|55 ELM STREET
Telephone: (860) 702-3480
|HEALTH CARE COST
|STATE OF CONNECTICUT
OFFICE OF THE STATE COMPTROLLER
HEALTHCARE POLICY & BENEFIT SERVICES DIVISION
|ATTENTION:||Human Resource, Benefit and Payroll Officers|
|Participants in the 457 and 403(b) Plans|
|SUBJECT:||Deferral of Vacation and Sick Leave Payouts from|
|Final Paychecks to Defined Contribution Plans|
The State of Connecticut offers two voluntary defined contribution plans: the 457 Deferred Compensation Plan--open to most active employees--and the 403(b) Plan--offered to those employed by eligible educational institutions and hospital facilities. 1 Employees who are retiring or leaving State service are eligible to contribute post-employment payouts for unused vacation or sick leave into these plans.
Payments due for unused sick or vacation leave are considered 'wages' and typically are paid by the next regular pay day after a State employee separates from service. Vacation and sick leave payouts can amount to thousands of dollars, and federal and state income taxes on these amounts can be substantial. For this reason, many employees find it advantageous to defer some or all of their vacation or sick leave payouts into the 457 or 403(b) plans. By doing so, employees can reduce taxes on the final payout and build up additional retirement savings.
The process for contributing these final payouts to the 403(b) or 457 Plan requires some advance planning. IRS regulations require that written deferral agreements be submitted the month before the final payment is made. This means, for example, that if the vacation/sick leave payout is due in August, the signed paperwork must be in place by July. This memorandum outlines how employees can take advantage of this benefit.
Employees who are eligible to participate in either the 457 or the 403(b) Plan can defer final payments of vacation and/or sick leave up to the maximum allowable limit. Even if an employee has not previously participated in the plan, deferral of these amounts will be permitted if the necessary enrollment forms are submitted on time.
Payroll and Human Resources Personnel are strongly encouraged to work with employees to provide information about their year-to-date plan contributions, the amount of any anticipated vacation/sick leave accruals, and the date when such payouts will be made.
Employees who want help in calculating the amount of their sick or vacation
leave deferrals to the 403(b) or 457 Plan can call ING at
1-800-784-6386 option #4 or can log onto our dedicated web site -
www.CTDCP.com for more information. You
may also contact Amy Cason at firstname.lastname@example.org
or 860-702-3553 for assistance.
Very truly yours,
THOMAS C. WOODRUFF, Ph.D.
Attachment: Payroll Cut-Off schedule
1 Detailed eligibility guidelines for each Plan, can be viewed on the Defined Contribution Plan web site – www.CTDCP.com
2 For a retiring employee,"Normal Retirement Age" should be your current age. For a terminating employee, enter age 65 or older.
3 Effective September 1, 2014, ING will change its name to VOYA
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