Retirement Plan for OPS Employees
The FICA Alternative Plan is a defined contribution plan authorized under Section 401(a) of the Internal Revenue Code. BENCOR, Inc. is the plan administrator for the University of West Florida. Wells Fargo Bank is the trustee and handles all deposits into and distributions out of the plan for the University and BENCOR.
The Omnibus Reconciliation Act of 1990 (OBRA 90) introduced into the law IRS Section 3121(b) (7) (f). As a result, temporary employees of a government entity may deposit money into a private retirement plan instead of Social Security. The University of West Florida began the FICA Alternative plan for its OPS Staff in September 2010.
How the Plan Works
Social Security payroll taxes are collected under authority of the Federal Insurance Contributions Act (FICA). Social Security is currently withheld at 6.2% of eligible wages and matched by the university. Participants (primarily temporary employees) in this plan will no longer contribute to the Social Security Administration nor will the amount contributed by the employee be matched by the university. Instead, employees will contribute 7.5% of their wages into an investment account in their name. Medicare contributions at 1.45% will continue to be withheld and matched by the employer. The plan is mandatory for eligible employees and employees will be automatically enrolled or un-enrolled based on their salary plan status during the affected pay period. There is no minimum age or service requirement.
Once a contribution has been made to the plan, the employee will receive an Enrollment/Designation of Beneficiary form and an introduction letter from BENCOR, the plan Administrator. They will also be available on the BENCOR web site. These forms will allow the employee to choose between a Guaranteed Pooled Fund (an interest bearing account) and a variable investment option. As a participant in the plan, you will have the option of investing in a mutual fund plan or a fixed account and will also be asked to identify a beneficiary. If an employee does not direct the investments of their funds, they will automatically be placed into the Guaranteed Pool Fund. The interest rate for the Guaranteed Pool Fund is determined each year by BENCOR. Approximately 95% of BENCOR participants have their money in the Guaranteed Pooled Fund.
Withdrawals from the plan may be made at the following times:
• Separation/termination of employment (a 10% IRS penalty will apply if you are younger than 55 years of age)
• After age 70 ½ or retirement, if later, when the IRS requires that the minimum distributions be made to the participant each year
• Participant’s total disability
• Participant’s death
Distributions can be made to the participant 1 month after the date of termination from the University of West Florida.
Withdrawals from your account may be made in a lump-sum cash payment (the IRS 10% penalty on early withdrawals does not apply to withdrawals upon separation at age 55 or later) or plan balances may be rolled over to an IRA or other eligible retirement plan. No IRS penalty applies to these transfers.
Who is Eligible?
Employees that are not covered by the university’s retirement plan and currently pay social security taxes will be eligible. Adjunct faculty, and hourly and exempt OPS employees (who are not otherwise exempt from social security taxes, also known as OASDI or Old Age, Survivors, and Disability Insurance) are eligible to participate in the FICA Alternative Plan.
Who is Not Eligible?
Faculty, Executive Service and University Work Force (UWF) employees participating in a university retirement plan are excluded from the FICA Alternative Plan. Also excluded are students, graduate assistants, fellows, phased retirees, rehired retirees, and any employees covered by current university retirement plans.
Advantages of the Plan
• Participating employees are not subject to Social Security taxes while covered by this plan, and Social Security taxes are never due on these funds.
• Any benefits previously earned under another retirement plan (including Social Security) will not be reduced by participation in this plan.
• Contributions to this plan are pre-tax. Therefore, the total amount of taxes paid will be reduced. No taxes are paid on the contributions until they are withdrawn.
• The account balance is portable and there are no administrative fees.
• Calculate your bi-weekly paycheck (Excel File)
Without Plan With Plan Monthly Earnings $1,000.00 $1,000.00 Less 7.5% Plan 0.00 75.00 Taxable Income 1,000.00 925.00 Less 15% Income Tax 150.00 138.75 Less 6.2% Social Security* 62.00 0.00 Less 1.45% Medicare 14.50 14.50 Net take-home pay $773.50 $771.75 Accumulated Savings $75.00 Net-pay plus savings $846.75 *Note that SS is after-tax
Investment and Plan Options
BENCOR Administrative Services (BAS) is a recordkeeping and administrative firm that specializes in qualified retirement plans. They provide services to over 3200 plans in 40 states. For more information about individual investments, participants may contact BENCOR Administrative Services at 888-258-3422 or by accessing their website.
Frequently Asked Questions
How will I be enrolled?
Employees will be enrolled automatically if they are in an eligible (OPS) salary plan.
What happens if my salary status changes and I am no longer eligible? Will I need to take an action?
No. Employees will be enrolled or un-enrolled automatically based on their current salary plan status. The university will monitor for changes in salary plan status each biweekly pay period.
May I decide not to participate in the FICA Alternative Plan?
No. The IRS regulations for the 401(a) plan require that all eligible employees participate for the agency to participate. Therefore, if you are in an eligible OPS salary plan, participation is mandatory.
What if I do not complete the enrollment form?
The enrollment form designates your investment choice and a beneficiary. If an investment choice is not selected, the contributions will be invested in the fixed account. The interest rate for the fixed account is determined each year by BENCOR.
Can I continue to contribute to the plan after I leave the University?
No, the plan requires contributions through the organization. If you begin working for another institution that has a similar plan with BENCOR, then you may begin contributions through that organization.
Will participation in the plan effect my past contributions to social security?
No, those contributions will remain in your name with social security.
If I am currently receiving social security benefits, can I still participate in the plan?
Yes, but it depends on the circumstances. For example, if you are currently paying FICA from your university wages and are in an eligible OPS salary plan, you may participate.
How often will contributions be taken?
Each biweekly pay period.
How much are the contributions to the plan?
7.5% of pre-tax wages
Can I contribute more than 7.5% into the plan?
Not at this time. The university will consider options for increasing contributions in the future.
Is there a charge from BENCOR to establish an account, switch between investment plans, or to withdraw funds?
No, there are no charges from BENCOR as long as contributions are being made. After 24 consecutive months of inactivity, there will be a small monthly fee. Please call BENCOR. There are also some small fees associated with the mutual fund options. See the fee schedule.
Will I still be able to participate in the plan if I move from OPS to a TEAMS or Faculty position?
No, these positions are eligible for other retirement plans.
Will I be able to withdraw my funds if I move from an OPS to a TEAMS or Faculty position?
Yes. The university will treat the employee as if they separated from the institution and were rehired.
If I do not currently pay FICA but am on an OPS appointment, can I participate in the plan?
No. You must be currently paying FICA to participate in the FICA Alternative Plan.
Are student assistants or graduate assistants eligible?
No. They are FICA exempt and are not eligible.
How do I access my account with BENCOR?
You may access the account online with a PIN number. It is established originally as the last 4 digits of your social security number but we encourage you to change that when you log in the first time. You will also get an annual statement mailed to you from BENCOR.
How can I determine the impact on my wages, with and without the FICA Alternative Plan?
See the sample spreadsheet calculation (Microsoft Excel)
How and when can I withdraw funds from my account?
What if my address or other contact information changes?
Please update your address in the UWF Directory. If you have separated from the university, please notify BENCOR of any address changes.
Can I send my 7.5% contribution to another plan (such as Valic or TIAA CREF)?
No, but you may roll the invested funds over into one of these plans when you separate from the university.
What if I have multiple jobs with the university and only some of the jobs are eligible for the FICA Alternative Plan?
All jobs must be eligible for the employee to participate in the plan.
Will my FICA Alternative contribution impact the amount I may contribute to an individual IRA?
Yes it may, depending on your adjusted gross income and your tax filing status. If you also contribute to an IRA, you are encouraged to check with a tax professional.