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The Voluntary Investment Program (VIP) is a tax-deferred optional retirement savings plan, operating under Section 403(b) of the Internal Revenue Code (IRC). The advantages to contributing to the VIP are (1) your contributions are deducted from your gross salary before taxes are calculated and (2) your contributions and earnings grow tax-deferred until you take a distribution.
Please note your VIP contributions are not matched by the University. Social Security tax is still paid on the deduction and contributions to VIP have no effect on future Social Security benefits. Your VIP funds should be regarded as unavailable until you reach age 59 ½ or separate from the University, with the exception of a Loan or Hardship Withdrawal described below. Any withdrawals will be subject to federal income taxes, and a 10% penalty may apply.
As a University employee, you're eligible to participate in the VIP unless you are a nonresident alien who receives no U.S.-source earned income. It's not necessary to be in one of the basic UW retirement plans in order to start contributions to the VIP, and you may enroll at any time.
The University of Washington has four VIP fund sponsors: Calvert, Fidelity, TIAA-CREF and Vanguard. Visit the links below to see a list of funds offered by each fund sponsor.
Under IRC 403(b), the IRS sets annual limits on total, combined employee and employer contributions to defined contribution retirement plans like the UW Retirement Plan (UWRP) and VIP. VIP employee contributions combined with employee and employer UWRP contributions cannot exceed the IRS limit for 403(b) plans.
You can contribute as little as $15 per pay period and as much as 75% of your pay not to exceed the maximum contribution limits described below.
The maximum combined employee and employer contribution allowed under IRC 403(b) for 2009 and 2010 is $49,000. An additional $5,500 is allowed for each of these years if you are age 50 or above as described in “Catch-up Contributions” section below.
The maximum amount you can contribute to your VIP, based upon the retirement plan you are participating in as a UW employee, is as follows:
*The VIP maximum contribution amount shown above includes the Age 50 “Catch–up Contribution” of $5,500 as described in the next section.
The IRS allows what is called an "Age 50 Catch-up Contribution," a contribution in excess of the general IRS contribution limit for 403(b) plans. This catch-up is available to employees who have reached age 50 during the 2009 and 2010 calendar years. The catch-up contribution is $5,500 for 2009 and 2010, and is included in the limits listed above.
UW Benefits & WorkLife reserves the right to stop or return VIP contributions to prevent over-deferrals. If you provide us with a new calculation from one of our VIP fund sponsors showing there is additional deferral available, you may rejoin the program. Current participants can find their current year VIP maximum contribution amount at Employee Self Service (ESS) under the “Retirement and Savings” tab.
When unexpected financial hardships occur, you may find that you need to explore all your options including tapping into any VIP savings. There are special rules about accessing these funds for hardship situations. Learn more.
The UW offers an additional optional retirement savings program, called the Washington State Deferred Compensation Plan (WSDCP). WSDCP is a retirement savings program operating under Section 457(b) of the IRC. It is an agreement between an employee and the state that postpones ("defers") part of the employee’s income. This income deferral reduces current taxable income and allows the deferred income to grow untaxed until retirement. The state of Washington retains ownership of funds invested through this plan until retirement.
If you wish to maximize your retirement savings, or if you participate in the UWRP and your allowed VIP contribution is smaller than your desired savings rate, you may wish to explore this plan. You may participate in your basic retirement plan and both the VIP and the WSDCP in the same tax year at the same time. If you wish to participate in the WSDCP contact the Department of Retirement Systems at 1-888-327-5596 for assistance in plan enrollment. See the WSDCP webpage for more information.
When making contributions to the VIP, you may be eligible for a "saver's credit." This credit could reduce the federal income tax you pay dollar-for-dollar. The amount of the credit that you can receive is based on the contributions you make and your credit rate. Review the rules for the Saver's Tax Credit to see if you qualify.
To participate in the Voluntary Investment Program (VIP), you must first create an account with one or more of our VIP fund sponsors and sign a contract. Failure to do this creates an incomplete application and your money may not be invested. For detailed information about the VIP, including how to establish a fund sponsor contract, follow these VIP Enrollment instructions.
You can stop your VIP contributions in one of two ways:
VIP
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