University Times

Starting Oct. 1, Pitt employees in the defined contribution (DC) savings plan will have a new Roth 403(b) option to consider as part of their retirement planning.

Letters announcing the changes were being mailed to Pitt employees this week.

According to Human Resources, approximately 90 percent of eligible employees at the University choose the DC plan (through TIAA-CREF and Vanguard) over Pitt’s defined benefit pension plan.

Currently, contributions to the DC plan are deducted from employees’ base pay on a pre-tax basis. Current taxable income is reduced, making for a slightly larger paycheck now, but the funds and the gains earned are taxable when they are withdrawn in retirement.

The new Roth 403(b) option gives Pitt employees the chance to make after-tax contributions to their retirement — reducing their take-home pay now with an eye toward withdrawing their contributions and investment earnings tax-free in retirement.

(Matching contributions from the University continue to be considered pre-tax regardless of whether an employee chooses the Roth option.)

TIAA-CREF consultant Jay Mahoney said the Roth 403(b) option is attractive to people at opposite ends of the income spectrum.

“People who are in a low tax bracket today might consider switching to the Roth because they expect to be in a higher bracket later,” he said. Those people could include employees who have a lot of tax deductions or tax credits now.

In addition, employees with high incomes also may consider the Roth 403(b) in order to diversify their retirement assets for tax purposes. Among the considerations is that there is no income cap for contributing to the Roth 403(b) option as is the case with Roth IRA plans.

Industry estimates show that about 5 percent of employees initially opt for the Roth 403(b) plan when it’s available, Mahoney said.

For Pitt employees who don’t wish to take advantage of the Roth 403(b), no action is required. Participants who want to shift all or part of their retirement contributions to the Roth 403(b) option need to make the change in the month prior to the date in which the change will take effect. Past retirement contributions cannot be converted to the Roth 403(b) option.

“It’s not an easy decision,” Mahoney said. “It really requires people to do the math.”

The Benefits office will sponsor information sessions on the Roth 403(b) plan in conjunction with TIAA-CREF and Vanguard. Employees also may schedule a free one-on-one session with TIAA-CREF or Vanguard consultants to learn more about the new option.

Mahoney noted that even for those who don’t select the Roth option, the opportunity to assess their retirement savings situation is beneficial. “Reviewing it helps them stay on track,” he said.

On the Pittsburgh campus, the 90-minute sessions for faculty and staff are set for:

• Sept. 2, 10 a.m. and 2 p.m., William Pitt Union Assembly Room;

• Sept. 17, 9:30 a.m., S100A Starzl Biomedical Science Tower and 2 p.m. S120 Starzl BST;

• Sept. 18, 10 a.m. and 2 p.m. WPU Kurtzman Room;

• Sept. 24 and 25 at 1 p.m., 342 Craig Hall.

Sessions for University of Pittsburgh Physicians are set for 8 a.m. and 5:30 p.m. Sept. 16 in S100A Starzl BST.

Sessions on the regional campuses are set for:

• Sept. 4, 10 a.m. and 2 p.m., Student Union Cambria Room at Pitt-Johnstown;

• Sept. 9, 11:30 a.m. and 2 p.m, 118-119 Frame-Westerberg Commons at Pitt-Bradford;

• Sept. 10, 10 a.m. and 1 p.m., Haskell Memorial Library auditorium at Pitt-Titusville;

• Sept. 11,10:30 a.m. and 2:30 p.m., Campana Lecture Hall and Chapel at Pitt-Greensburg.

A presentation and additional information, including frequently asked questions and enrollment instructions, will be online at www.hr.pitt.edu/roth starting Sept. 1.

One-on-one sessions are encouraged so plan participants can discuss more fully their individual situations. Free consultations may be scheduled with TIAA-CREF consultants by calling 800/842-2776 or visiting www.tiaa-cref.org/moc or with Vanguard consultants by calling 800/662-0106 ext. 14500 or visiting www.meetvanguard.com.

—Kimberly K. Barlow