University Human Resources
IU Tax Deferred Account (TDA) Retirement Plan
- IRS Code Section 403(b) defined contribution plan
- Employees make all contributions to the Plan
- Plan contributions are always 100% vested and nonforfeitable
- Participant directed investment – daily valuation plan
- Distributions upon termination of employment with Indiana University or after attainment of age 59½.
To be eligible to participate in the Plan, an employee must be:
- An Academic (including Medical Residents) or Staff employee appointed at 50% or more full-time equivalent (FTE); or
- A Temporary employee who is expected to work at least 1000 hours of service or more in a 12-month period and is appointed as "Temporary with Retirement."
The following individuals are prohibited from participating in the Plan:
- Students with non-FICA status;
- Non-resident aliens; and
- Independent contractors.
An employee is not required to satisfy any age or service condition (e.g., complete a year of service) in order to be eligible to participate in the Plan.
An employee may enroll in the Plan immediately upon satisfying the eligibility requirements described above. An eligible employee does not have to wait until the general open enrollment period to enroll in the Plan.
To enroll in the Plan and begin making salary deferrals and catch-up contributions to the Plan, an eligible employee must:
- Complete a salary reduction agreement;
- Establish a Plan account at an authorized investment company by completing an account application; and
- Return a completed salary reduction agreement and account application to the campus human resources office no later than 30 days prior to the next pay date. If an eligible employee does not return both documents to the campus human resources office, salary deferrals cannot be made to the Plan.
Salary deferrals and catch-up contributions will begin being made to the Plan as soon as administratively feasible following receipt of fully completed forms by the campus human resources office.
A participant may elect to defer from one to 100 percent of his or her compensation to the Plan each calendar year up to the maximum percentage allowable by law not to exceed the limits of federal tax code sections 402(g), 403(b), or 415. Elections must be made at the time, in the manner, and on such forms as established by Indiana University.
Please note that employment taxes (i.e., Social Security taxes) and premiums for employer-provided benefits will be deducted from a participant's compensation prior to salary deferrals and catch-up contributions.
Federal law limits the amount of salary deferrals that can be contributed to the Plan and to all 403(b) plans, 401(k) plans and other similar type of plans in which an individual participates in any calendar year.
Salary deferrals made to the IU 457(b) Retirement Plan are not limited by this salary deferral contribution limit.
Age 50 or Older Catch-Up Contributions
For participants who are at least age 50 before the end of the calendar year, the current dollar limit on salary deferrals is increased. The additional amount of salary deferrals that are permitted to be made by an eligible participant is the lesser of (i) the participant's compensation for the year reduced by any other salary deferrals of the participant for the year or (ii) the "applicable dollar amount."
Catch-up contributions will not be taken into account when applying the salary deferral contribution limit described above or the maximum contribution amount limit (415 limit) described below.
Maximum Contribution Amount (415 Limit)
Federal law limits the total amount of contributions that may be contributed to certain Indiana University retirement plans on behalf of an employee for any calendar year. The total amount contributed cannot exceed the lesser of 100 percent of the employee's compensation for the year or the "applicable dollar amount." (The IRS adjusts the contribution limit periodically for increases in the cost-of-living.) However, age 50 or older catch-up contributions will not be taken into account in applying the maximum contribution amount.
The maximum contribution amount limits the total amount of employer contributions and salary deferrals that can be made to the Plan, IU Retirement Plan, and the 403(b) plan portion (i.e., continued contributions) of the IU 18/20 Retirement Plan on behalf of an employee.
A participant is always 100 percent vested in his or her Plan account. This means that the participant's Plan account may never be forfeited.
Taxes on Contributions
Salary deferrals and catch-up contributions will not be included in a participant's income reported to the federal government for income tax purposes. However, the participant and Indiana University must pay employment taxes (i.e., Social Security taxes) on salary deferrals and catch-up contributions when they are made to the Plan.
Contributions Will Not Reduce Social Security Benefits
Employment taxes are deducted from a participant's compensation before salary deferrals and catch-up contributions are contributed to the Plan. Therefore, making salary deferrals and catch-up contributions to the Plan will not reduce a participant's compensation for purposes for calculating Social Security benefits.
The Plan is a participant directed plan. This means that each participant is responsible for directing the investment of his or her Plan account. A participant may direct the investment of his or her Plan account among any investment funds provided under the Plan. A participant may also transfer monies from one investment fund to another.
TIAA and Fidelity both offer a self-directed brokerage window option. The brokerage window gives plan participants access to thousands of mutual funds outside of TIAA and Fidelity in which to invest. The initial minimum investment is $5,000 and subsequent minimum investments are $1,000. Annual account fees may apply.
A participant's election to invest his or her Plan account, to change the investment direction of future contributions, or to transfer amounts from one investment fund to another must be made in accordance with the rules established by Indiana University.
Indiana University has approved of the following investment companies under the Plan:
|Company||Address||Telephone Numbers||Web site|
|TIAA||730 Third Avenue
New York, NY 10017
|Fidelity Investments||82 Devonshire Street
Boston, MA 02109
Most (but not all) of the authorized investment companies do not charge the following fees: front end / sales load fees, account maintenance fees, cash-out or transfer fees. However, each individual fund will have minimum management fees as specified in the fund's prospectus.
Each investment company reports net investment return figures, which reflect investment performance after administrative expenses are deducted.
Participants should contact the investment company for more information about fees before investing with that company.
A participant may only withdraw funds from his or her Plan account upon:
- Attainment of age 59½ or older while employed at Indiana University; or
- Termination of employment with Indiana University.
Hardship distributions are not allowed to be made to a participant from the Plan.
A participant may receive a loan from his or her Plan account with a current approved vendor by contacting the investment company. Loans are subject to both federal tax code and investment company rules and regulations.
Minimum Required Distributions
Federal law requires that distribution of a participant's Plan account, regardless of the form, must begin on or before April 1st of the calendar year following the calendar year in which he or she attains age 70½ or the calendar year in which the participant retires, whichever is later.
Forms of Distribution
A participant may choose to receive a distribution of his or her Plan account in any one of the following forms or combination of forms:
- Single sum distribution of cash
- Any legally permissible form of distribution permitted by an authorized investment company
Taxes on Distributions
Plan distributions are generally subject to a 20% mandatory federal income tax withholding rate. This mandatory withholding will reduce the amount a participant actually receives upon withdrawing funds from the Plan. However, the amount withheld will be credited against any taxes the participant owes for the year when the participant files his or her annual tax return.
There are exceptions to the mandatory federal income tax withholding rule, including receiving the Plan distribution as a life-time annuity payment or directly rolling over the Plan distribution to an eligible retirement plan (e.g., an IRA).
In addition, Plan distributions made prior to attainment of age 59½ are generally subject to a 10% early withdrawal penalty tax.
There are exceptions to the 10% early withdrawal penalty tax, including: receiving the Plan distribution as a life-time annuity payment, receiving the Plan distribution after terminating employment at age 55 or older, or receiving the Plan distribution after terminating employment due to a permanent disability.
Direct Rollover Distributions
A direct rollover of an eligible rollover distribution may be made at the participant's election. A direct rollover is a payment of an eligible rollover distribution from the Plan directly to another eligible retirement plan, such as a 401(a) plan, 403(b) plan, 401(k) plan, governmental 457(b) plan, or IRA. However, certain types of distributions, such as life-time annuity payments, are not eligible for direct rollover treatment.
Qualified Domestic Relations Orders (QDROs)
Indiana University may be required by law to recognize obligations a participant incurs as a result of a qualified domestic relations order (QDRO). A QDRO is a decree or order issued by a court that obligates the participant to pay child support or alimony, or otherwise allocates a portion of the participant's assets in the Plan to his or her spouse, former spouse, child, or other dependent (collectively known as "alternate payees").
A distribution authorized by a QDRO to an alternate payee will be permitted under the Plan, even if the affected participant is not currently eligible for a Plan distribution.
Please contact University Human Resources with any questions or comments regarding the Plan at:
University Human Resources
Attn: IU TDA Plan
400 East 7th Street, Poplars E165
Bloomington, Indiana 47405-3085
Appointment Scheduling: 800-642-7131
Appointment Scheduling: 800-732-8353