Section 457 Deferred Compensation Plan
Faculty and staff can save more for retirement through the Section 457 Deferred Compensation Plan voluntary retirement plan offered by the University. This plan is a tax-deferred retirement option to help you save more for retirement in addition to the automatic workplace retirement plan—either the Minnesota State Retirement System or the Faculty Retirement Plan—you're enrolled in at the University.
- 457 Deferred Compensation Plan overview (pdf)
- Investing Basics (pdf)
- Investment Performance Results (Excel)
- Investment Company Contact Information
- Compare the ORP and 457 Plans (pdf)
- 2019 Schedule of Effective Dates for New Enrollments (pdf)
- Documents and enrollment forms:
- Fidelity Investments: plan information (pdf) | form (pdf)
- Securian: investing your retirement savings (pdf) | investing questionnaire (pdf) | enrollment form (pdf)
- Vanguard: enrollment form (pdf) | Asset Transfer Form (pdf)
- University of Minnesota: Section 457 Deferred Compensation Plan Retirement Savings Agreement (pdf)
All faculty and staff members who are paid on a continuous basis are eligible to participate in the Section 457 Deferred Compensation Plan. You can begin contributing at any time.
How do I enroll?
- For information on specific investment funds, contact the investment companies directly.
- Complete the Section 457 Deferred Compensation Plan Retirement Savings Agreement (pdf). The agreement permits the University to deduct your contribution from your salary and reduce the amount of your salary subject to taxation.
- Complete the paper account enrollment form for the investment company or companies you select.
- Attach the Retirement Savings Agreement to the investment company enrollment form(s) and return them to: University of Minnesota, Employee Benefits, 200 Donhowe, 319 15th Avenue SE, Minneapolis, MN 55455-0103.
If you have questions, call 612-624-8647 or 800-756-2363 to reach the Employee Benefits Service Center.
How much can I contribute?
In 2018, you can contribute either 100% of your reduced salary or $18,500—whichever figure is smaller. Your "reduced salary" is defined as the amount after your required contribution to your basic retirement plan. Your participation in another employer's retirement plan during the year may affect your limit.
You may change or stop your contributions at any time by completing a new Retirement Savings Agreement.
What's the minimum contribution?
You must invest at least $200 per year, and you can contribute a flat dollar amount or a percentage of your salary.
When should I start investing?
It's never too late to start investing for your retirement. Saving early lets you take advantage of compounding so you build wealth with even small, regular investments. The chart from Fidelity Investments shows the results of investing $100 per month with an average return of 6% over a number of years. Over a 25-year period, investing this much could add up to nearly $70,000.
Whenever you start, you should consider your risk level and how many years you have before retirement. Your payments are withdrawn from your payroll.
Can I change investment funds?
You can select investment funds within a particular company. Subject to the investment company's restrictions, you may change your new contributions and move money you have already invested. Some companies permit transfers by phone or through their websites. Contact the company directly for specific information on their policies.
Can I change investment companies?
You can change investment companies at any time by completing a new Retirement Savings Agreement and an account enrollment form for the new investment company.
To transfer existing funds, you must complete a transfer form and an account enrollment form for the new investment company. Transferring money from one investment company to another is subject to the company's restrictions. Contact the individual company for more information.
How do I track my investments?
The University publishes quarterly Investment Performance Results online. Additional information is available on your quarterly statements and on the investment companies' websites.
How do I increase or decrease my contributions?
You may only elect to change your contributions amount for funds that you have not previously earned. If you want to increase or decrease your contribution, you must make this election prior to the end of the month before the compensation was earned. As a result, there will be a delay between the time you submit your request to Employee Benefits and when you see the change on your paycheck. efer to the 2018 Schedule of Effective Dates for New Enrollments (pdf) for more information. (Note: This change does not affect contributions to the Optional Retirement Plan.)
How do I stop my contributions?
You may stop your 457 Plan contribution anytime by completing a Retirement Savings Agreement and returning it to Employee Benefits. You may only defer funds that you have not yet earned. If you want to restart your deduction, you must make this election prior to the end of the month before the compensation is earned. As a result, there will be a delay between the time you complete your election and your first deduction date. Refer to the 2019 Schedule of Effective Dates for New Enrollments (pdf) for more information.
Can I contribute to both voluntary plans?
You may participate in both the University's 457 Plan and its Optional Retirement Plan in the same calendar year and simultaneously contribute the maximum amount permissible to both plans.
Can I take a loan against my 457 investments?
The 457 Plan does not permit loans to be taken from the Plan and restricts withdrawals while employed unless a participant has an unforeseeable emergency.
Can I withdraw money from the 457 Plan before age 59½?
Distributions from the 457 Plan are not subject to penalty for early withdrawal before age 59½.
What taxes must be paid when I withdraw my savings?
Money withdrawn is subject to federal and state income tax. Except for "rollovers," annuities, and regular installments over 10 years or more, all other payments will have 20% withheld automatically for federal taxes.
Under the Internal Revenue Code, funds in a 457 Plan may be made available to you under one or more of the following circumstances:
- upon severance from service
- attaining the age of 70½
- when you encounter an "unforeseeable emergency" as defined by IRC Section 457
Any amount you receive will be treated as ordinary income for federal tax purposes.
You may be able to request a hardship withdrawal if you experience an unforeseeable emergency. However, before your request can be approved, you must show that the financial emergency meets the legally mandated criteria for an unforeseeable emergency and that you have exhausted all other financial resources.
The IRS defines an unforeseeable emergency as the sudden or unexpected illness of you or a dependent, the loss of property due to casualty, or any other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant.
Conversely, events such as divorce or credit card debt do not in and of themselves qualify as unforeseeable emergencies and therefore your withdrawal would be subject to taxation.
You may begin payments anytime following severance from service, or you may wait until retirement to begin receiving payments. However, distributions must begin by April 1 of the calendar year following the year in which you turn 70½.
You will be able to access your 457 Plan accumulations in a variety of ways, from cash to lifetime income. You can choose from the following payment options:
- Lump-sum withdrawal
- Fixed-period annuity
- Lifetime annuity income
- Systematic withdrawals
- Minimum distribution option
Money withdrawn is subject to federal and state income tax.
Please note that this material is intended for informational purposes only, and no warranty is given regarding the information. None of the information is intended to constitute, nor does it constitute, financial advice. This information is not a substitute for professional financial advice, and each person should always consult his or her own financial or other professional advisor and discuss the facts and circumstances that apply to the person. So far as it is permitted by law, the University of Minnesota disclaims liability for any loss, however caused, arising directly or indirectly from the use and content of this Web site.