Academic Affairs Manual (ACD)

Effective: 7/1/1978

Revised: 1/1/2000

ACD 606: Tax-Sheltered Plans

Purpose

To allow faculty members and academic professionals to defer a set amount of salary from federal and state income taxes

Sources

Internal Revenue Code §§ 403(b) and 457

Arizona Board of Regents Policy Manual - 6–603

Applicability

Faculty and academic professionals who are contributing participants in approved retirement plans

Policy

An eligible faculty member or academic professional may, upon voluntary written agreement, elect to accept a reduction in salary. The university shall execute a nonforfeitable annuity, mutual fund, or deferred compensation contract for each faculty member or academic professional electing a reduction in salary. The amount of the contract will equal the amount of the agreed salary reduction.

Only one salary reduction agreement may be entered into by an eligible employee for each calendar year, or tax year if otherwise designated. However, an agreement may be stopped at any time for amounts not yet earned.

Each participating faculty member or academic professional may specify, within the terms of the written salary reduction agreement, the company with which the deferred compensation, tax-sheltered annuity, or mutual fund will be purchased. The company must be on the university’s approved list.

The salary reduction agreement shall be no less than $200 per year, and no more than the maximum exclusion allowance, unless the employee is eligible for the special catch-up provision, which may allow a yearly exclusion of $13,500 for no more than five years.

ProcedureD

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Responsibility	Action
Faculty member or academic professional	Obtain a list of approved companies from Human Resources (HR). Contact an agent to arrange an annuity contract. Execute a salary reduction agreement.
Agent	Send the salary reduction agreement to HR.
Human Resources (HR)	Review the salary reduction agreement and arrange for deduction of premiums from the faculty member’s or academic professional’s salary.
	Transmit the individual’s premiums to the appropriate company.

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