403(b) Plan and Savings Plus Program

Following are brief summaries of two programs available to eligible CSU employees that allow long-term investment and/or capital accumulation for retirement on a pre-tax basis through monthly payroll deductions. The information contained herein is not intended to recommend that an employee participate in the Tax Sheltered Annuity (TSA) or Savings Plus Program (SPP), nor will it give employees investment or tax advice. For general information that may assist you in your financial planning needs, visit the Securities Exchange Commission's Web Page at http://www.sec.gov/invkhome.htm and access their Financial Facts Tool Kit. The decision to participate is up to the individual employee.

The CSU’s 403(b) Tax Sheltered Annuity and Mutual Fund Program

The CSU’s 403(b) program includes tax sheltered annuities and mutual fund custodial accounts qualified under Section 403(b) of the Internal Revenue Code. Over 100 different companies are available for employees to invest with through monthly pre-tax payroll deduction.

• The minimum monthly 403(b) contribution is $15 per month. Currently, some 403(b) vendors require a monthly contribution greater than $15, so this level of contribution may limit the employee’s choice of vendors.
• With the exception of certain student classifications, all employees are eligible to participate in the 403(b) program, including rehired annuitants (regardless of age).
• Only the following student classifications are ineligible for 403(b) participation:

  Resident Assistant (class code 1869)

  Student Assistant (class code 1870)

  Student Trainee, On-Campus Work Study (class code 1871)

  Student Trainee, Off-Campus Work Study (class code 1872)

  Graduate Assistant (class code 2355)

Salary Reduction Agreement:

• The IRS now permits an employee to change his or her Salary Reduction Agreement (SRA) at any time during the year. Because the CSU has a monthly payroll, employees may submit a new SRA each pay period if desired.

Salary Reduction Agreement (SRA) forms must be signed and submitted to Human Resource Services prior to the date the applicable salary payment is earned (e.g., if the SRA is to be applied to the June pay period’s salary payment on July 1st, it must be signed and submitted to Human Resource Services by May 31st). This rule applies to new SRAs, SRA changes and cancellations.

For the 2006 tax year, the lesser of the following two limits apply to determine the maximum contribution to a 403(b) plan:

• Internal Revenue Code (IRC) 402 (g) Elective Deferral Limit- $15,500
• Internal Revenue Code (IRC) 415 “Percentage of Compensation” Limit- 100% of adjusted gross salary

Over Age 50 Catch-Up Provision:

IRC Section 414(v), added under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), created a new catch-up provision available to individuals age 50 or older before the end of the plan year, and allows them to make additional pre-tax elective deferrals to a 403(b) plan over and above the general contribution limits, without regard to previous contributions. This new catch-up rule does not require a calculation worksheet. The maximum amount of this new additional contribution is $5,000 in 2007 for a total of $20,500.

15-Year Rule Catch-Up Provision:

IRC Section 402(g)(7) “catch-up” election permits some long-term employees to contribute an additional $3,000 during the year. If you wish to contribute up to this amount you must demonstrate your eligibility for the catch-up rule by completing a “2006 Worksheet to Determine Eligibility for 403(b) Contributions over $15,000”. You may pick up a worksheet at the Human Resource Services, Customer Service Center (CLA Building 98, room B1-20). This worksheet must be completed every year you plan to contribute over the limit.
2006 maximums under this provision:

• $18,500 if under the age of 50
• $23,500 if over the age of 50

Additional Information:

Internal Revenue Service (IRS) Publications 553 and 571 provide additional information, these publications are available on the IRS’s web site address at: http://www.irs.gov.

Other Plan Administration Issues:

• Currently, the CSU pays all processing fees for this program; there is no cost to the employee for participation.

How To Obtain Additional Information And/Or Forms:

The following forms are available through the Customer Service Center located in Human Resource Services, CLA Building 98, Room B1-20:

• Salary Reduction Agreement (SRA) Form
• Worksheet to Determine Eligibility for 403(b) Contributions Over Annual Limit
• List of Authorized TSA Companies
• Highlights of the Tax Sheltered Annuity Program

The Savings Plus Program (SPP)

The Department of Personnel Administration (DPA) is responsible for administering the Savings Plus Program. Funding is provided by fees charged to plan participants. Savings Plus is a long-term savings program that gives members two ways to save for retirement. The State of California offers eligible employees two plans authorized by the Internal Revenue Code. A Deferred Compensation plan under Internal Revenue Code (IRC) Section 457 and a Thrift Plan authorized by IRC 401(k). Both plans offer you:

The potential for rapid growth of your account with pre-tax investing and tax deferred investment earnings;

A variety of investment options to choose from;

Convenient payroll deductions; and Program flexibility to manage your accounts.

Who Is Eligible For Savings Plus?

Employees who are contributing members to the California Public Employees’ Retirement System (CalPERS) are eligible to participate with the Savings Plus Program.

How To Request Information Or Join

For enrollment information or to request an enrollment kit, please call the Savings Plus Program at (916) 322-5070 or send a written request to the Department of Personnel Administration, Savings Plus Program Office, 1515 "S" Street, North Building, Suite 108, Sacramento, CA 95814-7243. Information is also available through the Savings Plus Program WEB site at http://www.dpa.ca.gov or through E-Mail: Saveplus@dpa.ca.gov.