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University Business Policies and Procedures Manual |
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University Business Policies and Procedures Manual |
3640
TAX DEFERRED ANNUITIES
Effective Date: July 30, 1982
Revised: 11/01/91, 12/23/93/, 04/01/94, 08/23/99, 08/01/06, 02/01/07
Subject to Change Without Notice
Authorized by Regents' Policy 6.3 "Privileges and Benefits"
1. General
Employees may enter into contracts for tax deferred annuities, covered by Section 403(b) of the Internal Revenue Code, and have the annuity payments made by bi-weekly or monthly payroll deduction. The employee may thus postpone paying income tax on that portion of earnings until retirement. At that time, the employee's income and tax rate may be lower. However, there are penalties for early withdrawal.
Various companies offer such tax deferred annuities and a list of participating companies and payroll deduction forms may be obtained from the University Payroll Department or at www.unm.edu/~payroll. The University will act only as a collector of the premiums without endorsing any of the participating companies.
2. Employee Eligibility
The following employees are eligible to participate in tax deferred annuities:
3. Contributions
The maximum amount an employee may contribute to their tax deferred annuity is defined by the Internal Revenue Code. The Internal Revenue Code rules described herein are subject to change without notice and are complex; therefore, employees who wish to participate in a tax deferred annuity should consult with an annuity agent.
During a calendar year, an employee is generally eligible to make voluntary employee contributions of as much as 20% of his or her includable compensation as defined by the Internal Revenue Code, up to $10,000 each calendar year.
In certain instances, employees with greater than, or equal to fifteen (15) years of service at the University may be eligible for the "catch-up provision" and can then contribute up to $13,000 in a calendar year. This calculation requires that prior year contributions be taken into consideration.
To participate in the program, an employee must submit a Tax Deferred Annuity Contract (available at www.unm.edu/~payroll) and a Maximum Exclusion Allowance (MEA) calculation (provided by the employee's annuity company) to the Payroll Department.
Employees must be aware of the penalties and tax that may apply to premature distributions from tax deferred annuities. In general, the same tax rules apply to distributions from tax deferred annuities that apply to distributions from other retirement plans. "Retirement" Policy 3625, UBP, discusses premature withdrawals or distributions in more detail.
4. Company Guidelines
The University reserves the right to regulate the solicitation practices of all agents or companies conducting business on campus. Any companies interested in offering tax deferred annuities to University employees must contact the Payroll Department. In order for a company to offer tax deferred annuities (403[b]), they must comply with this policy and sign the University's Letter of Compliance. They must not discriminate in offering or administering tax deferred annuities on the basis of race, color, sex, national origin, age, religion, handicap, veteran status, sexual orientation, marital status, or medical condition.
Those companies who market tax deferred annuities to University employees must meet the following conditions. The company must complete and sign the University's Letter of Compliance, which can be obtained from the Payroll Department.
4.1. Each company must provide evidence of five (5) or more years experience in marketing tax deferred plans and enroll twenty-five (25) employees prior to the University's approval of a contract.
4.2. Solicitation using misleading information or false promises or statements is prohibited. Unless at the invitation of the employee, solicitation on campus, by telephone, or other means is prohibited. Appointments are allowed at the request of the employee, based upon a referral or written material mailed to the employee's home address. Any written material must have the prior approval from the authorized officer of the company.
4.3. Information and/or written material referring to The University of New Mexico shall not be used without the written approval of the Executive Vice President for Administration.
4.4. A company authorized to market tax deferred annuities to University employees shall not market any product on campus other than those within the meaning and limitations of Section 403(b) of the Internal Revenue Code, including life insurance and other financial service products.
4.5. Each company must guarantee that each tax deferred annuity offered is "qualified" as defined under Section 403 (b) of the Internal Revenue Code in order to secure approval as a company. The guarantee must provide that interest and penalties imposed on the employee or the University will be paid by the company if it is determined that the annuity is not qualified.
4.6. Companies must provide each employee, who has entered into a contract, a signed maximum exclusion allowance calculation as of January 1, of each year. The maximum exclusion allowance calculated by the company will not exceed the maximum allowable exclusion permitted by law.
4.7. Two (2) tier tax deferred annuities cannot be solicited or sold to any University employee. A two (2) tier annuity is a dual fund, dual-interest rate contract that has been declared illegal by some states.
4.8. Companies must furnish data pertinent to the company and the tax deferred annuities upon request by the University.
4.9. Failure to comply with this policy will result in the denial of offering contracts to University employees.
5. Contracts With Non Qualified Companies
University employees currently participating in a tax deferred annuity with a company that does not meet the conditions set forth in this policy will be allowed to continue payroll deductions for the existing contract. Employees may not request payroll deductions for additional contracts with a company that does not meet these conditions or change an existing contract, except to decrease the amount of the deduction, until the company has met all the conditions stated in Section 4. herein.
6. Modification to Individual Contracts
The University allows employees to change existing contracts whenever necessary in compliance with the Internal Revenue Code. The employee's request must include a current MEA calculation from the employee's annuity company.
Comments may be sent to UBPPM@UNM.edu
http://www.unm.edu/~ubppm