The Basic Retirement Plan offers a two-for-one match of your contributions and immediate vesting. Eligible employees can enroll at any time using Employee Self-Service > Benefits in Wolverine Access. University contributions begin after a 12-month waiting period once you are enrolled. Contributions and earnings are tax-deferred until you take a distribution. You do not pay state or federal income taxes on your contributions at the time they are made. However, you still pay the 7.65% FICA (Medicare and Social Security) tax.
Type of Plan
The Basic Retirement Plan is a defined contribution retirement plan. Contributions to the plan are tax-deferred. The plan is a combination of a 403(b) for employee contributions and a 401(a) for university contributions. Section 403(b) is a retirement plan for employees of tax-exempt organizations, including public universities, research organizations, hospitals, churches, and charitable organizations. Section 401(a) is a qualified retirement plan that both for-profit and non-profit employers may offer.
All retirement savings plan contributions and earnings are vested immediately. This means that your contributions, the university contributions, and all earnings are yours for retirement or to be paid to your designated beneficiaries in the event of death.
Employee Contribution Rate
Employees who participate in the Basic Retirement Plan contribute:
- 4.5% of eligible compensation for employees of the U-M Hospitals and Health Centers who are subject to the Paid Time Off Leave Policy
- 5% of eligible compensation for all other faculty and staff
Employees cannot increase or decrease the amount of their contributions to the Basic Retirement Plan. The required contribution applies to eligible compensation up to $265,000 for 2015.
U-M Contribution Rate
After a 12-month waiting period, the university contributes to the Basic Retirement Plan as follows for those enrolled:
- 9% of eligible compensation for employees of the U-M Hospitals and Health Centers who are subject to the Paid Time Off Leave Policy
- 10% of eligible compensation for all other faculty and staff
The university contribution applies to eligible compensation up to $265,000 for 2015.
- Regular faculty and staff and LEO Lecturers II, III, and IV are eligible with at least a 1% appointment lasting for at least four continuous months funded by the university.
- Supplemental Instructional staff (Adjunct, Visiting I/II and Clinical I titles) and LEO Lecturer I are eligible with a 50% or greater appointment funded for at least four continuous months by the university.
- Employees with dual appointments are eligible provided that effort and funding is present in the appropriate combination.
12-Month Waiting Period for University Contributions
You may enroll in the Basic Retirement Plan and begin employee contributions as soon as you are eligible, or at any time throughout the year. The university two-for-one match of your contributions will be provided once you have completed the 12-month waiting period.
IMPORTANT: If you have not enrolled after completing the waiting period, you must affirmatively enroll in order to receive the university contribution. Enrollment in the Basic Retirement Plan and university contributions do not automatically begin due to completing the waiting period.
Waiting Period Highlights
The waiting period is measured from the date you are first eligible to enroll in the plan, which is typically your date of hire. If you were hired into a job not eligible for the plan (for example, temporary employee, House Officer, Research Fellow) but later become eligible due to a change in effort or job title, the waiting period is measured from the effective date of your job change. Time worked at a previous employer does not count toward meeting the waiting period.
The waiting period does not mean you cannot enroll until after completing 12 months of service. You may enroll in the plan at any time; however, university contribution begins after you have completed the 12-month waiting period and have affirmatively enrolled in the plan. You may also wait until after completing the waiting period to enroll in the Basic Retirement Plan.
If you are rehired or lose eligibility for the plan:
- If your gap in employment or eligibility is one year or greater, you will need to complete the waiting period to become eligible to receive university contributions.
- If your gap in employment or eligibility was less than one year, and you were eligible for university contributions prior to the gap, you do not need to fulfill the waiting period and you will receive university contributions upon enrollment.
- If your gap in employment or eligibility was less than one year, but you were not eligible for university contributions prior to the gap, you will need to complete the waiting period.
- University retirees who are rehired into a title eligible for the Basic Retirement Plan do not need to complete the waiting period again and will receive university contributions upon enrollment.
Not everything you receive in a paycheck can be contributed to the Basic Retirement Plan. Eligible compensation must be:
- earned compensation that is paid to you as a University of Michigan faculty or staff member for services performed,
- subject to federal income tax withholding through the university, and
- reported on a W-2 issued by the university.
Pay issued on or after January 1, 2015 will have employee and university contributions for the Basic Retirement Plan provided on base salary. Employees subject to a collective bargaining agreement should refer to the terms of the contract.
Examples of Eligible Earnings:
- Base salary and wages
- Incentive payments (Risk Pay) under the Medical Service Plan
- Summer salary for university-year appointees
Examples of Ineligible Earnings:
- Shift differential
- Administrative differential
- Fellowship, scholarship, and stipends
- After-tax payments
- Allowances for housing, uniforms, and travel
- Royalty payments
- Long-term disability plan benefit payments
- Worker’s Compensation
View the Earnings and Time Report Codes spreadsheet on the Payroll Office website for a complete list of the types of compensation that may or may not be contributed to your U-M retirement savings plans. Refer to these columns:
A - Earnings Code, and N - Retirement Eligible - Union, if you are covered under a collective bargaining agreement, or O - Retirement Eligible - Non-Union
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 ($118,500 in 2015):
- You contribute nothing.
- The university contributes 5% of salary (4.5% for employees of the U-M Hospitals and Health Centers who are subject to the Paid Time Off Leave Policy).
- For eligible compensation above the Social Security wage base ($118,500 in 2015):
- You contribute 5% of salary.
- The university contributes 10% of salary (9% for employees of the U-M Hospitals and Health Centers who are subject to the Paid Time Off Leave Policy).
Changing Your Contributions
If you are participating at the Reduced Benefit Option you may elect to contribute 5% and receive the 10% U-M match (or contribute 4.5% and receive the 9% match if you are subject to Paid Time Off as an employee of the U-M Hospitals and Health Centers).
You may also decrease your contribution rate from the full 2-for-1 matching down to the Reduced Benefit Option. These changes cannot be made online using Wolverine Access; please call the SSC Contact Center for instructions. Call 5-2000 from the Ann Arbor campus, 734-615-2000 locally, or 1-866-647-7657 toll free for off-campus long-distance calls Monday–Friday, 8 a.m.–5 p.m. ET.
Compulsory Participation and Your 403(b) SRA Limit
Compulsory participation impacts your 403(b) SRA contribution limit. The 5% or 4.5% you contribute under the Basic Retirement Plan counts against the Internal Revenue Code (IRC) limit. However, only part of your 5% or 4.5% contribution is subject to the limit once you become a compulsory participant.
- The 5% or 4.5% 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% or 4.5% 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% or 4.5% 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% or 4.5% university contribution because you are a compulsory participant. The second is another 5% or 4.5% university contribution (for a total of 10% or 9%) that matches your contribution you voluntarily make.
Changes to Your TIAA-CREF and 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% or 4.5% contribution made on your U-M pay under the FICA wage base ($118,500 for 2015) will be listed under the University of Michigan 403(b) Retirement Plan at TIAA-CREF (Plan 101010) and Fidelity Investments (Plan 72104).
Once your U-M pay exceeds the FICA wage base, your 5% or 4.5% contribution is no longer classified as a 403(b) contribution but as a 401(a) contribution. As a result, the deposits of your 5% or 4.5% 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-CREF (Plan 101011) and Fidelity Investments (Plan 86503). The 401(a) Plan is also where the 10% U-M match is reported.