Navigating Your Future: A Guide to UCLA's Retirement Plans with Fidelity Investments

Planning for retirement is a significant financial undertaking, and the University of California (UC) offers a comprehensive suite of retirement plans to support its employees. Administered by Fidelity Investments, these plans provide a strong foundation for a secure future. This article explores the various retirement savings options available to UC employees, focusing on the voluntary pre-tax retirement savings accounts: 403(b) and 457(b), in addition to touching on UCRP, CAP, and DCP.

Understanding UC's Retirement Plan Landscape

UC's primary retirement benefits are designed as a collaborative effort, with costs shared between employees and the university. Beyond the core retirement benefits, UC provides additional avenues for employees to enhance their retirement savings through voluntary contributions. These include the 403(b) and 457(b) plans, both administered by Fidelity Investments.

Voluntary Pre-Tax Retirement Savings Accounts: 403(b) vs. 457(b)

UC offers its employees two voluntary pre-tax retirement savings accounts: 403(b) and 457(b). Employees have the option to contribute to either the 403(b) or the 457(b), or even both simultaneously, allowing for greater flexibility in their retirement savings strategy. Both plans offer unique benefits and features. Let's delve into a detailed comparison of these two accounts:

Eligibility and Contributions

Eligibility: All UC employees are eligible to participate in both the 403(b) and 457(b) plans.
Pre-tax Contributions: Contributions to both plans are made on a pre-tax basis, meaning that the amount contributed is deducted from your taxable income, potentially lowering your current tax liability.
Tax-Deferred Growth: Both plans offer tax-deferred growth, meaning you won't pay taxes on any earnings until you withdraw the money in retirement.
Administration Fees: There are no administration fees associated with either the 403(b) or 457(b) plans.
Investment Options: Participants in both plans have access to a diverse array of investment options to suit their individual risk tolerance and financial goals.
Deferral Limits: The deferral limits for both plans are the same. For example, in 2009, the limit was $16,500, or $22,000 for those over age 50.
Contribution Method: Contributions can be made as a percentage of your salary or as a flat dollar amount in both plans.
Catch-up Provision: Both plans offer a catch-up provision, allowing those nearing retirement to contribute more.
Simultaneous Participation: Employees can participate in both the 403(b) and 457(b) plans simultaneously.
Payroll Deduction Enrollment/Changes Deadlines: The deadline for the 403(b) and 457(b) are not the same. For 403(b), the deadline is different each month. Generally, if the request is processed 5 business days before the "pay-compute date," the change will be reflected in the next month's paydate. (PST) on the last business day of the month for next month's earnings. For example, 2-28 for March earnings which is the 4-1 paydate for monthly payroll (earlier paydate for bi-weekly payroll).

Distributions and Rollovers

Distribution After Separation from Service: Yes. A distribution can be requested 30 days after separation date.
Rollover Eligible: Both plans are rollover eligible.
Incoming Rollovers: Both plans allow incoming rollovers. The 403(b) plan accepts rollovers from 401(k), 403(b) and 457 public plans, but not from a 457 private plan. The 457(b) plan has the same rollover options.

Key Differences: Accessing Your Funds

One of the most significant differences between the 403(b) and 457(b) plans lies in the accessibility of funds before retirement:

In-Service Distributions (403(b)): The 403(b) plan allows in-service distributions after age 59.5, in cases of permanent disability, or for financial hardship due to six very specific reasons.
In-Service Distributions (457(b)): The 457(b) plan generally does not allow in-service distributions, except in the case of an unforeseeable financial emergency for very specific, very limited reasons.
Early Distribution Penalty (403(b)): Early distributions from the 403(b) plan are subject to a 10% federal and 2.5% state penalty.
Early Distribution Penalty (457(b)): The 457(b) plan typically does not have an early distribution penalty, except for funds that were rolled into the plan from a plan that was subject to a penalty, i.e. (PST).

Loans

Loans (403(b)): The 403(b) plan allows for loans.
Loans (457(b)): Loans are not currently offered in the 457(b) plan.

Investment Options within UCLA's Retirement Plans

UC employees are provided with a diverse array of investment options to align with their individual financial goals and risk tolerance. These options are categorized to help investors make informed decisions.

Core Investment Funds

These funds are designed for investors seeking a simplified, diversified approach to retirement savings, offering convenience and a one-stop solution.

Single, Diversified Investment Options: These options include UC Pathway Funds with target retirement dates ranging from 2010 to 2055, as well as a UC Pathway Income Fund. These funds automatically adjust their asset allocation over time, becoming more conservative as the target retirement date approaches.
Primary Asset Class Options: For those comfortable building their own diversified portfolio, UC offers broad-based asset class funds, including:
- UC Savings Fund
- UC ICC (Insurance Company Contract) Fund
- UC Bond Fund
- UC TIPS (Treasury Inflation-Protected Securities) Fund
- UC Domestic Equity Index Fund
- UC Equity Index Fund
- UC Balanced Growth Fund
- UC International Equity Fund

Specialized Asset Class Options

These options allow investors to supplement their broad-based portfolios with specialized asset class funds:

Vanguard Small Cap Index Fund - Admiral Shares
Dimensional Emerging Markets Portfolio
Vanguard REIT Index Fund - Admiral Shares
Vanguard Calvert Social Index Fund - Investor Shares

Self-Directed Brokerage Accounts (SDBAs)

For more experienced investors seeking greater control and flexibility, SDBAs offer access to a wider range of investment options. However, fees may apply. Options include:

Fidelity Investments: Access to more than 150 Fidelity Investments Funds.
Calvert Group: A selection of 13 socially conscientious investment funds.
Vanguard Admiral: Treasury Money Market Fund.

Staying Vigilant: Cybersecurity and Your Retirement Savings

In the digital age, cybersecurity is paramount. In the past, a limited number of UC Retirement Savings Program accounts, administered by Fidelity Investments, have been the targets of separate incidents of fraudulent activity . It is crucial to remain vigilant and take proactive steps to protect your retirement savings.

Monitor Your Accounts: Regularly sign into your Fidelity accounts - UC accounts at www.netbenefits.com and personal Fidelity retail accounts at www.fidelity.com - to ensure your information is accurate and up to date.
Utilize Fidelity's Resources: Fidelity provides a checklist of tools and resources to help you protect your account.
Report Suspicious Activity: Immediately report any suspicious activity to Fidelity and your location's IT security team.
Strengthen Your Security: Take advantage of the cybersecurity resources offered by your location, including multi-factor authentication applications and resources for reporting potential phishing attacks.

Seeking Personalized Guidance

Navigating the complexities of retirement planning can be overwhelming. UC and Fidelity Investments offer resources to assist you in making informed decisions:

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Fidelity Retirement Services: Contact Fidelity directly at (866) 682-7787 for questions about your accounts.
One-On-One Consultations: Schedule a confidential one-on-one retirement counseling appointment with a Fidelity Investments Retirement Planner by calling (800) 558-9182.
Director, Retirement Planner, Andrew Fung, CRPC®: Meet with Director, Retirement Planner, Andrew Fung, CRPC to ask questions about accounts remaining within the University of California Retirement Savings Program or review financial planning for your individual and specific situation. As a Fidelity Director/Retirement Planner, Andrew has more than nine years with the company. He was previously a Financial Consultant at the Fidelity Pasadena Investor Center. Registered and licensed in California, Andrew holds a bachelor’s degree in Business Administration from the University of California, Riverside. Andrew will be able to access your account and run various financial planning tools. These sessions are confidential and are conducted in a one-on-one private-setting format at the Emeriti/Retirees Relations Center. Andrew Fung can schedule time with you for a phone or virtual one-on-one consultation.

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