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Texas Woman’s University (TWU)

OPTIONAL RETIREMENT PROGRAM (ORP)

AND TAX DEFFERED ACCOUNTS (TDA)

RULES AND REGULATIONS

PURPOSE

 The purpose of these Rules and Regulations is to provide for greater uniformity of procedures for the administration of the Internal Revenue Code (IRC) section 403(b) Texas Optional Retirement Program (ORP) and 403(b) Tax Deferred Accounts (TDA) available to eligible employees of Texas Woman’s University (TWU).

 POLICY

The TWU Office of Human Resources (OHR) is responsible for establishing the Rules and Regulations for the administration of Texas Woman’s University's retirement programs within the terms, conditions, and requirements of the appropriate federal and state laws, regulations, and acts, and the rules and regulations of the TWU Board of Regents.  Administration of these programs shall be interpreted in a manner that is consistent with the Internal Revenue Code of 1986, as amended, and other applicable federal and state laws. 

 COMPANY APPROVAL REQUIREMENTS AND PROCEDURES

 TWU will provide a selection of at least four and not more than ten ORP/TDA companies that are qualified and approved by the Texas Higher Education Coordinating Board to do business in the State of Texas.  The addition of or the deletion of companies to the selection list requires the approval of the Office of Human Resources.  An audit of the status of current authorized companies and consideration of any new company’s applications through TWU’s certification/recertification process will be conducted periodically, at least once every three to five year period, normally during the spring.  

ORP/TDA products offered by authorized companies and provided to TWU employees must be products outlined in and governed by Section 403(b) of the Internal Revenue Code.  Companies and representatives are required to comply with these Rules and Regulations and all federal and state laws.  Failure to do so can result in expulsion from business with TWU of the company and/or a representative.

 Only authorized representatives of TWU’s list of selected companies may provide ORP/TDA products to eligible TWU employees.  A maximum of two representatives or agents representing each company is allowed.  An exception may be made if a third representative is designated for either the Dallas campus or the Houston campus. 

 Representatives or agents are not considered or approved separate from the company approval.  Contributions may not be made or arranged through representatives or agents that are not designated by the approved companies to represent them.

 In accordance with Section 25.6(c)(2) of Chapter 25, the Coordinating Board’s rules for the Optional Retirement Program, companies authorized by institutions to provide ORP products to their employees must be qualified to do business in this state as determined by the appropriate oversight agency, including the Texas Department of Insurance for insurance companies; Texas State Securities Board for investment companies, securities brokers/dealers, and investment advisors; Texas Department of Banking for trust companies and state-chartered banks; and the federal Office of the Comptroller of the Currency for nationally chartered banks.  All authorized companies must be registered with the appropriate oversight agency.  Simply registering with the Secretary of State as a company doing business in Texas is not sufficient, even if the company is domiciled in another state and subject to that state’s regulatory agencies. 

 Authorized companies and companies applying for authorized status must provide TWU with documentation indicating that the company is registered with the appropriate oversight agency.   Companies that cannot or will not provide documentation of current valid registration with the appropriate oversight agency will not be considered in compliance with Chapter 25 and are not eligible to remain on TWU’s list of authorized ORP/TDA companies.  Each company seeking authorization must provide documentation that it is registered with the appropriate oversight agency prior to being considered for the authorized list. 

 Companies seeking approval to provide Texas ORP/TDA 403(b) products to employees of TWU must request an application in writing from the TWU Benefits area.  Applications will be sent upon request only if TWU is reviewing companies at the time of the request.  If new company applications are being accepted, they will be reviewed and approved/denied at the discretion of the TWU OHR.

 Companies seeking to be authorized as ORP/TDA carrier/representatives must meet and certify compliance with specified conditions established by TWU.  TWU reserves the right to limit the number of companies eligible to provide ORP/TDA to employees paid through the TWU payroll.

 After receiving written notification from TWU of their approval to offer ORP/TDA products on campus, the company may begin conducting business with eligible employees.

 TWU reserves the right to withdraw authorized status of companies that become inactive or few or no employees enrolled with their company for a continuous six (6) month period.

 ORP/TDA contributions may only be made to an ORP/TDA company currently authorized by TWU.  Employees who wish to continue participating with a previously authorized ORP company may be grandfathered only if approved by the TWU Office of Human Resources.  A grandfathered employee who experiences a break in service other than a routine semester break in service or who begins participation with a currently authorized ORP company will no longer be considered grandfathered and must thereafter participate with a currently authorized ORP company.

 Preliminary Conditions Required for 403(b) Carriers Seeking TWU Authorized Status

1. The company must have a minimum of ten (10) years experience providing IRS Section 403(b) products to clients in the higher education sector in Texas.
2. The company must provide both ORP and TDA products, not just TDA or ORP.
3. The company must be registered with the appropriate oversight agency(ies) and provide documentation of current registration to TWU.

 Periodic Recertification of Companies

 Chapter 25 now requires all institutions to periodically re-authorize or re-certify the companies on the institution’s list of ORP companies (Section 25.6(c)(5)(E)).  “Periodically” is interpreted as every three to five years.  Chapter 25 also now requires ORP employers to periodically review authorization/certification policies and procedures such as this document, and to update as needed (Section 25.6(c)(5)(D)).

 When recertification is due, companies with experience and good standing with TWU may be given preference first in filling the maximum number of slots.

 Continued authorized status requires a minimum of two (2) clients over a six (6) month period.  If an authorized company has only one (1) or fewer clients currently contributing to either ORP or TDA for a six (6) month period, the company will be removed from the authorized list for new enrollment.  Actively contributing participants will be allowed to grandfather for continued participation with the previously authorized company, but participants will be notified in writing of the company’s status with TWU.

 Carriers are expected to have at least one authorized representative attend scheduled TWU employee benefits fairs, preferably at every annual benefits fair or related event.  Carriers and/or representatives who do not have representation to answer employee questions at two (2) annual events in a row will be removed from authorized status.  Actively contributing participants may be allowed to grandfather for continued participation with the previously authorized company, but participants will be notified in writing of the company’s status with TWU.

 COMPANIES AND AGENTS

1. An officer of each company, at a level authorized to bind the company, must designate its authorized representatives, up to a maximum number defined herein.  Only agents authorized in writing by an officer of the company and approved by TWU may conduct business for employees of TWU.
2. To change an authorized representative, the officer of the company, authorized to bind the company, must submit a letter of agent appointment to the TWU stating:
   1. the name of the representative that is being replaced;
   2. the name, address, telephone number, fax number, and email address of the agent to be appointed;
   3. that the agent being appointed has been furnished a copy of the TWU ORP/TDA Rules and Regulations to follow;
   4. that the agent being appointed is familiar with the benefits provided by ORP, TDA, and TRS; and
   5. that the company will be responsible for the conduct of the agent being appointed.
3. Companies are expected to have at least one authorized representative attend scheduled TWU employee benefits fairs, preferably at every annual benefits fair or related event.  Companies who do not have representation to answer employee questions at two (2) annual events in a row will be removed from authorized status.
4. The company is responsible for the actions of its agents and for insuring that they are informed of and abide by these Rules and Regulations, all institutional rules and regulations, Texas Higher Education Coordinating Board Rules and Regulations, Internal Revenue Service Code regulations, and all applicable federal and state laws.
5. Although TWU exercises caution in the selection and approval of companies, their products, and agents, TWU assumes no liability or responsibility for the financial integrity of the company, the terms of the products offered, or the conduct of the company’s agents.
6. An employee is requested to notify the OHR of any witnessed or suspected violations of TWU Rules and Regulations by companies or agents. The Benefits section of the OHR will handle such reports. A violation can result in suspension or expulsion of the agent and/or company from doing business with TWU and its employees. TWU RESERVES THE RIGHT TO REMOVE OR SUSPEND AN AGENT OR COMPANY FOR VIOLATION OF ANY OF THE TWU ORP/TDA RULES AND REGULATIONS.
7. TWU reserves the right to select representatives of their choice whom they deem to have best demonstrated the ability and qualifications to serve as a representative of an authorized ORP/TDA carrier; however, TWU asks that each company’s President or VP appoint its authorized representatives.
8. TWU reserves the right to remove representatives whom they determine have become unqualified to serve as a representative of an authorized ORP/TDA carrier.

 SOLICITATION REGULATIONS 

1. Employees eligible for and interested in ORP/TDA are advised to contact one of the listed agents of the company of their choice to obtain information about the company's programs and to secure forms to enroll in the program of their choice.
2. Authorized agents are permitted to make sales presentations to eligible employees on TWU premises only at the employee's request and may not solicit business with any employee unless contacted first by the employee.  AGENTS OF APPROVED COMPANIES ARE NOT AUTHORIZED TO INITIATE CONTACT WITH EMPLOYEES.

4. No list of names or mailing labels of TWU employees shall be provided by the Benefits section of Human Resources.  No campus mailings or “cold call” telephone calls are permitted to campus offices.
5. The providing of gifts or monetary rewards in exchange for information on newly hired employees or in exchange for enrollment in ORP/TDA is strictly prohibited.
6. All agents and their couriers must abide by the parking rules and regulations of TWU. Parking arrangements must be made between the authorized representative and TWU Parking Office.
7. Applications for participation or any change in ORP/TDA, along with other applicable TWU or TRS forms, must be submitted to the TWU OHR.
8. Forms submitted incomplete or incorrect will not be processed.  It is the responsibility of the employee to resubmit a corrected application within the eligibility period.  The date on which a correct application is submitted will determine the employee's effective date of participation or change.

COMPANY LIABILITY

 Each company must certify that, as a company, it is and will be primarily responsible for the defense of any suit against TWU resulting from actions of the company or the design of the company's program.  Such responsibility includes awards, court costs, attorney's fees, damages, or other expenses required as a result of a suit(s) against TWU.  Suits may include, but are not limited to; tax issues, sex and age discrimination issues resulting from the design of the company's program, the misplacement of funds sent to the company by TWU but not properly credited, misinformation or misrepresentation by the company or any other agent of the company, or any other issue arising from the company's program.

 CHANGE OF COMPANY  

1. The employee may change ORP/TDA companies up to two times per calendar year. A new election for ORP/TDA is counted as one change.  The appropriate forms must be completed and turned in to the TWU OHR prior to the first day of the month in which the change is to go into effect.  The effective date is the first day of the month’s payroll period, for which the employee is paid on the first workday of the following month.

 ACCOUNT TRANSFERS 

1.    Companies approved to do business with TWU shall not permit ORP/TDA funds to be transferred or rolled over to any other company without written authorization from TWU.  Requests to change companies or to roll over funds must be submitted to the TWU OHR using the applicable TWU forms.  TWU will not make contributions via payroll deduction or from TWU directly except to companies and/or accounts approved by TWU.

2.    If approved by TWU, a nontaxable transfer of accumulated deposits is permitted if the receiving company is a TWU-authorized company and the company agrees to the transfer.  An employee may change ORP/TDA companies without rolling over contributions on deposit with the prior company.  If an employee desires to rollover prior contributions in connection with or following a company change, it is necessary to furnish the TWU OHR with a signed TWU ORP/TDA Transfer form and other required forms.  An employee may not withdraw accumulated ORP/TDA deposits from a previous company before or after a change of companies until termination, retirement, or attainment of age 70½ for ORP or age 59½ for TDA.

3.    Companies are required to handle transfer/rollover transactions in a manner that does not permit the employee access to ORP or TDA funds while actively employed (except at ages 70½ for ORP and 59½ for TDA).

4.    IT IS THE SURRENDERING COMPANY'S RESPONSIBILITY TO TRANSFER ALL REQUESTED FUNDS PERMITTED BY LAW OR CONTRACT TO BE WITHDRAWN IMMEDIATELY UPON RECEIPT OF THE TWU ORP/TDA TRANSFER FORM.  A SURRENDERING COMPANY THAT DOES NOT COMPLETE A REQUESTED TRANSFER/ROLLOVER WITHIN 30 DAYS MAY BE DROPPED AS AN AUTHORIZED COMPANY FOR TWU.  Surrender/ distribution forms from the company are allowed ONLY IF relevant information not on the TWU Transfer form is requested.

5.    It is the receiving company's responsibility, when accepting ORP/TDA transferred funds that contain non-sheltered contributions, to identify the amount of those funds and to establish records that will accurately track and report those funds to the employee upon termination of employment and withdrawal.

Partial or full transfers of ORP/TDA accounts by active employees are permissible only to ORP/TDA accounts with TWU-authorized companies.

6.    According to Revenue Ruling 90-24, partial transfers and transfers between a 403(b)(7) account (mutual fund) and a 403(b)(1) account (annuity) are permissible and non-taxable if the following conditions are met:

1. the transfer is made directly from the surrendering company to the receiving company, and
2. the transferred funds continue to be subject to the same or more stringent early distribution restrictions.  Transfers or exchanges under other circumstances may have adverse consequences.  Employees are solely responsible for satisfying any federal income tax deficiency in the event of an adverse ruling by the IRS regarding a transfer or rollover.

7.    If a full transfer is completed by the surrendering company (i.e., the total funds are transferred to the receiving company), and the surrendering company subsequently receives additional funds, it is the surrendering company's responsibility to automatically transfer those funds directly to the receiving company.

 ORP GENERAL PLAN DESCRIPTION 

The ORP Program is offered as an alternative retirement plan to the Teacher Retirement System of Texas (TRS) for certain employees who are ORP eligible.  The Texas ORP is a 403(b) plan that involves employee and employer tax-sheltered contributions.

 Under the ORP Program, an employee enters into an agreement with TWU to reduce current earnings, up to specified limits, and to apply the proceeds of such reduction to the purchase of qualified 403(b) products with companies approved by TWU.  Contributions made under the ORP that are within the prescribed limits are not subject to income tax until received by the employee.  The employee owns and controls all rights to and the investment values of the annuity/investment plan selected at all times, and the investment values of the annuity/investment will accumulate tax-free, until retirement, death, disability, or until such other time as the employee elects to receive the benefit payments, subject to the provisions of the Internal Revenue Service Code and applicable state law.

 ORP ELIGIBILITY

 An employee shall be eligible to make a once-per-lifetime irrevocable election of ORP in lieu of the Teacher Retirement System of Texas (TRS) if all of the following criteria are met:

1. The employee is employed in an ORP-eligible position as defined by the Texas Higher Education Coordinating Board (THECB) and in this document;
2. Employment in an ORP-eligible position is on a full-time basis (i.e., 100 percent effort) for a period of at least one full semester or four and one-half months with a single ORP employer; and
3. The eligible employee formally elects ORP during the employee’s initial ORP eligibility period.

The once-per-lifetime irrevocable election includes any future periods of employment in Texas public higher education and the election may never be revoked except in two circumstances: 1) prior to vesting, the employee changes to a non-ORP eligible position or employment hours reduce below full-time, or 2) regardless of vested status, the employee leaves TWU and becomes employed with a Texas public school system or ISD, where only TRS is available.

ORP eligible positions are positions that meet the criteria below.  Refer to the Texas Higher Education Coordinating Board (THECB) Chapter 25, ORP Rules and Regulations for more details. 

(1) Faculty Member--A member of the faculty whose duties include teaching and/or research as a principal activity and who holds the title of professor, associate professor, assistant professor, instructor, lecturer, or equivalent faculty title, including "visiting professor" if the position is at least one full semester in duration.

(2) Faculty Administrator--An administrator responsible for teaching and research faculty whose principal activity is planning, organizing, and directing the activities of faculty and who holds the title of dean, associate dean, assistant dean, director, department chair, or head of academic department.

(3) Executive Administrator--An administrator who holds the title of chancellor, deputy chancellor, vice chancellor, associate vice chancellor, assistant vice chancellor, or the equivalent, and an administrator who holds the title of president, executive vice president, provost, vice president, associate vice president, assistant vice president, or the equivalent.

(4) Other Key Administrator--An administrator other than a faculty administrator or an executive administrator whose position is considered a key administrative position within the institution's organizational structure and that meets the requirements of this paragraph. The most common position titles in this category are director or associate director, but included titles may vary by institution based on differences in organizational structure, size, mission, etc. All positions in this category, including positions with the title of director or associate director, shall meet the following criteria:

· serves as director or other administrative head of a major department or budget entity excluding the title of assistant director unless the assistant director position has responsibility for what is considered a major department or budget entity that is within a larger department or budget entity, as may be the case at large institutions;

· is responsible for the preparation and administration of the budget, policies, and programs of the major department or budget entity;

· usually reports to the office of a chancellor, president, vice chancellor, vice president, dean, or equivalent; and

· is generally and customarily recruited from the same pool of candidates that other colleges and universities across the nation are recruiting from for this type of position by, for example, advertising in national publications such as the Chronicle of Higher Education or in newsletters or websites of national professional associations or at meetings of such associations.

A position shall not be considered ORP-eligible under this category unless it can be reasonably demonstrated that all of the applicable criteria have been met. If there is significant ambiguity concerning whether a position meets the criteria for this category, the default finding shall be that the position is not ORP-eligible.

(5) Librarian--A professional librarian who holds, at a minimum, a master's degree in library science or information science, and whose principal activity is library services.

ORP PARTICIPATION

1. Participation in ORP is in lieu of active membership in TRS.  TWU employees who are newly eligible for ORP have a 90-day, one-time option from the date of their first eligible appointment at TWU in which to elect participation in ORP provided they have not previously exercised a 90-day option through previous employment in the State of Texas.  At the end of this 90-day period, the retirement program the individual is enrolled in is irrevocable (except in two circumstances: 1) prior to vesting, the employee changes to a non-ORP eligible position or employment hours reduce below full-time, or 2) regardless of vested status, the employee leaves TWU and becomes employed with a Texas public school system or ISD, where only TRS is available.
2. New employees who have exercised this ORP option elsewhere in the State of Texas no longer have the 90-day option available to them, and must continue under the ORP or TRS program they have chosen elsewhere in Texas.
3. An employee who becomes eligible for participation in ORP because of a promotion or transfer has a 90-day option period from the effective date of the promotion or transfer, provided the employee has not previously exercised a 90-day option for ORP in the State of Texas.
4. After electing ORP, an ORP participant is not thereafter eligible for membership in TRS unless the individual terminates employment covered by ORP and becomes employed in the Texas public school system (even if the individual was vested in ORP).  Such an individual, upon becoming reemployed in Texas public higher education, may not resume participation in ORP.
5. An ORP participant, who, after less than one year and one day of participation in ORP, becomes employed in an institution of higher education or in the public school system in Texas in a position not eligible for ORP, shall be required to return to membership in TRS.
6. An ORP participant who, after at least one year and one day of participation in ORP, becomes employed in an institution of higher education in Texas in a position not eligible for ORP shall, nevertheless, continue to participate in ORP and shall not be eligible for TRS membership.
7. Prior enrollment, participation or vested status in any plan other than an ORP plan authorized under Texas Government Code, Chapter 830 (non-Texas ORP plans), shall have no bearing on an employee’s eligibility to elect ORP.
8. ORP contributions may only be made to a contract that is authorized by the participant's current ORP employer for Texas ORP contributions, even if the participant already has a contract with a company from a prior period of employment with another employer, whether a Texas ORP employer or not.

ORP VESTING

A participant in ORP is considered vested in the State/employer matching contributions after one year and one day of ORP participation.

ORP COMPANY SELECTION REQUIRED AT ELECTION

When a new employee makes an election to participate in ORP the employee must select an ORP company from the TWU list of currently authorized ORP companies in conjunction with the election of ORP and complete the required enrollment forms.

The new employee is responsible for making contact with an authorized representative of an ORP authorized company and for completion of all paperwork for enrollment.  To enroll in ORP, the employee must submit a copy of the company’s application form and an ORP/TDA Purchase Agreement form authorizing payroll contributions to the TWU Office of Human Resources (OHR) immediately upon election of ORP.

ORP EFFECTIVE DATE AND ENROLLMENT PROCEDURES

A new employee is automatically enrolled in TRS at the time of initial retirement plan eligibility and will remain in TRS until he/she exercises the 90-day option to change to ORP and submits the appropriate forms to the TWU OHR.  The eligible employee is responsible for electing participation in ORP in lieu of TRS and for having the ORP contract and all other necessary forms completed and delivered to the TWU OHR before the first day of the month in which the election is to be effective.  The effective date for forms received on or after the first workday of the month will be the first day of the following month.  

WITHDRAWAL OF TRS CONTRIBUTIONS BY NEW ORP PARTICIPANT 

1. An employee electing to participate in ORP is allowed to withdraw all prior TRS contributions plus accrued interest. Such refunds may not be transferred to ORP. Employer/state contributions to TRS are not payable to the employee, even to vested members with 5 or more years of service. The employee is responsible for satisfying any federal income tax liability accrued by the withdrawal of a TRS account.
2. To request a withdrawal of TRS deposits, a Notice of Election to Participate in Optional Retirement Program (TRS-28 form) and an Application for Refund (TRS-29 form) must be completed and submitted with the ORP company application and ORP/TDA Purchase Agreement form to the TWU OHR.

WITHDRAWAL/DISTRIBUTION OF ORP ACCOUNT

1. Benefits of ORP become available only upon one of the following events:
   1. retirement,
   2. termination of employment in all public institutions of higher education in Texas, or
   3. death.
2. No contract issued under ORP may provide for loans, cash surrender, or contain any other provision which permits the availability of benefits prior to a participant's retirement, termination as an employee in all public institutions of higher education in Texas, or the employee’s attainment of 70½. Furthermore, no ORP funds can be used as collateral for loans.
3. At attainment of age 70½, minimum distributions may begin prior to retirement at the employee’s request. Employer approval for distributions by employees age 70½ is not required provided the participant provides the company with proof of age.  A participant must begin to receive ORP account distributions by the later of April 1st of the calendar year following the year in which they attain age 70½ or the year in which the participant actually retires. Distributions that do not begin by the deadline will be subject to an additional tax equal to 50 percent of the amount of the minimum amount that should have been distributed.
4. Companies shall not permit a withdrawal or distribution of ORP accounts without written authorization from the TWU OHR.  Employer approval for distributions is made via a termination/retirement vesting letter. No other employer authorization signature is needed for employees who have permanently terminated all Texas ORP-covered employment.  Employer approval for distributions from death benefits is not required.
5. In the event an employee does not begin a second year of participation in ORP, and is not vested, the company is required by Texas State law to refund the full amount of the employer's contributions to TWU.  The balance of the employee contributions plus interest is in the account is returnable to the individual upon his/her written request, acknowledgment of ending employment with all ORP employers, and written proof from the former employer(s) of the termination(s).

FORMS REQUIRED TO ENROLL IN OR MAKE CHANGES TO ORP

It is the responsibility of the company agent to secure the required TWU ORP/TDA/TRS forms and submit them along with company forms to the OHR by the applicable deadline for processing.

FORMS TO TURN IN TO TWU OHR

Enroll in ORP

1. ORP Acknowledgment

2. ORP/TDA Purchase Agreement

3. TRS-28

4. TRS-29 (if applicable)

5. Copy of company application/contract  

Change ORP Company (up to two changes per tax year)

1. ORP/TDA Purchase Agreement

2. Copy of company application/contract 

Transfer of ORP Account (Partial or Full)

1. ORP/TDA Transfer form (copy)

2. Copies of receiving company application/contract (if a new ORP account)

3. Receiving or surrendering company transfer form, if any, if data different from TWU Transfer form (copy)

TDA GENERAL PLAN DESCRIPTION

The TDA Program is offered as a supplemental retirement program to the Teacher Retirement System (TRS), ORP, and/or the 457 Deferred Compensation Plan (DCP). Participation in a TDA is voluntary and involves employee tax-sheltered contributions only.

Under the TDA Program, an employee enters into an agreement with TWU to reduce current earnings, up to specified limits, and to apply the proceeds of such reduction to the purchase of qualified 403(b) products with companies approved by TWU. Contributions made under the TDA Program that are within the prescribed limits are not subject to income tax until received by the employee. The employee owns and controls all rights to and the investment values of the annuity/investment plan selected at all times, and the investment values of the annuity/investment will accumulate tax-free, until retirement, death, disability, or until such other time as the employee elects to receive the benefit payments, subject to the provisions of the Internal Revenue Service Code.

TDA ELIGIBILITY

Regular, benefits-eligible TWU employees (non-temporary employees who are appointed at least half-time in salaried positions not requiring student status) are eligible to participate in a TDA.  The minimum monthly contribution to a TDA is $20.  Participation in a TDA may be combined with TRS/ORP and/or a 457 Deferred Compensation Plan (DCP) up to the limits prescribed by law.

EFFECTIVE DATE AND ENROLLMENT PROCEDURES

All required forms must be completed and delivered to the TWU OHR before the first day of the month in which the election is to be effective. The effective date for forms received on or after the first workday of the month will be the first day of the following month.   A TDA may be canceled effective the pay period of any future month by turning in a new ORP/TDA Purchase Agreement or other acceptable written authorization to the TWU OHR.

WITHDRAWAL OF PAST TDA CONTRIBUTIONS

As a result of the Tax Reform Act of 1986, certain cash withdrawals are restricted. Specifically, amounts attributable to contributions made by employees under salary reduction or purchase agreements in years beginning after December 31, 1988 and earnings credited after that date attributable to any salary reduction amounts, may not be received by an individual unless the participant:

a. attains age 59½;

b. dies;

c. becomes disabled;

d. separates from service with the employer maintaining the plan under which contributions were made; or

e. encounters financial hardship (cash withdrawals based on financial hardship may be subject to further restrictions imposed under federal income tax law)

Loans, if available, and hardship withdrawals on contracts issued under the TDA program are dependent upon the policy issued by the company and are subject to the restrictions imposed by applicable tax legislation. TWU assumes no liability or involvement regarding loans or hardship withdrawals from voluntary 403(b) TDA. TWU reserves the right to request documentation related to loan activity from the carrier in order to monitor carrier compliance with IRS regulations.  TWU requires notification of all hardship withdrawal approvals.

A 10 percent additional tax is imposed on distributions made before age 59½ regardless of when the contributions to which the accumulations are attributable.  There are exceptions to the 10 percent tax; it does not apply to distributions made prior to age 59½ if the distribution:

a. is made after the employee separates from employment and is part of a scheduled series of substantially equal periodic payments for the life expectancy of the employee or the joint life expectancy of the employee and a beneficiary;

b. is made to an employee because of early retirement under the plan after attainment of age 55;

c. is made to an employee who has separated from service and used to pay medical expenses to the extent that they are tax deductible under the Internal Revenue Code;7

d. is a result of a permanent disability retirement;

e. is made to a beneficiary or the employee's estate after death; or

f. is subject to a special exception that applies to payments to an alternate payee, not to the employee, according to a qualified domestic relations order (QDRO).

Employer approval for TDA distributions to employees requesting distributions at age 59½ or over is not required provided the participant provides the company with proof of age.

A participant must begin to receive TDA account distributions by the later of April 1st of the calendar year following the year in which they attain age 70½ or the year in which the participant actually retires. Distributions that do not begin by the deadline will be subject to an additional tax equal to 50 percent of the amount of the minimum amount that should have been distributed.

FORMS REQUIRED TO ENROLL IN OR MAKE CHANGES TO TDA

It is the responsibility of the company agent to secure the required TWU ORP/TDA/TRS forms and submit them along with company forms to the OHR by the applicable deadline for processing.

TDA FORMS

FORMS TO TURN IN TO TWU OHR

Enroll in a TDA

1.    ORP/TDA Purchase Agreement

2.    Copy of company application/contract

3.    Signed Maximum Contributions Calculation (required if employee is electing to tax-shelter the maximum for 15 years of service)

Increase/Decrease Amount of Monthly Contribution

1. ORP/TDA Purchase Agreement  

Change TDA Company (up to two changes per tax year)

1.    ORP/TDA Purchase Agreement

2.    Copy of company application/contract

3.    Signed Maximum Contributions Calculation (if not already on file for current year)

Transfer of TDA Account (Partial or Full)

1.    ORP/TDA Transfer form (copy)

2.    Receiving company application and beneficiary designation form(s) (if a new TDA account) (copy)

3.    Receiving or surrendering company Transfer form, if any, if it contains data different from TWU Transfer form (copy)

Stop TDA Contributions

1. ORP/TDA Purchase Agreement -- noting “-0-“ monthly contribution or an email or other written request from the employee

DEFERRED COMPENSATION 457 PLAN

TWU also offers a second type of TDA, an IRS Section 457 Deferred Compensation Plan.  Eligibility requirements are the same as the TDA program.  Enrollment in a 457 plan is allowed with certain vendors and funds as authorized by the State of Texas.

PROGRAMS SUBJECT TO CHANGE

The Employee Retirement Income Security Act of 1974 (ERISA), Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Federal Deficit Reduction Act of 1984 (DEFRA), Retirement Equity Act of 1984 (REACT), Tax Reform Act of 1986 (TRA), Technical and Miscellaneous Revenue Act of 1988 (TAMRA), Small Business Job Protection Act of 1996 (SBJPA), Taxpayer Relief Act of 1997 (TRA), and Economic Growth Tax Relief and Reconciliation Act of 2001 (EGTRRA) impose federal regulations on employee benefit plans.  Future laws may change the provisions, tax status, and/or benefits available from individual ORP and TDA Program contracts.  The TWU Office of Human Resources reserves the right to make changes in TWU Rules and Regulations governing the ORP and TDA Programs.

MAXIMUM CONTRIBUTION LIMITS

1.   The maximum amount(s) an employee may tax shelter from gross salary to a TDA and/or to an ORP account is (are) based on IRS regulations and applicable tax code.  TWU refers to this limit and potential optional limits as the maximum allowable contribution (MAC).  TWU refers to the formula to determine these limits as the MAC calculation or Maximum Contributions Calculation (MCC).

2.   As an approximation, an employee is permitted to exclude up to a maximum of 100 percent of eligible gross salary up to certain IRS limits; however, the actual amount is dependent upon the number of years of service, the amount of prior tax sheltered contributions, salary, and other factors.  The company agent and employee/participant must recalculate the MCC for each participant at least once each calendar year.

3.   In addition to regular salary payments, total gross salary used in calculating the limitation includes longevity pay, benefit replacement pay (pay that replaces the portion of the employee's share of Social Security previously paid by the State), and other items of compensation taxable as income and paid by TWU.

4.   TWU utilizes the MAC formula adapted from the IRS MAC in Publication 571. TWU does not warrant any particular tax consequences to the employee and that all computations in connection with the determination of the amount of the salary reduction are the responsibility of the employee.  If federal income tax laws, state laws, and/or court rulings result in adverse rulings about the taxability of any of these contributions and/or their earnings, the employee will be solely liable for the payment of all taxes due.  TWU assumes no responsibility for the individual's tax liability with respect to the TDA Program.

5.   A TDA participant may enter into a new salary reduction agreement during the same calendar year to increase, decrease, or cancel TDA contributions.  The tax year at TWU is defined as the reporting period on each employee's W-2 form for tax purposes.  Therefore, because December earnings for monthly salaried employees are reported in the next tax year, the tax year for monthly salaried employees is December of one calendar year through November of the next calendar year.

6.   The MCC is the responsibility of the TDA company and the employee.  The TWU OHR can provide the ORP/TDA company agent or employee with historical data necessary for computing a participant’s MCC.