Security for the Future

There are three programs through which Howard University helps you to obtain financial security for yourself and your dependents in the future. The three programs are:

1. Howard University Savings Plan
2. Howard University Employees' Retirement Plan (HUERP)
3. Social Security/Medicare Taxes

HOWARD UNIVERISTY SAVINGS PLAN

The Howard University Savings plan gives employees the opportunity to save money for their retirement. Beginning with your first paycheck, you can contribute a portion of your salary to the plan on an after-tax or tax-deferred basis. When you become eligible, the University will contribute 6% of your base annual salary on a bi-weekly basis coinciding with your pay date. The Internal Revenue Service (IRS) determines the maximum amount that can be contributed by either you or the University. All contributions are invested with carriers sponsored by the University. You will be responsible for selecting a carrier.

Below you will find frequently asked questions about the Howard University Savings Plan:

FOR THOSE OF YOU WHO ARE NOT CURRENTLY PARTICIPATING IN THE HOWARD UNIVERSITY SAVINGS PLAN:

1. What does tax-deferred mean?

   If you contribute on a tax-deferred basis, your contribution is not subject to federal and state taxes. The money that you would have paid in taxes will instead be invested in your account. At the end of the calendar year, your taxable income will be reduced by the amount that you have contributed.
   

2. What is the least amount that I can contribute to the Plan, I am on a strict budget?

   The minimum contribution is $10 per pay period. If you increase that by $5 and contribute $15 per pay period, after 3 years you could accumulate $1,651 and after 10 years you could accumulate $7,096.

3. When will I be eligible for the University's 6% contribution to the Howard University 403(b) Savings Plan?

   If you are at least age 21, you will be eligible to receive the University's 6% contribution beginning the January 1st or July 1st following one year of service as a full-time salaried employee.

   In order to receive these funds, you must choose a University sponsored investment carrier and complete the necessary enrollment forms.

4. When will these funds be available to me?

   Ideally these funds will remain in your account until you retire. However, under certain circumstances, you may be able to take funds out of your account before retirement if you need a loan, have a bona fide hardship, or if your are at least age 59 1/2.

5. How can I make arrangements to contribute to the Howard University Savings Plan? Who should I contact?

   If you wish to contribute a portion of your salary to the Howard University Savings Plan and/or to arrange for the receipt of the University's 6% contribution, just call or visit the Office of Total Compensation (202-806-1280). Our staff will be more than happy to provide you with materials to assist you in making an informed decision when selecting a University sponsored investment company and will ensure that you complete all of the necessary enrollment forms.

6. I am a new employee. At my former place of employment, I participated in a 401(k) plan. Is there any way that I can rollover these funds my Howard University 403(b) Savings Plan account?

   Yes, rollovers can be made between 401(k), 403(b) and 457 plans. In addition, these three plans now can be rolled over into an IRA. Therefore, you may rollover the funds from your 401(k) plan into the 403(b) plan.

AND FOR THOSE OF YOU WHO ARE CURRENTLY PARTICIPATING IN THE HOWARD UNIVERSITY SAVINGS PLAN:

1. I am eligible for the University 6% contribution and have completed my enrollment forms. What is the maximum amount that the University will contribute on my behalf?

   Internal Revenue Code (IRC) Section 401(a)(17) determines the amount of includable income, your base annual salary that the University may contribute to the Howard University Savings Plan on your behalf. This year, in 2005, the maximum University contribution to your account is 6% of $210,000 or $12,600.

   In subsequent years, the limit will be indexed for cost-of-living increases in $5,000 increments. Therefore, beginning January 1, 2006 the limit will be $215,000.

2. I contribute a portion of my salary on a tax-deferred basis to a University sponsored investment company (TIAA-CREF, VALIC, or Lincoln Financial). What is the maximum amount that I can contribute?

   IRC Section 402(g) limits the amount that you may contribute on a pretax basis to the Howard University Savings Plan. This year, in 2005, that limit is $14,000. This limit will increase $1,000 each year until it reaches $15,000 in 2006. After 2006, the limit will increase in $500 increments.

3. Suppose I am 55 years of age and will be retiring in 7-10 more years. I want to do everything that I can to build a nice nest egg. Is there anything that I can do this year to set aside more than $14,000?

   In 2005, you can set aside more than $14,000 in two ways:

   1. If you have 15 years or more of service at Howard University, you may be able to contribute up to an additional $3,000. Therefore, in 2005, you may be eligible to contribute up to a total of $17,000 (402(g) limit of $14,000 plus $3,000 = $17,000). Your eligibility must be certified by your University sponsored investment carrier and you must provide a copy of that certification to the Office of Total Compensation and complete a new salary reduction agreement.
      
   2. If you are at least 50 years of age, you may contribute more than $14,000 under a special catch-up rule. This year, in 2005, you may contribute an additional $4,000 on a tax deferred basis to the Howard University Savings Plan.

The catch-up amount will increase by an additional $1,000 per year up until 2006 when it will be $5,000. After 2006 the catch-up amount will increase in $500 increments.

4. Prior to 2002, I made a hardship withdrawal. After I made that withdrawal, I could not contribute to the plan for 12 months. If I make another hardship withdrawal this year, will I have to wait 12 months again before I can contribute again?

   No, if you make a hardship withdrawal after 2002, you will only have to suspend your contribution for six months instead of twelve months.

5. Can I increase my contributions to the Howard University Savings Plan during the course of the year?

   You may change your contribution to the Savings Plan up to four times during any calendar year.

6. Can I change sponsored investment carriers any time during the year?

   No, you may change your sponsored investment carrier only during the annual open enrollment period.

Howard University Employees' Retirement Plan

The HUERP provides you with an additional retirement benefit, paid for entirely by the University. Below are frequently asked questions about this plan:

1. When will I be eligible to participate in the Howard University Employees' Retirement Plan?

   If you are at least age 21, you will automatically become a participant in the Howard University Employees' Retirement Plan the January 1st or July 1st following one year of service as a full-time salaried employee.

   Certain part-time employees may become eligible after one year of service, if they work 1,000 hours during a plan year, i.e., July 1st through June 30th.

2. What will the University contribute each year to this plan on my behalf?

   The University funds a trust to provide plan participants with future benefits under the plan. That benefit, on a cumulative basis, is 1% of your base annual salary each July 1. The total accumulation would be payable once you have reached your Normal Retirement Age (the June 30th on or after your 65th birthday).

   For example, if I want to calculate a quick estimate of benefit at Normal Retirement age and I am age 35, with a continuous base annual salary of $35,000, and must work 30 more years at Howard University until I reach my Normal Retirement date I would multiply $350 (1% of $35,000) by 30 (years I must work at Howard until I reach my Normal Retirement) which will equal $3,500/year or $291.67/month.

3. Do I have to work until my Normal Retirement date before I can receive a benefit under the plan?

   No, you can receive a benefit before your Normal Retirement date. The earliest that you will be eligible to receive a benefit under the plan is when your age plus years of service equals seventy. For example, if you are an active employee age 55 and have 15 years of service at Howard University you would have the combination of 70 and could retire early.

   If you retire early, at any time before your Normal Retirement date, your benefit will be reduced. By starting early, the benefit would be paid out over a longer period of time than if it began at your Normal Retirement date.

4. Is there a maximum amount that the University can contribute to the plan on my behalf?

   Yes. Internal Revenue Code (IRC) Section 401(a)(17) determines the maximum amount of includable income, your base annual salary, to be used by the University to calculate your HUERP contribution. In 2005, the limit is $210,000. Therefore, in 2005, the maximum that the University can contribute on your behalf will be $2,100 (1% of $210,000). In subsequent years, the limit will be indexed for cost-of-living increases in $5,000 increments. Therefore, beginning January 1, 2006 the includable income limit will be $215,000.

5. If I leave the University, before I am eligible to retire, will I be entitled to a benefit under the plan?

   When you leave the University and have at least 5 years of eligible service you are considered vested in the plan. Vested means that you have earned a right to a future benefit under the plan.

6. If I die while working but am not eligible to retire under the plan, will my beneficiary receive any benefits?

   If you are vested at the time of your death and are married your spouse will be entitled to a survivor's benefit.

7. When I leave the University, can I take these funds with me and roll them over to an account with my new employer?

   No, you may not roll over these funds. The HUERP is a defined benefit plan. Rollovers upon separation are applicable only to defined contribution plans, such as our 403(b) Savings Plan.

FEDERAL INSURANCE CONTRIBUTIONS ACT (FICA) - SOCIAL
SECURITY/MEDICARE TAXES

The deduction that you see on your pay stub for Social Security and Medicare Hospital Insurance represents one-half of the taxes that are due. The Social Security tax is 6.2% of your wages, up to $90,000 in 2005. The Medicare tax is 1.45% of all wages earned. Wages in this case do not include your pre-tax contributions to your flexible spending account or your healthcare plans or your tax deferred contributions to the Howard University Savings Plan.