and after you have attained age 59 ½, become disabled, or die.
- You may contribute to the Roth 403(b) regardless of income level.
The total combined contributions cannot exceed the year's contribution limit (see below).
Please note your VIP contributions are not matched by the University. Social Security tax is paid on the deductions whether pre-tax or Roth, and contributions to VIP have no effect on future Social Security benefits. Your VIP funds should be regarded as unavailable until you reach age 59 ½ or separate from the University, with the exception of a Loan or Hardship Withdrawal described below. Any withdrawals from your pre-tax contributions will be subject to federal income taxes, and a 10% penalty may apply.
As a WWU employee, you are eligible to participate in the VIP at any time regardless of whether you are enrolled in one of the basic WWU retirement plans. Those not eligible to participate include:
- Nonresident aliens who receive no U.S.-source earned income
- Individuals receiving a stipend as defined by the Department of Labor. (Stipends are not reportable as wages on the IRS Form W-2 and therefore are not subject to federal withholding taxes.)
View the list of investment options at www.fidelity.com/wwu.
Under IRC 403(b), the IRS sets annual limits on total, combined employee and employer contributions to defined contribution retirement plans like the WWU Retirement Plan (WWURP) and VIP. VIP employee contributions—whether pre-tax and/or after-tax—combined with employee and employer URP contributions cannot exceed the IRS limit for all 403(b) plans.
You can contribute as little as $15 per pay period and as much as 75% of your pay not to exceed the maximum contribution limits described below.
The maximum combined employee and employer contribution allowed under IRC 403(b) for 2013 is $51,000. An additional $5,500 is allowed for each of these years if you are age 50 or above as described in “Catch-up Contributions” section below.
The maximum amount you can contribute to your VIP, based upon the retirement plan in which you are participating as a WWU employee, is as follows:
- PERS/TRS/LEOFF participants, or those with no retirement plan:
- $17,500 - If you are under age 50
- $23,000* - If you are age 50 or over
- WWU Retirement Plan participants:
- $17,500 - If you are under age 50
- $23,000* minus your optional 2.5% WWURP contribution amount:
- If you are age 50 or older, and contribute 10% of your gross income to the WWURP.
- The compensation limit of $250,000 applies to the July 1, 2012 - June 30, 2013 plan year.
- Contributions under other employer plans also count towards the limits as do certain individual plans. If you have contributed to a plan with another employer in the same tax year, please notify the WWU Benefits Office immediately so that your limit can be evaluated.
*The VIP maximum contribution amount shown above includes the Age 50 “Catch–up Contribution” of $5,500 as described in the "Catchup Contributions" section below.
The IRS allows what is called an "Age 50 Catch-up Contribution," a contribution in excess of the general IRS contribution limit for 403(b) plans. This catch-up is available to employees who have reached age 50 during the calendar year. The catch-up contribution is $5,500 for 2012 and 2013, and is included in the limits listed above.
The WWU Benefits Office reserves the right to stop or return VIP contributions to prevent over-deferrals. Current participants can find their current year VIP maximum contribution amount at Web4U on their pay stub.
At age 59-1/2 or greater: Once you reach this age, you can access your VIP contributions regardless of your employment status according to the Internal Revenue Code.
- Pre-tax VIP: Upon withdrawal, normal taxes will apply unless you roll your VIP into another tax-protected vehicle such as an IRA. This is consistent with Section 6.1 of the VIP plan document.
- After-tax Roth VIP: Qualified distributions may be taken at least five tax years from the year of your first Roth 403(b) contribution and after you have attained age 59 ½, become disabled, or die. See IRS Publication 571 for further details.
Prior to Age 59-1/2 or Loan and Hardship Withdrawals: When unexpected financial hardships occur, you may find that you need to explore all your options including tapping into any VIP savings. There are special rules about accessing these funds for hardship situations.
Western Washington University offers an additional optional retirement savings program, called the Washington State Deferred Compensation Plan (WSDCP). WSDCP is a retirement savings program operating under Section 457(b) of the IRC. It is an agreement between an employee and the state that postpones ("defers") part of the employee’s income. This income deferral reduces current taxable income and allows the deferred income to grow untaxed until retirement. The state of Washington retains ownership of funds invested through this plan until retirement.
If you wish to maximize your retirement savings, or if you participate in the URP and your allowed VIP contribution is smaller than your desired savings rate, you may wish to explore this plan. You may participate in your basic retirement plan and both the VIP and the WSDCP in the same tax year at the same time. If you wish to participate in the WSDCP contact the Department of Retirement Systems at 1-888-327-5596 for assistance in plan enrollment. See the WSDCP web page for more information.
When making contributions to the VIP, you may be eligible for a "saver's credit." This credit could reduce the federal income tax you pay dollar-for-dollar. The amount of the credit that you can receive is based on the contributions you make and your credit rate. Review the rules for the Saver's Tax Credit to see if you qualify.
Eligible employees may enroll in the VIP at any time. Enroll or make changes through the WWU’s master administrator, Fidelity Investments at www.fidelity.com/wwu, or call 1-800-642-7131 for assistance. Also, update your beneficiary information here.