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 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, the plan Administrator. They will also be available on the TIAA 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) may be 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