Faculty and Staff Retirement Plan (403(b) Plan)
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.
What does "Roth 403(b) after-tax" mean?
- Roth 403(b) after-tax refers to the deduction amount that you elect to have contributed to the 403(b) plan after federal and state income tax have already been withheld, therefore it does not reduce your taxable income.
- The earnings on contributions are eligible to be withdrawn tax free as long as you are age 59 ½ and your withdrawal is made at least five years after your first Roth 403(b) contribution.
- Click here to learn more about Roth
How can I see what effect pre-tax vs. Roth 403(b) after-tax contributions would have on my take home pay?
- If you would like to calculate how a pre-tax contribution or Roth after-tax 403(b) contribution 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 University Faculty and Staff 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 University Faculty and Staff Retirement Plan is a defined contribution 403(b) plan funded by your voluntary pre-tax or Roth after-tax contributions. Duke does not contribute to this plan for biweekly paid staff. 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 voluntary pre-tax or Roth after-tax 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 always 100% vested in their own voluntary contributions to the 403(b) retirement plan. Vesting only applies to Duke's contribution. Once you are vested, you have an irrevocable right to the amount of the Duke contribution in your account adjusted for gains or losses. Employees hired prior to January 1, 2012 are 100% vested in Duke's contribution towards their retirement. In general, employees hired January 1, 2012 or after will become 100% vested after completing three (3) years of service. Click here to learn more about vesting.
- 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?
- It is up to you to determine the right mix of investments that meets your needs. Duke offers a tiered approach to investing, based on how hands-on you want to be with your investments. This makes it easier to navigate through the investment options of Duke's 403(b) plans. Duke actively monitors funds in Tier 1 and Tier 2. Funds in Tier 3 are available for employees to invest in, but not monitored by Duke.
- Please review the Investment Performance and Fee Disclosure Summary information before making your investment selections.
- All of Duke's investment carriers 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?
- You may borrow against your contributions from VALIC and TIAA, our annuity vendors by contacting your investment carrier(s) directly.
- 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 percent 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 withdraw money from your retirement plan.
- For more information, please visit Request a Withdrawal or Loan.
- All withdrawals and distributions from the plan are subject to federal and state taxes. You may be subject to a 10 percent federal tax penalty if you make a withdrawal before age 59 ½. In addition, the federal government requires that 20 percent of your withdrawal be withheld as a prepayment of your federal income tax due on the taxable portion of the withdrawal. This 20 percent 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 percent tax penalty?
- There may be some cases where the 10 percent 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 in the plan.
- You can roll over your pre-tax balance and/or your Duke contribution vested account balance into a traditional IRA, Roth IRA or another employer's 403(b) plan, 401(k) plan, 401(a) plan or governmental 457(b) plan. Please contact your future employer to find out if their plan accepts rollovers.
- You can roll over your Roth after-tax balance into a Roth IRA or another employer's 403(b) plan, 401(k) plan, 401(a) plan or governmental 457(b) plan. Contact your future employer to find out if their plan accepts rollover of Roth after-tax.
- You can withdraw your vested account balance as cash.
- Duke does not restrict the types of distribution options you can choose. However, restrictions, limitations and fees may apply. 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 percent on the amount you should have received in addition to our regular taxes.
- Contact your tax accountant and investment carrier(s) for more information.
When can I request a rollover from my Duke 403(b) retirement account to another retirement plan, such as, another 403(b) plan, 401(k) plan, or IRA?
- You may rollover the money associated with your voluntary contributions to a retirement carrier or retirement plan outside Duke's plan once you attain age 59 ½ or you separate service from Duke. Any vested money that Duke has contributed towards your retirement only becomes available for rollover once you separate from service, your attainment of age 67, retirement, death, or disability.
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 vested account balances within Duke's plan from your 403(b) retirement plan to any of the active investment carriers (VALIC, Fidelity, TIAA, Vanguard).
- Non-vested account balances may only be transferred from the default investment carrier to another carrier within the first 30 days of the date of the first Duke contribution. Once account balances become vested then you may transfer to any of the investment carriers offered in the 403(b) retirement plan.
How do I request a transfer?
- Contact the investment carrier you would like to transfer vested money to and they will send you the necessary paperwork. For example, if you are transferring from Fidelity to VALIC, contact VALIC. They will send you the appropriate paperwork and instructions.
What is a QDRO? Where do I get model language for a QDRO?
- A QDRO, or a qualified domestic relations order, is a legal order which can follow a divorce or legal separation. This type of order splits ownership of a retirement account to give the alternate payee/ex-spouse a share of the assets.
- Contact your retirement plan investment carrier directly to obtain model language or additional instructions pertaining to a QDRO.
NOTE: These FAQs are Highlights of the Faculty and Staff Retirement Plan. The plan document is available on request and its terms and conditions govern the operations of the Plan.