Date: January 18, 2012
To: Pension Plan Participants
From: Vivian Fernández
Vice President Faculty and Staff Resources
Subject: 2012 Voluntary Tax-Deferral Limit

As tax season approaches, we would like to remind you of the options available to you to maximize retirement savings while reducing your tax liability. As an eligible Rutgers employee, you may elect to contribute to optional tax-deferred and after-tax Roth retirement programs in addition to your current retirement plan. There are limits to the amount of income that can be deferred through these programs, so we recommend that you review your personal voluntary deferral limit. You may view your 2012 voluntary deferral limit, change your contribution percentage, or select a different investment carrier at any time by accessing our secure TDA Management website.

The two plans available are the Voluntary Tax-Deferred Annuity IRC 403(b) Plan and the New Jersey State Employees Deferred Compensation Plan (NJSEDCP). These plans are separate plans, and participation in one plan has no effect on participation in the other plan, including the voluntary deferral limits. 

The Voluntary Tax-Deferred Annuity IRC 403(b) Plan allows you to reduce your federal taxable income while saving for retirement. Under this plan, federal income tax is not due on the deferred contributions or earnings until you receive distributions from the plans. 

The New Jersey State Employees Deferred Compensation (NJSEDCP) IRC Section 457 Plan can also help you save for retirement and offers two options: 

  • Pre-tax Contributions
    With this option, federal income tax is not due on deferred amounts or accumulated earnings until you receive a payment from your account.
  • After-tax Roth Contributions
    Roth contributions are made on an after-tax basis so taxes are paid in the year you make your contribution. Therefore, a withdrawal of your Roth contributions will always be 100% federal income tax free. In addition, you can take Roth earnings from your account free from federal income tax once your distribution is “qualified.” For a withdrawal of Roth money to become a qualified distribution, it must be made after a 5-taxable-year period of participation and made after you reach age 59½, become disabled, or die.

 

The 2012 deferral limits are $17,000 for employees under age 50 and $22,500 for employees age 50 and over. The 2012 combined deferral limits for the Voluntary Tax-Deferred Annuity IRC 403(b) and the Deferred Compensation IRC 457 plans are $34,000 for employees under age 50 and $45,000 for employees age 50 and over. Employees with 15 or more years of service may be eligible to defer an additional $3,000 per plan, if they have not contributed the maximum amounts in previous years.

Choosing to make additional pre-tax and or after-tax contributions is an important financial planning decision. Our online process makes it easy for you to take advantage of the Voluntary Tax-Deferred Annuity IRC 403(b) option. Enrollment forms must be completed to enroll in the New Jersey State Employees Deferred Compensation IRC 457 Plan. If you are already enrolled in the New Jersey State Employees Deferred Compensation IRC 457 Plan, you may make changes online by visiting the Prudential New Jersey State Employees Deferred Compensation website. Visit the University Human Resources website for additional information regarding the voluntary retirement programs. If you do not wish to submit your transaction online, access the Carrier Allocation/Salary Reduction Agreement form, and send your completed form to Benefits Enrollment, 57 U.S. Highway 1, ASB II, Cook Campus.

Should you have questions or need assistance, please contact a University Human Resources Benefits Specialist via email or 848-932-3990.