To enroll in the 457(b) deferred compensation plan, you must be an eligible faculty or staff employee with eligible earnings of more than $218,000 in 2019 earnings for 2020 participation. Employees hired in 2020 must be hired with a scheduled annual compensation over $218,000 for 2020 participation. The plan is governed by Internal Revenue Service, Department of Labor and California securities rules that impose specific limits on eligibility criteria. Eligibility is reviewed annually, and Benefits will notify eligible employees. New employees or current employees who wish to enroll may direct any inquiries and enrollment forms to the HR Service Center at email@example.com.
The USC 457(b) Plan is an additional retirement account that helps eligible employees invest and save for retirement while deferring taxable compensation each year. In 2020 eligible employees may defer up to $19,500 in taxable compensation. This plan benefits USC employees who also contribute the maximum IRS contributions allowed under the 403(b) USC Retirement Savings Program. The university does not contribute to this plan; contributions are made entirely through employee salary deferrals.
Important differences between USC’s 457(b) plan and the 403(b) USC Retirement Savings Program
|Features||Matched employee and USC contributions||Supplemental employee contributions||457(b) deferred compensation plan|
|Eligibility||Employee must be at least 21 years of age, complete 1 year of service, and be working in an eligible job category||All non-student employees||All employees having eligible earnings in excess of a salary threshold ($218,000 in 2019 earnings for 2020 participation) who meet the criteria of the investor’s questionnaire. Eligibility is renewed annually.|
|Enrollment||USC tracks and notifies you when eligibility requirements are satisfied so that enrollment forms can be completed. If you do not make an election, enrollment is made by Benefits under the plan’s default provisions.||New enrollments, changes in contribution rate and/or percentage allocation between vendors, and termination of participation may be made anytime throughout the year; unless you actively make a change, elected contribution amounts automatically continue throughout the following year.||Must be renewed annually with a salary deferral agreement form|
|University contributions||University makes a 10% contribution on the first $285,000 eligible earnings when employee makes a 5% contribution. You may make lower contributions and receive correspondingly lower USC contributions.||None||None|
|Vesting requirement||The USC non-elective contribution is subject to a four-year graded vesting schedule (25% per credited year of service) for employees hired on or after January 1, 2012. You earn a year of vesting credit for each calendar year in which you are credited with at least 1000 hours of service. Each year of vesting credit earns you 25% ownership in the non-elective portion of the USC contribution. The USC matching contribution, the portion that matches one-to-one your 1-5% contribution, is structured to meet the IRS 401(m) “safe harbor” criteria and is 100% vested at all times.||You are always 100% vested.||You are always 100% vested.|
|Rollovers/transfers from prior employer’s plan||Not accepted||Accepted||Transfers from other nongovernmental 457(b) plans permitted|
|Loans||Available on university contributions||Available||None|
|Hardship withdrawals||Available to satisfy “immediate and heavy financial need”; includes tuition and purchase of a home. Available on employee contributions only.||Available to satisfy “immediate and heavy financial need”; includes tuition and purchase of a home.||Available for “unforeseeable emergency,” but strict requirements apply; does not include tuition or purchase of a home.|
|In-service withdrawals||For non-tenured faculty and staff allowed after age 59 1/2; for tenured faculty age 65 and 50% time or less||After age 59 1/2||None|
|Payments following termination of employment||Benefits begin when participant reaches age 70 1/2 unless earlier payment is requested.||Benefits begin when participant reaches age 70 1/2 unless earlier payment is requested.||Entire benefit is paid immediately as a lump sum unless participant elects to defer payment or receive a different form of payment within 60 days following termination.|
|Rollovers/transfers from this plan after university employment ends||May be made to IRA or to new employer’s 401(a), 401(k), 403(b) or governmental 457(b) plan (if plan accepts rollovers)||May be made to IRA or to new employer’s 401(a), 401(k), 403(b) or governmental 457(b) plan (if plan accepts rollovers)||May be made only to new employer’s nongovernmental 457(b) plan (if plan accepts transfers)|
Eligibility is determined each calendar year based on the earnings of the prior year. You are eligible to participate in the plan beginning the first of each year if you satisfy all of the following requirements:
- Your final 2019 total eligible earnings must equal or be greater than the plan’s annual dollar threshold. For 2020 participation, an employee must have earned at least $218,000 by December 31, 2019 (eligible earnings include regular base pay plus any summer supplements, bonuses, accrued vacation paid in a lump sum within two and a half months of termination of employment, overtime pay, administrative stipends and merit awards. Eligible earnings do not include sponsorship payments or private practice pay)
- You can attest you are an “accredited investor” by meeting the criteria set forth in the USC 457(b) Salary Deferral Agreement.
Your investment selection
When you make a deferral election, you select the investment funds that are used to measure the investment experience of your account. You may select funds offered by one of the three provided investment companies – Fidelity Investments, TIAA-CREF, or Vanguard.
You may change your investment allocation at any time, subject to the investment company’s regulations. Once you have established your 457(b) plan account, you may change your investment allocation within each investment company by contacting them directly.
How to enroll
If you are enrolling for the first time, complete the USC 457(b) Salary Deferral Agreement AND your chosen retirement provider’s enrollment forms (one of three choices below). Email completed enrollment forms to firstname.lastname@example.org or fax to (213) 740-3875.
These forms require investment instructions – see the fund menu for available investment choices.
Mid year changes
You can cancel or adjust your 457(b) contribution amounts by submitting a Retirement Savings Change in Workday. All retirement changes take effect in the month following your Workday request date.
Receiving your benefits
You may elect to receive all or part of your deferral account when you terminate employment with the university for any reason including disability or retirement.
The normal retirement age under this plan is 65. You may begin receiving payments from this plan following termination even if you have not reached the normal retirement age. Once you have retired, payment of benefits must begin no later than April 1 of the year in which you reach age 70 1/2 or, if later, April 1 of the year following the year in which you retire.
The plan offers four distribution options:
- A single lump-sum payment of the entire balance of your deferral account, with proper income tax withholding, directly from the investment company. This is the default option; if you do not elect a distribution option by submitting a distribution election form within 60 days of termination, you will receive your account balance on or about the 120th day after termination, as required by federal law. In this event, your entire benefit is taxed as ordinary income for the year in which it is paid to you.
- You may elect an annuity payable in equal installments for your lifetime that ends upon your death OR an annuity payable in equal installments for the joint lives of you and your beneficiary.
- You may elect payments for a fixed period of not less than one year and not more than 20 years.
- You may make a direct tax-deferred transfer to your new employer’s nongovernmental 457(b) plan (note that federal tax laws limit the kinds of tax-advantaged plans that can accept rollovers from this plan; your distribution is not eligible for rollover to an IRA or another employer’s 401(a), 401(k), 403(b) or governmental 457(b) plan).
All forms of payment are subject to the requirements of the investment companies.
If you submit a distribution election form on which you select a payout date after the 120th day following your termination date, you may make a one-time deferral of your initial payout date up to 60 days before your initial commencement date. You may also change your distribution option up to 60 days before the date you have selected as your payout date. Contact Benefits for appropriate forms.
Your deferrals (and investment earnings) are not subject to federal income tax until you receive payment from the plan. When you do receive a payment of your benefit, the entire amount paid is taxed as ordinary income unless you transfer it to another employer’s 457(b) nongovernmental plan.
As the plan administrator for the 457(b) plan, the university is responsible for performing the duties required for operation of the plan, and retains the sole right to interpret and construe the plan and determine conclusively all questions pertaining to eligibility and benefits under the plan. The university reserves the right to amend the plan in any respect at any time, and to terminate the plan. Upon termination, all accounts under the plan will be distributed as soon as administratively possible in accordance with applicable IRS rules.