TO: Northern Illinois University Employees
FROM: Beth Ingram, Executive Vice President and Provost
RE: Eligibility for 403(b) Deferred Compensation Retirement Plan Annual Notification of Plan Availability
Northern Illinois University sponsors the Northern Illinois University Supplemental Retirement Plan – Internal Revenue Code Section 403(b) (“Plan”). As an employee of Northern Illinois University receiving compensation reportable on a W-2, you are eligible to voluntarily elect to invest a portion of your compensation to the Plan to supplement your retirement savings. The Plan allows employees to make tax-deferred (pre-tax) and/or Roth option (after-tax) 403(b) investment contributions with one of the two (2) approved 403(b) vendors:
- Fidelity Investments
- TIAA-CREF
What is a 403(b) plan?
A 403(b) Plan is a retirement savings plan available to employees of educational institutions and certain non-profit organizations. Employees can invest in any investment options offered by the vendor. Contributions to the Plan are made solely by the employee, and the employee is 100 percent vested in their account(s) at all times.
The tax-deferred 403(b) Plan option allows employees to make pre-tax contributions for retirement savings. Federal and state income taxes are deferred on contributions and earnings until a distribution is taken from the Plan. Distributions are generally available at age 59½ or when a severance from employment occurs. Distributions may also be available in the event of financial hardship, death, or disability. Distributions from the Plan are taxable as income under the federal tax code. Subject to Illinois tax regulations, distributions may not be taxed by the state of Illinois provided the distribution is implemented under the Plan provisions, after the employee has reached full retirement age, and while the employee is a legal resident of the state of Illinois. A non-taxable loan may also be utilized to meet short-term needs.
403(b) Roth contributions are made on an after-tax basis and are included in your taxable income at the time of contribution. Upon withdrawal or distribution, earnings are tax free provided they meet the definition of a qualified distribution. A qualified distribution is one that is taken at least five years from the first Roth 403(b) contribution and after the age of 59½ (or following death or disability).
The NIU 403(b) Plan allows you to enroll in one or both options (pre-tax and/or Roth) with one approved vendor. A certified financial advisor or tax consultant can assist you with deciding which 403(b) option (pre-tax and/or Roth) is best suited for your future plans.
How much can I contribute to the 403(b) plan?
Each calendar year the Internal Revenue Service (IRS) establishes the maximum contribution allowance. The maximum total allowable 403(b) contribution for calendar year 2020 is:
- $19,500
- If the participant will be age 50 or older by the end of the 2018 calendar year, additional contributions of $6,500 can be made.
Most faculty, supportive professional staff, and operating staff employees are participants in the State Universities Retirement System (SURS). Participation in the SURS does not affect eligibility or contribution limitations under the 403(b).
How do I enroll in the plan?
Employees can begin participating in the Plan at any time during their employment. Employees who would like to enroll should use the NIU Salary Contribution Agreement form. The form can be found on the Human Resource Services website www.hr.niu.edu under Forms and Documents. Additionally, employees will need to choose between the university’s approved two vendors and complete their respective account application. Additional reference information is available in the Human Resource Services office or on the Human Resource Services website.
A 403(b) informational document is located at:
https://www.hr.niu.edu/hrs/resources/forms_docs/downloads/supplemental-retirement-plans.pdf
How do I get more information?
To obtain more information, including about how to participate, the savings products available under the Plan, and/or access to the enrollment information provided above, contact Human Resource Services at (815) 753-6000, or visit the NIU Human Resource Services website at www.hr.niu.edu.
Disclaimer: This informational notification does not constitute tax or legal advice. Neither NIU nor the investment providers offering retirement savings products under the plan can provide tax or legal advice. If tax, legal, or other professional retirement savings assistance is required, the services of a professional advisor should be obtained by the employee. Operation of the NIU 403(b) Plan and the contents of this correspondence are subject to and governed by the Plan Document and applicable laws/regulations.
