a new, tax-deferred way to save
Building a bigger nest egg
BY CYNTHIA LEE
UCLA Today Staff
By next year, UCLA employees will be able to take advantage of
a new voluntary savings plan that will help them put together a
bigger retirement nest egg in a tax-deferred account.
The new savings plan, called the 457(b) plan, is similar to the
403(b) plan, to which more than 50,000 UC employees already contribute.
UC employees may choose to contribute to both plans, to one or neither.
Currently, UC is searching for an outside firm to administer the
plan and provide employees with investment information. It is expected
that the 457(b) plan will be up by 2005.
Granted, not every employee will be able to put more money away
in another tax-deferred retirement plan, said Lydia Oller, UCLA’s
director of benefit services in Campus Human Resources. But many
may find it advantageous. “We have a lot of employees who
contribute to the DCP (Defined Contribution) Plan After Tax Account,”
she said. “They may want to think about putting future contributions
into this new plan instead so they can take advantage of both tax-deferred
earnings and pre-tax savings.”
If employees decide to enroll in both plans in 2005, they can
double the amount they save and invest. In 2005, employees under
50 would be able to save a maximum of $14,000 in each plan for a
total of $28,000. The limit for those 50 and over would go up to
$18,000 each for a total of $36,000. In 2006, the limit for each
plan would increase to $15,000 ($30,000 total) for those under 50
while those older would be able to contribute a maximum of $20,000
($40,000 total).
Initially, employees who decide to enroll in the new 457(b) plan
will be able to invest in the six UC-managed funds. As the program
develops, more investment options will be added, Oller said.
There are some differences between the two plans, she explained.
For example, active UC employees may borrow from their 403(b) plan
if they’ve accumulated at least $1,000 in the UC-managed funds.
They can also withdraw money from the 403(b) plan if they are active
employees and are at least 59-and-a-half years old. There will be
no provisions for loans or early distributions with the 457(b) plan.
But if employees leave UC before they retire, funds in both plans
can be rolled over to other retirement accounts, she said. Watch
for more information about the new plan.
|
