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403(b) FAQ
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403(b) FAQ
What is a 401(k) Plan? What is a 403(b) Plan? Which does Duke offer?
- A 401(k) plan is a type of retirement plan offered by an employer under section 401(k) of the Internal Revenue Code.
- A 403(b) plan is a somewhat different type of retirement plan, which has many of the same features of a 401(k). Since Duke is a tax-exempt, non-profit organization and educational institution we can offer a 403(b) plan.
What does "pretax" mean?
- The amount that you elect to have deducted for the 403(b) is contributed to the plan before federal and state income tax, therefore reducing your taxable income, which may reduce the federal and state income taxes you pay each year. Deductions do remain subject to FICA.
- The earnings on contributions grow tax deferred until you take a distribution. At that time both your contributions and earnings will be taxed as income.
- If you would like to calculate how a pre-tax 403(b) deduction would affect your take home pay, use
Duke's Take Home Pay Calculator.
Does Duke contribute to my retirement plan(s)?
- Duke offers two different types of retirement plans. Generally, eligibility for participation in these plans is determined by whether you are paid biweekly or monthly. Both plans provide a comparable retirement income.
- Biweekly paid staff are eligible for two Duke retirement plans - the Employees' Retirement Plan and the Duke Savings for Retirement Plan. First, the
Employees' Retirement Plan is a defined benefit pension plan paid for entirely by Duke. This plan does not contain individual accounts and the benefit is typically determined on a formula basis considering level of compensation at retirement and years of service. Second, the
Duke Savings for Retirement Plan is a defined contribution 403(b) plan funded by your voluntary pre-tax deductions. This plan does provide individual accounts for employees who contribute and this plan places the responsibility on the employee for the investment decisions in this type of retirement plan.
- Faculty and monthly paid staff are eligible for the Duke Faculty and Staff Retirement Plan. This plan is funded both by your pretax contributions and
Duke's contributions. Your retirement benefit will be based on 1) the amount you and Duke contribute, and 2) your investment decisions, which will be reflected in the final amount you have accumulated at retirement.
How much can I contribute to Duke's 403(b) retirement plan?
- For the minimum and maximum amounts that you can contribute to your 403(b)
retirement plan, please see How Much Can I Contribute?
What is vesting?
- Vesting refers to a participant's right to receive a present or future retirement benefit.
- Monthly paid staff and faculty are immediately vested in both the employee and employer contributions to the 403(b) retirement plan.
- Biweekly paid staff are immediately vested in their contributions to the 403(b) retirement plan. Biweekly paid staff are entitled to receive benefits under the Employees' Retirement Plan, Duke's pension plan, after completing five years of continuous service.
What investment options are available under Duke's 403(b) retirement plan?
- Duke offers plan participants a wide range of investment options. These include money market, bond, fixed investments, asset allocation funds, equity income funds and stock funds. There are over 300 funds to choose from.
- The Investment Performance Summary lists these options by category of investment.
- All of Duke's retirement plan providers provide automated toll-free telephone services to help you keep track of your retirement assets. You may also access your account on the
Investment Carriers page. Quarterly account statements are mailed to your home address from your investment carrier to help you monitor your retirement plan assets.
How do I change beneficiary information?
- You may call the investment carrier(s) directly in order to obtain a form to change your beneficiary (keep a copy for your records).
How do I request a loan from the retirement plan?
- Yes, you may borrow against your contributions from VALIC and TIAA-CREF, our annuity vendors.
- You are simply borrowing money from your retirement plan account. You will repay the loan amount and interest through quarterly payments directly to the investment carrier.
- There are no taxes or penalties involved when taking out a loan.
- If you default on your repayments, however, you will be taxed as if the outstanding balance of your loan was distributed to you and might possibly include a 10% penalty, if you are under the age of 59½.
- The interest you pay on the loan is not tax deductible.
- For more information, please visit Request a
Withdrawal or Loan.
How do I request a withdrawal from my retirement plan and what are the tax consequences?
- You may request a withdrawal from your 403(b) retirement plan by contacting your
investment carrier(s) directly. There are some restrictions on when you are eligible to withdraw the contributions that you put into the plan. Please carefully consider all your options before you withdrawal money from your retirement plan.
- For more information, please visit Request a
Withdrawal or Loan.
Are there any tax consequences?
- Yes, all withdrawals and distributions from the plan are subject to federal and state taxes. You may be subject to a 10% federal tax penalty if you make a withdrawal before age 59 ½. In addition, the federal government requires that 20% of your withdrawal be withheld as a prepayment of your federal income tax due on the taxable portion of the withdrawal. This 20% withholding requirement does not apply to direct rollovers to an IRA or a new employer's retirement plan.
Are there circumstances in which I can withdraw money from the retirement plan without paying a 10 % tax penalty?
- There may be some cases where the 10% early withdrawal penalty does not apply*:
- Distributions made after you attain the age of 59 ½
- After separation from service after attainment of age 55
- Approved disability
- Distributions made on account of your death
- Distributions for certain medical expenses may possibly be exempt from the penalty
* You should consult your accountant, tax attorney, or other qualified financial adviser before making a withdrawal from the plan.
When I retire or separate from service, what are my options?
- You can leave the money where it is at Duke.
- You can roll over your investment into an IRA or another employer's 403(b) plan, 401(k) plan, 401(a) plan or governmental 457 plan. Please contact your future employer to find out if their plan accepts rollovers.
- You can withdraw it as cash.
- Duke does not restrict the types of distribution options you can choose. Contact your
investment carrier(s) regarding the many options available to you.
- The options include, but are not limited to: lump sum, systematic withdrawals, non-periodic payments, or annuities.
What is a Required Minimum Distribution (RMD)?
- The IRS requires that, after a certain point, you begin to withdrawals from your 403(b) retirement plan account.
- Money contributed and growing after 1986 has minimum distributions rules by April 1 of the year following the year in which you attain age 70 1/2, or following the year in which you retire, whichever is later.
- Money contributed and growing before 1986 has minimum distributions rules by April 1 of the year following the year in which you attain age 75, or following the year in which you retire, whichever is later.
- If you do not take the required minimum distribution, you may be subject to an excise tax as high as 50% on the amount you should have received in addition to our regular taxes.
- Contact your tax accountant and investment carrier(s) for more information.
Can I request a rollover from my Duke 403(b) retirement account to another retirement vehicle, such as, another 403(b) plan, 401(k) plan, or IRA?
- You may rollover the money associated with your (employee) contributions to a retirement carrier or retirement vehicle outside Duke's plan once you attain age 59 ½ or you separate service from Duke. Any money that Duke has contributed towards your retirement only becomes available for rollover once you separate from service.
How do I request a rollover?
- Contact your investment carrier(s) and they will forward you the paperwork to process a rollover.
Can I request a transfer to another investment carrier?
- You may transfer funds within Duke's plan from your 403(b) retirement plan to any of the 5 investment carriers (VALIC, Fidelity, DWS Scudder, TIAA-CREF, Vanguard).
- Note: You must first open up an account with the new investment carrier if one is not already established for Duke's plan. Then you may transfer those funds to the new investment carrier(s).
How do I request a transfer?
- Contact the carrier you would like to transfer money to and they will send you the necessary paperwork.
- Note: You must first open up an account with the new investment carrier if one is not already established for Duke's plan. Then you may transfer those funds to the new investment carrier(s).
NOTE: These FAQs are Highlights of Duke's 403(b) retirement plans. The plan document is available on request and its terms and conditions govern the operations of the Plan.
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