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The Voluntary Investment Program (VIP) is a tax-deferred retirement savings plan, operating under Section 403(b) of the Internal Revenue Code (IRC). Deductions are made from your gross salary before taxes are calculated, so you pay less tax now, and contributions and earnings grow tax-deferred until you request a distribution.
Money contributed to the VIP is not matched by the University. In addition, it should be regarded as unavailable until you reach age 59 1/2. The Internal Revenue Service (IRS) limits access to these accounts except under IRS "hardship" rules.
The IRS limits hardship withdrawals to:
Requests for hardship withdrawals require verification by the Benefits Office. Your withdrawal will be subject to withholding taxes, and a 10% penalty may apply.
It's not necessary to be in one of the basic UW retirement plans to use the VIP, and you may enroll at any time. As a University employee, you're eligible to participate unless you are a nonresident alien who receives no U.S.-source earned income.
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 the 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 contribution limits as listed below.
The maximum combined employee and employer contribution allowed under IRC 403(b) for 2009 is $49,000 (See “catch-up” contribution exceptions below).
You can generally contribute the following amounts to the VIP:
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. The 2009 catch-up contribution is $5,500 for 2009, and are in addition to any general limit listed above.
Benefits reserves the right to stop VIP contributions to prevent over-deferrals. If you provide us with a new calculation that shows there is additional deferral available, you may rejoin the program.
The UW offers an additional 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, you may wish to explore this plan. You may participate in both the VIP and the WSDCP in the same tax year at the same time. If you wish to use both plans in the same tax year, 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 you can get 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.
Enroll in the Voluntary Investment Program.
You can stop your VIP contributions in one of two ways:
VIP
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