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A Salary Reduction Agreement is an arrangement between an institution and its employees whereby employees agree to remit a specific dollar amount or percentage of pay at pre-defined time periods to their retirement plan. Your institution determines the plans available and any limitations on the amount that can be contributed, subject to IRS limits. Your institution can also set a limit on the number of times employees can change their contribution elections per calendar year and determine whether or not the agreements are irrevocable. You may want to check your plan documents for details on this. There are two types of contributions:
Contributions are taken out of a participant's salary after taxes have been withheld. Contributions are taxed as income in the year they are made, not when they are received as benefits. Earnings on these contributions are tax deferred, though; they are taxable when income is received. Participants making contributions on an after-tax basis should complete an Authorization for Payroll Deductions form. If participants want to make additional contributions by salary deduction and your plan allows such contributions, they should fill in the amount or percentage and the date for additional contributions on the form. If your plan does not allow these additional contributions, or if the participant doesn't wish to make them, this section of the form should be left blank. Please note that the Authorization for Payroll Deductions form is for use only at your institution. TIAA-CREF does not need to see the form and does not keep a copy on record. You should provide a copy to the participant and keep a copy on file.
Contributions are taken from a participant's salary before taxes are withheld. Both these contributions and their earnings are taxed as income when the participant receives them as benefits. If a participant decides to make salary reduction contributions to a TIAA-CREF annuity, Section 403(b) of the Internal Revenue Code requires the completion of a Salary Reduction Agreement between the participant and his/her employer. You should prepare the agreement with the help of your legal counsel. The Salary Reduction Agreement is for use only at your institution. You should give a copy to the participant and keep a copy on file.
There are two ways that this you can process Salary Reduction Agreements. Our Online Salary Reduction Agreement System, or by paper form provided by your institution.
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