SUBJECT: Defined Contribution Retirement Plan Clarification
DESCRIPTION: There are two separate Plan Documents related to the University's retirement plan. One relates to contributions made by an employee either before or after taxes and the other relates to the University's rate of contribution to the retirement plan. The University's current contribution rate toward an employee's retirement plan under the latter plan document is 10% and employees whose annual basic salary exceeds $70,000 are required to contribute 3%.
Historically, the contribution rate has been applied to the individual's annual basic salary for the then plan and fiscal year. The Plan Document for the University's contribution provides a definition of "compensation" which limits the calculation for faculty to the amount stated in the individual's annual appointment while seeming to provide a different definition for administrative and wage and hour employees beyond their annual appointment amount. The Plan Administrator's interpretation and that of TIAA itself, limits the term "compensation" to income excluding bonuses, overtime and other supplementary remuneration. The administration proposes that the Plan Document be clarified to ensure consistency in treatment of all categories of employees. The administration proposes the following amendment to the definition of "compensation in 1.7 of the Plan Document
Compensation means the salary, when paid, stated in the academic year contract for faculty.
For all other employees, Compensation means the amount reported as wages on the
Participant's W-2, excluding bonuses,
or overtime, overload and any other supplementary
remuneration exceeding the annual salary amount in the employee's annual appointment,
plus compensation not currently includable because of the application of Code Sections 125
In addition to other applicable limitations stated in the plan, and notwithstanding any other provision of the Plan to the contrary, for Plan years beginning on or after January 1, 1996, the annual compensation of each employee taken into account under the plan shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner of the Internal Revenue Service for increases in the cost of living in accordance with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1996, any reference in this plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA '93 annual compensation limit stated in this provision.
If compensation for any prior determination period is taken into account in determining an employee's benefits accruing in the current Plan Year, the compensation for that prior determination period is subject to the OBRA '93 annual compensation limit in effect for that prior determination period. For this purpose, for determination periods beginning before the first day of the first Plan Year beginning on or after January 1, 1996, the OBRA '93 annual compensation limit is $150,000.
Notwithstanding the above, employees who became participants in the Plan before the first day of the plan year beginning on or after January 1, 1996 will not be subject to the annual compensation limit.
FINANCIAL IMPLICATIONS: None
President Farley recommends approval of the proposed amendment to the Defined Contribution Retirement Plan.
(date) Jerry B. Farley, President