Northern Illinois University (“NIU” or the “University”) sponsors the Northern Illinois University Supplemental Retirement Plan – Internal Revenue Code Section 403(b) (“403(b) Plan”). As an employee of Northern Illinois University receiving compensation reportable on a Form W-2, you are eligible to supplement your retirement benefits by making voluntary salary deferral contributions to the 403(b) Plan.
What is the 403(b) Plan?
The 403(b) Plan is a type of retirement savings plan available to employees of educational institutions and certain non-profit organizations. You may make voluntary salary deferral contributions to the 403(b) Plan. You are always 100% vested in your salary deferral contributions to the 403(b) Plan.
You can invest in any investment options offered by one of the two approved vendors under the 403(b) Plan:
- Fidelity Investments
You have the option to make your voluntary salary deferral contributions on a tax‑deferred (pre-tax) basis and/or a Roth (after-tax) basis.
The pre-tax 403(b) Plan option allows you to make contributions to the 403(b) Plan on a pre-tax basis. Federal and state income taxes are deferred on pre-tax contributions and earnings thereon until a distribution is taken from the 403(b) Plan.
The Roth 403(b) Plan option allows you to make contributions to the 403(b) Plan on an after-tax basis. Roth contributions are included in your taxable income at the time of contribution. Upon withdrawal or distribution, earnings on Roth contributions 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 contribution to the 403(b) Plan and after the age of 59½ (or following death or disability).
The 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.
When are distributions available from the 403(b) 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 403(b) 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 403(b) 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.
How much can I contribute to the 403(b) Plan?
The amount of salary deferral contributions that can be contributed to a 403(b) plan each year is established by the Internal Revenue Service (IRS). The 2020 limit on salary deferral contributions to a 403(b) plan is:
- $19,500, plus
- An additional $6,500 if the participant will be age 50 or older by the end of the 2020 calendar year.
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 for or contribution limitations under the 403(b) Plan.
How do I enroll in the 403(b) Plan?
Employees can begin participation in the 403(b) Plan at any time during their employment. Employees who would like to enroll should use the NIU Salary Contribution Agreement form. Additionally, employees will need to select one the University’s two approved vendors and complete the vendor’s online enrollment application. Additional reference information is available in the Human Resource Services office or on the Human Resource Services website.
How do I get more information?
For more information, including about how to enroll in the 403(b) Plan and the investment options available under the 403(b) Plan, contact Human Resource Services at (815) 753-6000, or visit the NIU Human Resource Services website.
This informational notification does not constitute tax or legal advice. Neither NIU nor the investment providers offering retirement savings products under the 403(b) Plan can provide tax or legal advice. If tax, legal, or other professional assistance is required, the employee should contact his or her own tax professional or investment advisor. Operation of the NIU 403(b) Plan and the contents of this correspondence are subject to and governed by the 403(b) Plan document and applicable laws/regulations.