Pre-tax 403(b) Contributions
- Contributions are deducted from your gross salary before taxes are calculated.
- Contributions and earnings grow tax-deferred until you take a distribution.
After-tax 403(b) Contributions (Roth)
- Contributions and earnings grow tax-free. This may be attractive to those who believe that their personal tax rates will increase over time and their tax rate may be higher in retirement.
- Withdrawals will not be subject to taxes if they are part of a "qualified distribution." A qualified distribution is one that is taken at least five tax years from the year of your first Roth 403(b) contribution and after you have attained age 59 ½, become disabled or die.
- You may contribute to the Roth 403(b) regardless of income level.
The total combined contributions cannot exceed the year's contribution limit (see below). Please note your SBVIP contributions are not matched by your employer. Social Security tax is paid on the deductions whether pre-tax or Roth, and contributions to SBVIP have no effect on future Social Security benefits. Your SBVIP funds should be regarded as unavailable until you reach age 59 ½ or separate from a Participating Employer, with the exception of a Loan or Hardship Withdrawal described below. Any early withdrawals from your pre-tax contributions will be subject to federal income taxes, and a 10 percent penalty may apply.
Almost all community and technical college system employees are eligible to participate in the SBVIP at any time regardless of whether they are enrolled in a retirement plan. Those not eligible to participate include:
- Students whose wages are exempt from FICA
- Nonresident aliens who receive no U.S.-source earned income
- Non-permanent employees working less than 20 hours per week who have and are expected to work less than 1000 hours in a calendar year.
View the list of TIAA (Teachers Insurance and Annuity Association) investment options.
The IRS sets annual limits on total contributions to defined contribution retirement plans like the State Board Retirement Plan (SBRP) and SBVIP. However, the mandatory SBRP contributions taken from your salary are not counted against your voluntary contribution limits.
You can contribute as little as $15 per pay period and as much as 75 percent 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 2020 is $57,000. An additional $6,500 is allowed if you are age 50 or for those who work for the same employer for at least 15 years, an additional $3,000 may be allowed. More detail on these additional amounts can be found in Catch-up Contributions.
The maximum amount you can contribute to your SBVIP under PERS, TRS, or the SBRP is:
- $19,500 — If you are under age 50
- $6,500 — For age 50 or over; Catch-up Contributions
- $3,000 — 15 year; Catch-up Contributions
Contributions under other employer plans also count towards the limits as do certain individual plans. If you have contributed to a plan with another employer in the same tax year, please notify your Benefits Office immediately so that your limit can be evaluated.
For more information regarding the changes for 2020, view the following news release from TIAA: IRS Announces 2018 Plan Contribution and Benefit Limits.
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 at any time during the calendar year. The catch-up contribution is $6,500 for 2020, and is included in the limits listed above.
An additional $3,000 per year (to a lifetime limit of $15,000) may be deferred for employees who have worked for the same employer for 15 years.
Your Participating Employer reserves the right to stop or return SBVIP contributions to prevent over-deferrals. Current participants can get their year-to-date deferral amounts from their employer(s).
At age 59-1/2 or greater: Once you reach this age, you can access your SBVIP contributions regardless of your employment status according to IRS regulations.
Pre-tax SBVIP: Upon withdrawal, normal taxes will apply unless you roll your SBVIP into another tax-protected vehicle such as an IRA.
After-tax Roth SBVIP: Qualified distributions may be taken at least five tax years from the year of your first Roth 403(b) contribution and after you have attained age 59 ½, become disabled, or die. See IRS Publication 571 for further details.
Prior to Age 59-1/2 — Loan and Hardship Withdrawals: When unexpected financial hardships occur, you may find that you need to explore all your options including tapping into any SBVIP savings. There are special rules about accessing these funds for hardship situations. See the SBVIP plan document for more information.
The community and technical college system 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 be invested and 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, you may wish to explore participation in the SBVIP and WSDCP. IRS regulations allows employees to participate in their basic retirement plan, a 403(b) plan (like the SBVIP) and a 457(b) plan (like 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. Visit the WSDCP website or view the SBVIP and DCP Comparison document for more information.
When making contributions to the SBVIP, 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 IRS rules for the Saver's Tax Credit to see if you qualify.
Disclaimer: If there are any discrepancies between this website and the provisions of the SBRP Plan Document, the Plan Document will prevail.
Last Modified: 2/27/20 4:29 PM