55 ELM STREET HARTFORD, CONNECTICUT 06106-1775 Telephone: (860) 702-3480 Facsimile:(860) 702-3556 |
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HEALTH CARE COST CONTAINMENT COMMITTEE |
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STATE OF CONNECTICUT OFFICE OF THE STATE COMPTROLLER HEALTHCARE POLICY & BENEFIT SERVICES DIVISION |
October 30, 2014
ATTENTION: | Human Resource, Benefit and Payroll Officers |
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Participants in the 457 and 403(b) Plans | |
SUBJECT: | Deferral of Vacation and Sick Leave Payouts from |
Final Paychecks to 403(b) or 457 Plans |
I. INTRODUCTION
Employees who are retiring or leaving State service can contribute final payouts for unused vacation or sick leave to the 457 Deferred Compensation Plan, which is open to most active employees, or the 403(b) Plan, limited to employees of eligible educational institutions and hospital facilities. 1 By making a pre-tax deferral of some or all of the vacation/sick leave payout into the 457 or 403(b) Plan, employees can reduce taxes withheld from the final paycheck and boost their retirement savings. The process for contributing final payouts to the 403(b) or 457 Plan requires advance planning because IRS regulations require deferral arrangements to be in place the month before the final payment is made. This memorandum outlines the steps for taking advantage of this benefit.
II. PROCEDURE
A. Determining Deferral Amount.
Employees should ask their Payroll/Human Resources office for an estimate of
the gross vacation/sick leave payout, the date when it will be paid, and their
year-to-date contributions to the 457 or 403(b) Plan. When setting the deferral
amount, an employee should factor in any contributions that will have taken
place by the date of the final paycheck. The maximum for 2014 is $17,500 (plus
an additional $5,500 for age 50 and over). For 2015, the maximum contribution
will be $18,000 (plus another $6,000 for those aged 50 and over). Someone who is
eligible for both Plans can contribute the maximum amount to each.
B. Using Age 50 Catch-up.
Employees who are over age 50 or will be age 50 by the end of the year can
defer additional amounts noted above by checking off the "age 50 catch-up"
option on the 403(b) Salary Reduction Agreement or the 457 Plan Participation
Agreement Form. 457 Plan members using this option for the first time must fill
in their "Normal Retirement Age" 2 in order to use this additional savings option.
C. Changing Deferral Amount--Current Participants
D. Employees not Previously Enrolled.
Employees who have not previously participated in the 457 or 403(b) Plan
will need to complete an enrollment form for each plan into which they will be
deferring vacation/sick leave payouts. (An employee who is eligible for and
wants to contribute to both the 403(b) and 457 Plans for the first time will
need an enrollment form for each, plus the appropriate contribution election
form.) To obtain forms and instructions go to
www.CTDCP.com. Select the Deferred Compensation 457 Plan or the 403(b)
Plan, go to the "Plan Information" tab, and follow instructions under "How to
Enroll".
E. Deadline for Submitting Forms.
The necessary forms with original signatures must be received by Voya, the
third-party administrator, before the Cut-Off Date for the employee?s final
paycheck, as set forth in the attached Payroll Cut-Off schedule. All forms
should be mailed to:
Voya Financial TM
P.O. Box 990069
Hartford, CT 06199-0069
Once the final payout check has been issued, agency personnel should not reverse or reprocess paychecks to allow employees to make untimely deferrals of vacation and sick leave payouts.
F. Common Problems to Avoid.
Advance planning will prevent common mistakes that can derail deferrals of vacation and sick leave payouts.
III. CONCLUSION
Payroll and Human Resources Personnel are encouraged to provide information to terminating or retiring employees so they are aware of the deferral option and provide information about year-to-date contributions, Employee Record Numbers, the amount of any anticipated vacation/sick leave payouts, and the date when they will be paid.
Employees who want help with calculating sick or vacation leave deferrals to the 403(b) or 457 Plan should call Voya at 1-800-784-6386 option #4 or log onto www.CTDCP.com for more information. You may also contact the Employee Benefits Unit for assistance at 860-702-3543 or at osc.ebu@ct.gov.
Very truly yours,
THOMAS C. WOODRUFF, Ph.D.
Director
Attachment: Payroll Cut-off Date Schedule: 4th Quarter 2014 and 2015 Plan Year
1 Detailed eligibility guidelines can be viewed on the Plans' dedicated web site ? www.CTDCP.com
2 For a retiring employee, "Normal Retirement Age" should be your current age. A terminating employee should enter age 65 or older and the year in which that age will be attained. Entry of this information will not affect your right to retire earlier (or later) than the stated date if you decide to do so.
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