Benefits

January 5 , 2009 - The Internal Revenue Service (IRS) recently imposed new guidelines requiring among other things, that employers create written plan documents for their 403(b) plans. To meet this requirement, the University of Kentucky has implemented a written plan for its 403(b) retirement savings plan, effective January 1, 2009. The new IRS guidelines also clarify existing rules related to annual retirement plan contribution limits, loans against retirement accounts and hardship withdrawals, as detailed below.

Combined Retirement Plan Contribution Limits with Employee-Owned Business Plans

With new IRS regulations, contributions to University of Kentucky retirement plans and outside employer-based retirement plans may be subject to the same annual limits. As a result, the IRS may require you to report retirement contributions made to retirement plans associated with outside businesses. If you meet all three criteria listed below, you will need to contact the UK Employee Benefits Office with information on your total contributions each year.

1) You are a participant in the University of Kentucky 403(b) plan, and

2) You own a controlling interest (50% or more) of an outside for-profit business. (This includes consulting services where you file a Schedule C for tax purposes.) and

3) You made contributions to a qualified retirement plan or Simplified Employee Pension (SEP) Individual Retirement Arrangement (IRA) plan through an outside business.

If you do not meet all three criteria above, you do not need to report your outside contributions to the University. If you do have contributions to report, please contact the UK Employee Benefits Office at (859) 257-9519, option 3. Failure to do so could result in tax consequences and penalties for both you and the University of Kentucky.

Simultaneous Loans Available Through Fidelity and TIAA-CREF

Retirement account-based loans are now available through both Fidelity and TIAA-CREF simultaneously. Previously, such loans were permitted only through one retirement carrier (Fidelity or TIAA-CREF) at a time. TIAA-CREF allows loans on 45% of your retirement account balance (CREF and TIAA Real Estate only) and Fidelity allows up to 50% of your account balance. The total loan amount between both carriers must not exceed the $50,000 IRS limit. Employees who default on a retirement loan are no longer eligible for future loans from either carrier unless they repay the amount in default.

Hardship Withdrawals

Employees may access retirement funds by taking a loan, hardship withdrawal, electing phased retirement or upon separation from service (including retirement). With new IRS rules taking effect January 1, 2009, hardship withdrawals in employer-based retirement plans are restricted to certain types of retirement accounts only. How will this change affect UK retirement plan participants? As January 1, 2009, hardship withdrawals will no longer be available from Fidelity 403(b) accounts, though such withdrawals will remain available from TIAA-CREF 403(b) accounts. If you foresee a need to take a hardship withdrawal, you may consider transferring all or a portion of your account balances and/or contributions from Fidelity to TIAA-CREF. Hardship withdrawals are available for medical expenses, post-secondary education or the purchase of your primary residence or to prevent eviction or foreclosure from your primary residence and are only available after all loan options have been exhausted per IRS regulations. For additional information regarding loans and hardship withdrawals, please visit this page.

Finally, please contact a benefits representative at benefits@email.uky.edu or (859) 257-9519, and press option 3 if you have any questions about these changes.