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FICA Alternative Plan Overview

 

INTRODUCTION

EFFECTIVE DATE OF THE PLAN

HOW THE PLAN WORKS

WHO IS ELIGIBLE?

WHO IS NOT ELIGIBLE?

ADVANTAGES OF THE PLAN

SAMPLE PAYCHECK

FREQUENTLY ASKED QUESTIONS

 


INTRODUCTION

The Omnibus Reconciliation Act of 1990 (OBRA 90) introduced into the law IRS Section 3121(b) (7) (f). As a result, temporary employees of a government entity may deposit money into a private retirement plan instead of Social Security. The FICA Alternative Plan is a defined contribution plan authorized under Section 403 (b) of the Internal Revenue Code. TIAA-CREF is the plan administrator for Florida Atlantic University.


EFFECTIVE DATE OF THE PLAN

The University implemented the plan for the pay period beginning 08/12/06, pay date of 09/01/06.


HOW THE PLAN WORKS

Social Security payroll taxes are collected under authority of the Federal Insurance Contributions Act (FICA).  Social Security is currently withheld from eligible wages and matched by the university. Participants (adjunct and temporary employees) in this plan will no longer contribute to the Social Security Administration nor will the amount contributed by the employee be matched by the university.  Instead, employees  contribute 7.5% of their wages into an investment account in their name. Medicare contributions at 1.45% continue to be withheld and matched by the employer. The plan is mandatory for eligible employees and employees are automatically enrolled or un-enrolled based on their salary plan status during the affected pay period. There is no minimum age or service requirement.

Once a contribution has been made to the plan, the employee will receive an Enrollment/Designation of Beneficiary form and an introduction letter from TIAA-CREF, the plan Administrator. They will also be available on the TIAA-CREF web site. These forms will allow the employee to choose between a Guaranteed Pooled Fund (an interest bearing account) and a variable investment option. As a participant in the plan, you will have the option of investing in a mutual fund plan or a fixed account and will also be asked to identify a beneficiary. If an employee does not direct the investments of your funds, they will automatically be placed into the Guaranteed Pool fund which has a fixed rate of 3%.

Withdrawals (Close the Account)

Withdrawals from the plan may be made at the following times:

  • After 30 days from date of separation / termination of employment.

  • Retirement .

  • After age 70 ½ or retirement, if later, when the IRS requires that the minimum distributions be made to the participant each year.

  • Participant's total disability.

  • Participant's death.

Withdrawal (account closure) can be made to the participant 30 days after the date of termination from Florida Atlantic University.

Withdrawals (total account balance) from your account may be made in a lump-sum cash payment (the IRS 10% penalty on early withdrawals does not apply to withdrawals upon separation if age 59½ or later) or plan balances may be rolled over to an IRA or other eligible retirement plan. No IRS penalty applies to these transfers.


WHO IS ELIGIBLE?  

Employees that are not covered by the university’s retirement plan and currently pay social security taxes will be eligible. Adjunct Faculty, and hourly and exempt Temporary employees (who are not otherwise exempt from social security taxes, also known as OASDI or Old Age, Survivors, and Disability Insurance) are eligible to participate in the FICA Alternative Plan. 


WHO IS NOT ELIGIBLE?

Faculty, Administrative Managerial Professional-AMP, and Support Personnel-SP employees participating in a university retirement plan are excluded from the FICA Alternative Plan.  Also excluded are students, graduate assistants, fellows, phased retirees, rehired retirees, and any employees covered by current university retirement plans.

Medical Residents and Preceptors in the College of Medicine are specifically excluded unless they hold another position at FAU that qualifies for the FICA Alternative Plan


ADVANTAGES OF THE PLAN

  • Contributions to this plan are pre-tax. Therefore, the total amount of income taxes paid will be reduced. No income taxes are paid on the contributions until they are withdrawn .

  • Participating employees are not subject to Social Security taxes while covered by this plan, and Social Security taxes are never due on these funds .

  • Any benefits previously earned under another retirement plan (including Social Security) will not be reduced by participation in this plan .

  • The account balance is portable and there are no administrative fees.


SAMPLE PAYCHECK

   Without Plan   With Plan 
Earnings $1,000.00 $1,000.00
Less 7.5% Plan 0.00 75.00
Taxable Income   1,000.00 925.00
Less 15% Income Tax 150.00 138.75
Less 6.2% Social Security *  62.00 0.00
Less 1.45% Medicare 14.50 14.50
Net Take-Home Pay $773.50 $771.75
Accumulated Savings   75.00
Net-Pay + Savings   $846.75
*Note that SS is after tax

Calculate your biweekly paycheck

 

FREQUENTLY ASKED QUESTIONS

How will I be enrolled?

Employees will be enrolled automatically if they are in an eligible Temporary (OPS) salary plan.

What happens if my salary status changes and I am no longer eligible? Will I need to take an action?

No. Employees will be enrolled or un-enrolled automatically based on their current salary plan status. The university will check for changes in salary plan status each biweekly pay period.

May I decide not to participate in the FICA Alternative Plan?

No. The IRS regulations for the 403 (b) plan require that all eligible employees participate for the agency to participate. Therefore, if you are in an eligible Temporary salary plan, participation is mandatory.

What if I do not complete the enrollment form?

The enrollment form designates your investment choice and a beneficiary. If an investment choice is not selected, the contributions will be invested in the fixed account.

Can I continue to contribute to the plan after I leave the University?

No, the plan requires contributions through the organization. If you begin working for another institution that has a similar plan with TIAA-CREF, then you may begin contributions through that organization.

Will participation in the plan effect my past contributions to social security?

No, those contributions will remain in your name with social security.

If I am currently receiving social security benefits, can I still participate in the plan?

Yes, but it depends on the circumstances. For example, if you are currently paying FICA from your university wages and are in an eligible Temporary salary plan, you may participate.

How often will contributions be taken?

Each biweekly pay period.

How much are the contributions to the plan?

7.5% of pre-tax wages

Can I contribute more than 7.5% into the plan?

7.5% percent is the minimum required for the plan. At this time, that will be the contribution for all employees. The university will consider options for increasing contributions in the future.

Is there a charge from TIAA-CREF to establish an account, switch between investment plans, or to withdraw funds?

No, there are no charges from TIAA-CREF. There are some small fees associated with the mutual fund options. See the fee schedule above.

Will I still be able to participate in the plan if I move from Temporary to a SP, AMP or Faculty position?

No, these positions are eligible for other retirement plans.

If I do not currently pay FICA but am on a Temporary appointment, can I participate in the plan?

No. You must be currently paying FICA to participate in the FICA Alternative Plan.

Are Medical School Residents and Preceptors eligible for this plan?

No,they are excluded from participation unless they have another OPS position at FAU.

How do I access my account with TIAA-CREF?

By logging on to the TIAA-CREF website: http://www.tiaa-cref.org

How can I determine the impact on my wages, with and without the FICA Alternative Plan?

See the sample spreadsheet calculation. (You must have Microsoft Excel.)

How and when can I withdraw funds from my account?

Upon termination of employment, contact your TIAA-CREF representative at 1-800-842-2776. (M-F 8 am - 10 pm)

What if my address or other contact information changes?

Address or contact information can be changed on the TIAA-CREF website

Can I send my 7.5% contribution to another plan (such as Valic or Gabor)?

No, but you may roll the invested funds over into one of these plans when you separate from the university.

What if I have multiple jobs with the university and only some of the jobs are eligible for the FICA Alternative Plan?

All jobs must be eligible for the employee to participate in the plan.

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 Last Modified 7/24/14