Introduction to the UC Retirement Savings Program

As a University of California employee, you may know that you have several retirement savings vehicles to help you plan for retirement.

UC’s primary retirement benefits help provide a strong foundation, with costs shared by you and UC.

In addition to your primary retirement benefits, you may need to save additional money to prepare for retirement.

The voluntary UC Retirement Savings Program—the 403(b), 457(b), and DC Plans—can help you build additional retirement savings to augment your primary UC retirement benefits, Social Security, and other non-UC retirement income.

About the 403(b), 457(b), and DC Plans

At UC, you can contribute to three different savings plans: the 403(b), 457(b), and DC Plans. Together, we refer to these plans as the UC Retirement Savings Program. All three plans are designed to provide savings that can be used in retirement.

  • In all three plans, your balance is based on your contributions and investment performance. You can withdraw money as needed during your retirement.
  • You decide how you want to invest your money. All three plans offer the same lineup of investment options. You can choose from the UCRSP Fund Menu, including the UC Pathway Funds, which let you choose a single, diversified fund based on the year you expect to begin withdrawing money from your account.
  • All three plans are designed to let you save for your future with tax advantages. In general, your contributions come out of your paycheck before taxes, so it costs you less to save for your future. For example, when you contribute $100 to the 403(b) Plan, it really only costs you $75 out of your paycheck (assuming a 25% tax bracket). Why? Because you pay $25 less in income taxes today. And that means more of your money goes to work for you now, and keeps working for you over time.

So, what’s different about each of these plans? It pretty much boils down to when and how you can gain access to your money, either through a loan or a withdrawal. If you have an extreme financial need while you are working for UC and have to tap your retirement savings, the UC 403(b) Plan generally offers you more flexibility. Let’s look at each plan’s highlights.

A Closer Look: the 403(b) Plan

  • Who can contribute: All UC employees can contribute to this plan, with the exception of most students who work less than 20 hours per week.
  • When you can enroll: You can enroll any time while you are working at UC.
  • How much you can contribute: If you are under  50, you can contribute up to $18,000 to this plan in 2017. If you are 50 or older, you can contribute up to$24,000 to this plan in 2017.
  • Your options if you need access to your money: Loans are available from this plan. While you are working at UC, you can generally take distributions without penalty if you are at least age 59½. Hardship withdrawals are available for authorized emergencies. Finally, you can withdraw your money once you leave the University. Think twice before using any of these options, however. You could miss out on valuable retirement savings. Remember that taxes will be due on any pretax amounts you withdraw, and you may pay a penalty if you withdraw your money before age 59½.

A Closer Look: the 457(b) Plan

  • Who can contribute: All UC employees can contribute to this plan, with the exception of most students who work less than 20 hours per week.
  • When you can enroll: You can enroll any time while you are working at UC.
  • How much you can contribute: If you are under  50, you can contribute up to $18,000 to this plan in 2017. If you are 50 or older, you can contribute up to $24,000 to this plan in 2017.
  • Your options if you need access to your money: You cannot take a loan from this plan. While you are working at UC, you cannot withdraw your contributions until you reach age 70½. Hardship withdrawals are available given certain emergencies. Finally, you can withdraw your money once you leave the University. Remember that taxes will be due on any pretax amounts you withdraw, and you may pay a penalty if you withdraw your money before age 59½.

A Closer Look: the Defined Contribution (DC) Plan

  • Who can contribute: Anyone can make after-tax contributions to the DC Plan, with the exception of most students who work less than 20 hours per week. UC employees who are not eligible for UCRP, UC’s pension plan, are required to contribute on a pretax basis. Note that, if you are eligible for UCRP and were hired before 2010, you previously made mandatory pretax contributions to the DC Plan; if so, those contributions still remain in your DC Plan account.
  • When you can enroll: If you are not eligible for UCRP, or if you are eligible for UCRP and were hired before 2010, you are already enrolled. If you are eligible for UCRP and were hired after 2010, you can enroll in the DC after-tax account at any time.
  • How much you can contribute: If you are not eligible for UCRP, you already make mandatory pretax contributions of 7.5% of pay to the DC Plan instead of paying into Social Security. If you decide that you want to make after-tax contributions to the DC Plan, remember that the total of your pretax and after-tax contributions can be no more than $53,000 in 2017.
  • Your options if you need access to your money: You cannot take a loan from this plan. While you are working at UC, you can generally withdraw any after-tax contributions or rollover money (and related earnings) at any time. Finally, you can withdraw your pretax, after-tax and rollover money once you leave the University. Remember that taxes will be due on any pretax amounts you withdraw, and you may pay a penalty if you withdraw your money before age 59½.

Do You Need to Save on Your Own?

As a UC employee, you already make required contributions to your primary retirement benefit, so you may think you don’t need to contribute to the UC 403(b) or 457(b) on your own. Think again. More than a quarter of those 65 and older wish they had done more to save for retirement during their working years.1

What’s more, if you are in the early stages of your career, chances are that you will work for a number of employers during your working life. Retirement benefits vary by employer, so if you work for an employer whose retirement benefit package is less comprehensive than UC’s, it may be even more important to save on your own.

Which Plan Is Right for You?

Choosing the right plan for you depends on your unique situation. Here are a few examples of when these plans might be a good choice for you.

  • Want to save with tax advantages? Think you may need access to the money in your account while you are working? The 403(b) Plan might be your best bet. Loans may be available; and you can withdraw your money from your account without penalty starting at age 59½.
  • Already contributing to the 403(b) Plan and want to save more before taxes? Consider the 457(b) Plan. You can contribute up to the IRS pretax limits in the 457(b) as well as the 403(b). That means you can contribute up to $36,000 per year across both plans if you are under 50, and up to $48,000 per year if you are 50 or older. You might also explore the Blue Shield Health Savings Plan, which lets you make pretax contributions to a health savings account (HSA). Distributions from an HSA are tax free if used for eligible medical expenses, either now or in the future.2
  • Saving in both the 403(b) and 457(b), and want to put even more away? Consider making after-tax contributions to the DC Plan.

Ready to Take Action?

Now it’s easier than ever to enroll in your UC Retirement Savings Program. EasyEnroll simplifies your saving decisions, and no log-in is needed. Just go to UCRSPenroll.com.

Want help? Remember, professionals are standing by, ready to help you as you make these important decisions. Just visit getguidance.fidelity.com/universityofcalifornia to schedule an in-person meeting with a Fidelity Retirement Planner. Or call 1-800-558-9182 to get help today.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

1 Bankrate Financial Security Index survey, May 17, 2016.

2 With respect to Federal taxation but may or may not apply to State taxation. Please consult with your tax advisor for more information on the State tax implications for HSA contributions.

 

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