Basic Retirement Plan

Basic Retirement Plan Details

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. It is very important to keep your beneficiary designations up to date.
Employee Contribution Rate

Faculty and staff who participate in the Basic Retirement Plan contribute 5% of eligible compensation.

Employees cannot increase or decrease the amount of their contributions to the Basic Retirement Plan. The required contribution applies to eligible compensation up to $330,000 for 2023.

Employees subject to a collective bargaining agreement should refer to the terms of the contract.
U-M Contribution Rate

After a 12-month waiting period, the university contributes 10% of eligible compensation to the Basic Retirement Plan. You may enroll at any time, however you must be enrolled in the plan in order to receive the university contribution.

The 12-month waiting period begins on the date of eligibility, not the date of enrollment. See 12-Month Waiting Period for University Contributions for more information.

The university contribution applies to eligible compensation up to $330,000 for 2023.

Employees subject to a collective bargaining agreement should refer to the terms of the contract.
Eligibility
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.

The following are not eligible for the Basic Retirement Plan but may contribute to the 403(b) SRA: House Officers, Research Fellows, Graduate Students, Professional Specialists, temporary staff and emeritus titles. Excluding temporary staff, individuals with these titles may also contribute to the 457(b) Deferred Compensation Plan.
If You Have Another Retirement Plan
Elective deferrals you make to another retirement plan in the same calendar year will reduce how much you may contribute to the Basic Retirement Plan and the 403(b) SRA. These include the following types of plans:

Federal Thrift Savings Plan (ex. if you are a VA Rotator)

403(b)

401(k)

408(k)(6) SARSEP

SIMPLE (Savings Incentive Match Plans for Employees)

If you have already made significant contributions to these plan types during the calendar year, you may have limited ability to save through the U-M 403(b) SRA and the Basic Retirement Plan. If this is the case, consider the 457(b) as an option to make additional contributions to save for retirement. Also, 457(b) elective deferrals you make at another employer will reduce how much you contribute to the 457(b) at U-M.
Your Contribution Limit

The Internal Revenue Code limits the total amount of contributions that may be made to all retirement plans you have across all employers.

Learn more about how much you may contribute.
12-Month Waiting Period for University Contributions
You may enroll in the Basic Retirement Plan and begin making employee contributions (5% of eligible compensation) as soon as you are eligible, or you may enroll at any time. Your eligibility for the university two-for-one match of your contributions (10% of eligible compensation) begins after you have completed the 12-month waiting period. The waiting period is independent of your enrollment in the plan.

The waiting period is measured from the date you are first eligible to enroll in the Basic Retirement 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.

IMPORTANT: Enrollment in the Basic Retirement Plan is not automatic. University contributions do not automatically begin due to completing the waiting period. You must enroll in the plan in order to receive the university contribution.

If you are rehired or lose eligibility for the plan:

If you terminate employment or lose eligibility for the retirement plan before completing the 12-month waiting period and you are later rehired or become newly eligible for the plan, your service prior to termination or loss of eligibility does not count toward fulfilling the waiting period. Your waiting period starts over with your date of rehire or date of new eligibility.

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.
Eligible Compensation
Not everything you receive in a paycheck can be contributed to the Basic Retirement Plan. Eligible compensation for the 5% employee contribution 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 the 5% employee contributions and the 10% 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 compensation that may be contributed:

Base salary and wages

Incentive payments (Risk Pay) under the University of Michigan Medical Group (UMMG)

Summer salary for university-year appointees

Examples of ineligible compensation:

Overtime

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

Salary supplement

Payout of unused accrued vacation or Paid Time Off at termination or retirement

Sell back of Paid Time Off

Added duties differential

Download and view the Earnings and Time Report Codes spreadsheet on the Financial Operations - Payroll 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
Compulsory Participation
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 ($160,200 for 2023):
You contribute nothing.

The university contributes 5% of salary.

For eligible compensation above the Social Security wage base ($160,200 for 2023):
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 $22,500 limit on 403(b) contributions ($30,000 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 $22,500 or $30,000 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. Complete this eForm. If you prefer a paper form, 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. Refer to How to Cancel Your Enrollment in the Basic Plan.

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 ($160,200 for 2023) 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.
How to Enroll

You may enroll online through Wolverine Access. View step-by-step enrollment instructions.

Important: If You are a Compulsory Participant

If you are a compulsory participant in the Basic Retirement Plan and you would like to cancel the Reduced Benefit Option and receive the two-for-one university match, you can use the eForm. If you would prefer a paper form, 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.

Questions About Your Benefits?

Call the SSC Contact Center at 5-2000 from the Ann Arbor campus, (734) 615-2000 locally, or (866) 647-7657 toll free, Monday through Friday from 8 a.m. to 5 p.m.

Limitations

The University of Michigan in its sole discretion may modify, amend, or terminate the benefits provided with respect to any individual receiving benefits, including active employees, retirees, and their dependents. Although the university has elected to provide these benefits this year, no individual has a vested right to any of the benefits provided. Nothing in these materials gives any individual the right to continued benefits beyond the time the university modifies, amends, or terminates the benefit. Anyone seeking or accepting any of the benefits provided will be deemed to have accepted the terms of the benefits programs and the university's right to modify, amend, or terminate them. Every effort has been made to ensure the accuracy of the benefits information in this site. However, if any provision on the benefits plans is unclear or ambiguous, the Benefits Office reserves the right to interpret the plan and resolve the problem. If any inconsistency exists between this site and the written plans or contracts, the actual provisions of each benefit plan will govern.

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