Feb. 11-17, 2000
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State to match employees' retirement contributions

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State to match employees' retirement contributions

By Dan Heuchert

It's like money for nothing. Well, sort of. The state has sweetened the pot for those who participate in the University's tax-deferred savings plan by matching 50 percent of an employee's contribution, up to a maximum of $240 per year.

Here's how the tax-deferred savings plan works. Eligible employees -- faculty and classified workers with at least a year's full- or part-time service -- may set aside a portion of their paychecks, to be deducted before state and federal taxes are taken out, for long-term savings. This lowers your taxable income.

They can choose how they want to invest the money from an array of options, and later may change those selections, and even how much they wish to invest. Employees may invest as little as a few dollars per month to as much as legally allowed (an amount that the Benefits Office can calculate for you.) The interest generated is also tax-free until you begin to draw down the account, perhaps as soon as age 59 1/2.

There are restrictions and penalties for withdrawing funds from the plan before reaching retirement age, so employees should only invest money that is not needed in the short term.

The new twist is that the state will also add some money to the plan, matching half of the employee's contribution up to $10 per bimonthly pay period, or $20 per month. Employees must contribute at least $40 per month to receive the maximum state match. And unlike many private plans, there is no vesting requirement -- employees are eligible to receive 100 percent of the state match, no matter how long they have been in the plan. However, employees may not withdraw any of the state contributions until they terminate their state employment or move to another state position in which they are not eligible to participate.

The state's money will be kept in accounts separate from the employees' contributions. Employees may still choose how to invest it, although they are limited to funds offered by two vendors: Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA/CREF) and Fidelity Investments. The state's match will take effect on pay earned in April. Those currently enrolled in the plan will be mailed details of the state matching plan in early March, said Laura Larew, director of employee benefits. If employees do not specify how the state funds are to be invested, they will be distributed in the same manner in which their contributions are now.

Currently, 2,800 U.Va. employees take part in the tax-deferred savings plan, Larew said. She anticipates that number will increase with the additional state contribution. Employees may sign up for the plan at any time, she said.

For information, call the benefits office at 924-4392, or send e-mail to hrdept@virginia.edu.


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