Faculty or staff members may voluntarily join the Basic Retirement Plan at any time. However, participation becomes compulsory for regular staff members who:
- are age 35 or older,
- work a 100% appointment, and
- have at least two years of service in a title eligible for the Basic Retirement Plan.
If you are already participating in the Basic Retirement Plan when you meet the above criteria no action is required of you. If you are not, you will be enrolled in the Reduced Benefit Option.
Reduced Benefit Option
Under the Reduced Benefit Option,
- For eligible compensation up to the Social Security wage base ($137,700 for 2020):
- You contribute nothing.
- The university contributes 5% of salary.
- For eligible compensation above the Social Security wage base ($137,700 for 2020):
- You contribute 5% of salary. This is a mandatory 401(a) contribution that cannot be canceled.
- The university contributes 10% of salary.
Since your 5% pre-tax 401(a) contribution on earnings exceeding the wage base is mandatory, it does not count against the $19,500 limit on 403(b) contributions ($26,000 if you are age 50 or older) and provides you with important benefits. It allows you to save more for retirement by giving you a higher contribution limit that exceeds the $19,500 or $26,000 limit, which increases the amount of contributions you may deduct from your taxable income each year. Since you do not contribute to Social Security on your excess wage base earnings you do not receive Social Security income benefits in retirement on those earnings. The higher contribution limit allows you to save more for retirement to make up for the diminishing value of Social Security income benefits once your earnings exceed the wage base.
Changing Your Contributions
If you would like to cancel the Reduced Benefit Option, you may elect to contribute 5% and receive the 10% U-M match. Download and complete the Cancel the Reduced Benefit Option form and return it as instructed on the form to enact the change in contribution rates.
You may also decrease your contribution rate from the full two-for-one matching contribution down to the Reduced Benefit Option. Download and complete the Request to Cancel Participation form and return it as instructed on the form.
Compulsory Participation and Your 403(b) SRA Limit
Compulsory participation impacts your 403(b) SRA contribution limit. The 5% you contribute under the Basic Retirement Plan counts against the Internal Revenue Code (IRC) limit. However, only part of your 5% contribution is subject to the limit once you become a compulsory participant.
- The 5% you contribute to the Basic Retirement Plan on your U-M pay under FICA is a voluntary 403(b) contribution and reduces the amount you may contribute to the SRA.
- The 5% you contribute on your earnings in excess of the Social Security wage base does not reduce your limit for making 403(b) SRA contributions because you are required to participate in the plan. This allows you to contribute more to the SRA than if you were a voluntary or non-compulsory participant.
- The 5% you contribute on earnings in excess of the Social Security wage base is no longer classified as a 403(b) contribution. Those contributions are classified instead as 401(a) compulsory contributions.
Changes to Your Paystub
As a voluntary participant, you may be accustomed to viewing two contributions on your pay stub: your contribution and the U-M match. Your pay stub will display three contributions once you become a compulsory participant. You will continue to see your “Retirement” contribution displayed under “Before-Tax Deductions.” However, you will now see two “Retirement” contributions under the “Employer Paid Benefits” section of your pay stub. The first is a 5% university contribution because you are a compulsory participant. The second is another 5% university contribution (for a total of 10%) that matches your contribution you voluntarily make. Learn how to read and review retirement savings deductions and U-M contributions on your paycheck.
Changes to Your TIAA and or Fidelity Statements
Your contribution will appear under two plan types on your quarterly statements and online over the course of the calendar year as a compulsory participant. Your 5% contribution made on your U-M pay under the FICA wage base ($137,700 in 2020) will be listed under the University of Michigan 403(b) Retirement Plan at TIAA (Plan 101010) and or Fidelity Investments (Plan 72104).
Once your U-M pay exceeds the FICA wage base, your 5% contribution is no longer classified as a 403(b) contribution but as a 401(a) contribution. As a result, the deposits of your 5% Basic Retirement Plan payroll contribution for the rest of the year will no longer appear under the U-M 403(b) Plan on the quarterly statements and online. Instead, they will appear under the University of Michigan 401(a) Retirement Plan at TIAA (Plan 101011) and Fidelity Investments (Plan 86503). The 401(a) Plan is also where the 10% U-M match is reported.