UC DCP Questions [Univ. of CA Defined Contribution Plan]

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emp2b3
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UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by emp2b3 » Wed Feb 09, 2011 2:00 am

I am in the process of cleaning up all of my investments. I did a search about DCPs on this site and read all of the associated threads, but I still have a few questions about this type of plan. We currently contribute 7.5% of our gross income to the UC DCP (listed as 401a on Fidelity website) on a pre-tax basis. I have been matching this w/ an additional 7.5% of my income on an after-tax basis. I will likely be at this job for the next 1.5-4.5 years. I am already maxing out my Roth IRA each year.

1. Is there any obvious reason that it would make more sense to instead contibute that money to a 403b or 457b plan? Those plans as well as the DCP all offer the same fund choices. From my reading it seems that the 457b is a bit more flexible than the 403b, but I am still working on understanding all of the nuances.

2. It appears that I would be able to roll over the DCP to another employer based savings plan vs my Roth once I leave this position and would pay taxes on the gains only from the pre-tax portion of the contributions? In the next ~5 years I will no longer be able to contribute directly to a Roth IRA, but could not tell from my reading if the DCP rollover is affected by the 'back-door' method of funding a Roth that is currently available.

3. I also want to verify that the after-tax contributions to the DCP are tax-deductible, and if this would be the same w/ the 403b and 457b.

Thank you so much for your help.

Shawn
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Re: UC DCP Questions

Post by Shawn » Wed Feb 09, 2011 4:43 pm

I have funds in UC's 403b, 457, and 401a plans. The differences in the plans seem rather subtle, at least for my situation, so I don't prefer one over another. I don't believe it matters too much where you park your pre-tax contributions. I'll probably roll everything into a single UC plan when I retire if only to simplify my life. Personally, I think the investment options in the plans are pretty good so I don't see compelling reasons to roll them over into another employers plan. In fact, I'd be more likely to do the reverse.

If you are maxing out the tax-deferred opportunities in the plans (i.e., a combined $33K/yr or $44K/yr if over 50), then making after-tax contributions to the DCP plan is a good strategy. The DCP plan allows in-service distributions of after-tax contributions (and their earnings) so you can fund a "backdoor Roth" in this way. As an added benefit, the plan does not charge a fee (through Fidelity) for performing a DCP -> Roth rollover. You may want to do this at least once a year so significant earnings do not accumulate on the after-tax contributions. This can be done with a single phone call to Fidelity. Also, UC/Fidelity keep pre- and after-tax earnings separated even after you leave UC employment. So you can do an after-tax to Roth rollover at anytime.

If you are not maxing out the tax-deferred opportunities in the 403b and 457 plans, then it *may* be more advantageous to take the tax deferral rather rather than making after-tax contributions to the DCP plan. An exception might be if you expect a significant defined benefit pension from UCRP or another employer.

If I'm understanding your question, no, the after-tax contributions to the DCP are not tax deductible (that's why they are called after-tax contributions). And I believe you can make only pre-tax contributions to the 403b and 457.

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emp2b3
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Post by emp2b3 » Thu Feb 10, 2011 1:58 am

Thank you very much for the response. So far I have not contributed anything to the 403b, so at this point it seems that I should change my after-tax DCP contributions from the DCP to pre-tax contributions to that.

Making sure that I am understanding you correctly, I can roll over the after-tax contributions that I have accumulated up until this point to my Roth IRA located at a different institution? And this does not count toward the $5000 yearly limit? If that is the case, I would have to decide if makes any difference whether to contribute to the DCP and rollover yearly to the Roth vs just contribute pre-tax to the 403b. I have to agree with you that I am impressed with the fund choices offered through the program after having read about some of the very limited 401ks offered to other forum contributors.

Thanks again for any guidance.

Shawn
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Post by Shawn » Thu Feb 10, 2011 8:14 pm

Yes. You can roll over the after-tax contributions that you have accumulated up until this point to your Roth IRA located at a different institution. This is despite the fact that you are already maxing out your Roth IRA at $5K/yr. Since you have already paid taxes on these after-tax contributions, this part of the roll over will be tax free.

Two caveats. First, you also will need to roll over the earnings on the after-tax contributions and these earnings will be taxable if you roll them into the Roth IRA. There are ways around this, but they may be too complicated especially if the earnings are relatively small. Second, it may be logistically easier to roll the after tax contributions (and their earnings) into a Roth IRA at Fidelity. If you do this, the whole process can be completed with a single phone call to Fidelity as opposed to worrying about the involvement of another institution. It should be relatively easy to combine the two Roth IRA's at a later date.

Personally, I will contribute $32.5K to a Roth IRA this year by making after-tax contributions to my 401k, and then rolling these contributions over into a Roth IRA (I'm no longer with UC, but I have a similar 401k plan at my current employer). I will contribute another $6K to a Roth IRA by rolling over after-tax contributions made to a traditional IRA (I'm above the income limit for direct Roth IRA contributions and I can contribute $6K due to the $1K over 50 catchup provision). And this is money that would otherwise go in a taxable investment account. This "backdoor Roth" mechanism is a free lunch. So far I've contributed about $200K to a Roth IRA using this process.

It may not be optimal to make after tax contributions to an employers retirement plan unless you plan to immediately roll the funds over into a Roth IRA (immediately is defined as "before significant earnings have developed," perhaps within a year or two). The reason is that the earnings on these contributions will be taxed at your full income tax rate when you withdraw these funds. Normally, it is better to either put these contributions into a pre-tax retirement account or if that is not possible to put them in a taxable investment account. If they are in a taxable investment account, then the equity portion of the portfolio gain will be taxed at the lower capital gains rate.

In other words, contributing after-tax dollars to a non-Roth retirement account is not the same as contributing to a Roth IRA.

In your case, given the information provided, I probably would 1) roll your after-tax 401a contributions (and their earnings) into a Roth IRA; 2) change my after-tax contributions in the 401a to pre-tax contributions (to the 401a, 403b, or 457). Alternatively, you can continue to make after-tax contributions to the 401a, but this may be beneficial only if you immediately roll these contributions over into a Roth IRA.

But before you take my word for it, make sure you understand how all the issues are related to your specific situation.

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emp2b3
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Post by emp2b3 » Thu Feb 10, 2011 9:08 pm

Thank you very, very much for the thorough reply. I believe what you are saying is all correct from what I am reading on the UC website and in other similar Boglehead threads. Just in case, I will call the HR department to verify before asking for the distribution. I am fortunate in that the after-tax contributions are so far have not accumulated significant gains so the tax hit should be minimal.
Thank you again for your time. Please know that this information will benefit many of my colleagues who are even more lost than I am ;).

AlexC
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Post by AlexC » Sun Feb 13, 2011 1:20 am

Shawn, do you roll the after tax DCP funds into a new Roth IRA every year or the same one (ok, I know this is a lame question but I wasn't sure)? My SO also works for UC and we're considering doing this. Also, so that I understand correctly, are you saying not to let the after tax funds grow too large since you will have to pay regular income tax on any earnings that have accrued when the funds are rolled into the Roth? Many thanks for pointing out this useful strategy!

Shawn
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Post by Shawn » Sun Feb 13, 2011 4:26 pm

I roll the after-tax contributions (and their earnings) into the same Roth every year. To be honest, I'm no longer with UC, but the 401k plan at my current employer is effectively identical to the DCP 401a plan at UC. So I have one Roth that contains the former after-tax contributions to the UC 401a and also the after-tax contributions to my current 401k. Everything is managed at Fidelity (401a, 401k, and Roth), which makes the rollover process trivial. I do it once a year. All it takes is a single phone call that lasts 10 minutes or so.

Yes, because you have to pay taxes on the earnings, it's best to perform the 401a,k->Roth rollover before significant earnings on the after-tax contributions have developed. That's why it's good to perform the rollover at least once a year.

In fact, while the after-tax funds are in the employer plan, it may be best to invest them in the the Savings or even better the ICC fund. This is a little hard to explain, but if the funds are invested in equities, you have to pay taxes on the gains but you don't get any tax benefit if you have negative earnings at rollover time (which could easily be true for equity investments). While this isn't true for most investment scenarios (i.e., it's better to pay significant taxes on significant gains rather than minimal taxes on minimal gains), with a 401-Roth rollover spanning a limited time window (e.g., one year), it's better to have a small positive return (Savings or ICC fund) that is nearly guaranteed, rather than a mixed probability of having large gains or large losses (an equity fund).

AlexC
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Post by AlexC » Sun Feb 13, 2011 9:17 pm

Thanks so much for the detailed explanation. All our aftertax 401a investments are in a UC bond fund but your idea of going savings or ICC is a good one.

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emp2b3
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Post by emp2b3 » Mon Feb 14, 2011 7:47 pm

An update in case it helps future UC members: I called today and had the after-tax contributions + earnings on those contributions released for roll-over into my Roth IRA at TD Ameritrade. It was an easy process done by phone in about ten minutes. They send you two checks made out to your broker that for which you are responsible for forwarding to the appropriate institution. When my wife tried to do the same they told her it was not possible without signatures etc. She called back and spoke to someone else and it went through with no problem, so realize that some of the customer service agents may not be familiar with the procedure.

hrwallace
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Re: UC DCP Questions

Post by hrwallace » Tue Jul 07, 2015 1:10 pm

Hi guys,

I'm new to the forum but have been doing a lot of reading here, on various other sites, and through various books. I wanted to check back in on this thread to see if anyone has used this tactic of making after-tax contributions to the UC DCP plan and rolling over 1+ time per year to a Roth IRA at Fidelity recently? I know that the IRS has announced various Notices in the past few years that change these issues slightly, but from everything I've read it should still be possible.

Is anyone still using this technique, and if so, do you guys have any tips on how to go about putting it into process? I'm a new resident physician here and when I asked the Fidelity representative about it at our orientation she just had NO idea what I was talking about and didn't seem to think it would be possible.....

I'm planning to survive during residency on some funds that I've built up through the years working, and I'm hoping to contribute 100% of my after-tax to the DCP and rollover all of it on a regular basis to my Roth IRA at fidelity. Any issues with this recently?

Thanks!

DVMResident
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Re: UC DCP Questions

Post by DVMResident » Tue Jul 07, 2015 3:37 pm

The 401(a), 403(b), and 457 are very similar and there's not a lot of advantage of using one over the other.

If you're a young lifer in the UC system, I would favor the 457 because it allows for withdraw before 59.5 years of age after employer separation without the 10% plenty. This is an extra layer of ER funds in case of job loss and would be useful if you're planning early retirement.

The disadvantage is 457s can't be only be rolled over to other 457s, which is not an issue as the UC 457 is an excellent plan. You'll just have one more account to keep track of.

You can use both the 403(b) and 457 to effectively double your pre-tax space to $36k/yr, but it doesn't like you need that much space. As mentioned above, the UC 401(a) post-tax money does allow for backdoor IRA conversions.

DVMResident
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Re: UC DCP Questions

Post by DVMResident » Tue Jul 07, 2015 4:13 pm

hrwallace wrote:Is anyone still using this technique, and if so, do you guys have any tips on how to go about putting it into process? I'm a new resident physician here and when I asked the Fidelity representative about it at our orientation she just had NO idea what I was talking about and didn't seem to think it would be possible.....


I was in the UC system for a number of years. I preformed several 401(a) to backdoor IRA conversions-most recently December, 2014 (my last for the UCs).

My experience with the Fidelity reps has been hit or miss. I've been told it's not possible only to call back to get a different rep and get everything completed in a few minutes. If you run into a rep that doesn't know what they're doing, hang up and call back until you get a knowledgeable rep. Kind of a pain, but worth the effort.

If there wasn't a BH thread describing the process, I would have believed the first rep. Thank you BH forum! :beer

Alan S.
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Re: UC DCP Questions

Post by Alan S. » Tue Jul 07, 2015 5:16 pm

Note that IRS Notice 2014-54 applies to your rollovers from the after tax account to your IRA accounts.

Therefore, if the amount of earnings are more than you want included in your taxable income, most plans will allow you to specify that the taxable amount be directly rolled into your TIRA, and the non taxable amount (your AT contributions) to your Roth IRA. There will be no current taxable impact. Of course, if you otherwise feel that the earnings amount is too small to warrant separating OR if your current tax rate is less than what you expect your rate in retirement to be, then doing a taxable Roth rollover would be to your benefit and you would not benefit by isolating only the basis amount to your Roth IRA.

hrwallace
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Re: UC DCP Questions

Post by hrwallace » Wed Jul 08, 2015 10:04 am

Thanks for your responses. Yeah, my plan's mandatory pre-tax contribution (in lieu of SS tax) doesn't allow in-service distributions/withdrawals, but the after-tax contributions and earnings do. So, I think probably once per month I'll move my after-tax and minimal earnings over to the Roth IRA that I created at Fidelity. You're right about the reps being hit or miss -- yesterday I talked to two different ones, one who said it was impossible and a second who said of course it's possible. Go figure.

One more question. Apparently across our plans we're only allowed to contribute 70% of our income to retirement plans. Do you guys think this is pre-tax income or would after-tax count too? As in, could I contribute approximately 100% of my total after-tax income assuming 30% of my total pre-tax income will go to tax? The representative I talked to yesterday couldn't answer that for me...

DVMResident
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Re: UC DCP Questions

Post by DVMResident » Wed Jul 08, 2015 10:51 am

hrwallace wrote:One more question. Apparently across our plans we're only allowed to contribute 70% of our income to retirement plans. Do you guys think this is pre-tax income or would after-tax count too? As in, could I contribute approximately 100% of my total after-tax income assuming 30% of my total pre-tax income will go to tax? The representative I talked to yesterday couldn't answer that for me...


I'm not sure. I was allowed to set my contributions to 100%, but I may have been an odd case.

I was an employee (resident) turned student (PhD combination). During the student years, I was "student" (paid through the Procurement office...because you buy grad students like capital equipment :confused ) for 3/4 of the year and an "employee" in the summer (paid through the Payroll office). While on student status, I could not contribute. During the employee/summer time, I could contribute 100% of my salary to the after-tax 401(a). Fidelity gladly accepted the money and Payroll didn't stop it.

You could always try to set the contributions to 100% on Fidelity's website and see what happens. If you're not allowed to, the website should not allow it.

StarTrekFan
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Re: UC DCP Questions

Post by StarTrekFan » Mon Oct 12, 2015 12:27 am

Been with UCSD for nearly two years and just found out about the backdoor Roth IRA option via our DCP. To date been maxing out on the 403 and 457 plans.

Great answers to my own questions above--especially on the distributions to the Roth IRA I have a very old Roth IRA from residency days and will be resurrecting that one for the distributions.

As to electing amounts; I have option to choose up to 100% on the DCP (didn't try it). We did max out earlier this year of the $18k each into 403 and 457 plans so nice end-of-year push into the DCP now that we changed that online.

My question that I fear won't be answered consistently correct by our HR --- how to determine if we fall into the 'highly compensated' category and trigger the cap limits for this?

standupguy
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Re: UC DCP Questions

Post by standupguy » Tue Jun 21, 2016 6:12 pm

Hi all,

I didn't want to create a new post as there is great advice above. I am a new physician intern starting this summer at the UC system making about 54k per year. Like above, the UC offers a mandatory 7.5% DCP pretax and optional 403b, 401a post-tax, and 457.

My situation: Married to higher income earner, married filing separately for loan repayment purposes. Do not qualify for ROTH IRA contributions.

I was just wondering what my general approach would be starting off. My original plan was to start a Traditional IRA, put post-tax contributions in and convert shortly thereafter to a ROTH IRA up to the $5500. My first question is, for CONVERSIONS to a ROTH IRA, is there a limit?

After my HR meeting yesterday, they proposed that I could and/or should go the 401a DCP route and roll it over into a ROTH and that the 403b pretax shelter may not be of much tax benefit given my lower tax bracket at this time. Realistically, I could put 6-7k in addition to the $5500 by December of this year and then contribute the 17500 and 5500 for next year. My question is, should I do the

Mandatory DCP+403b + Trad IRA ->Roth IRA conversion or
Mandatory DCP+Post tax DCP-> ROTH IRA conversion?

On another side note, what are some of the better funds in the fidelity options? Are most doing the Target date funds?

Thanks!

stochastic
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Re: UC DCP Questions

Post by stochastic » Tue Jun 21, 2016 6:32 pm

There are a lot of options with the UC savings plan. If you are expecting your joint income to be higher in the future and in retirement after-tax contributions may be the way to go. In this case contribute to the UC DCP after-tax. Rolling it over to a Roth IRA is then very easy, if it's with fidelity you can call them and have it done in a couple of minutes and the funds are available the next day. I've been doing this every month so that earnings don't build up in the account and so minimize any taxes on earnings when you do the transfer. You can really contribute a lot this way since it's not counted in the 18000 limit, the only limit is 53,000 per year for all your UC contributions including the mandatory DCP ones (but not including the 457).

In the IRA the fidelity retirement funds are ok but have a fairly high expense ratio so I've tended to buy directly Fidelity Total Market Index Fund (FSTVX ) and Fidelity® International Index Fund (FSIVX) and hold bonds elsewhere.

standupguy
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Re: UC DCP Questions

Post by standupguy » Tue Jun 21, 2016 7:04 pm

See below*
Last edited by standupguy on Tue Jun 21, 2016 9:50 pm, edited 1 time in total.

standupguy
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Re: UC DCP Questions

Post by standupguy » Tue Jun 21, 2016 7:12 pm

stochastic wrote:In the IRA the fidelity retirement funds are ok but have a fairly high expense ratio so I've tended to buy directly Fidelity Total Market Index Fund (FSTVX ) and Fidelity® International Index Fund (FSIVX) and hold bonds elsewhere.


By directly do you mean you have a separate brokerage account? Or that you aren't using the target date funds? Or are most doing separate brokerage accts?

Also, how are you able to keep track of the small growth in the account for tax purposes?

stochastic
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Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by stochastic » Wed Jun 22, 2016 12:17 am

I was a bit worried about the tax side of it but Fidelity gives you a tax document that summaries the information you need. I did it for the first time last year and it was a little confusing what to enter on turbo tax but no too bad. But I also keep track of conversions separately on a spreadsheet because if something happened and I want to make an early withdrawal from the Roth IRA then you need that info (in which case it would get a bit complicated, particularly if it's been less than 5 years).

I don't use the fidelity target retirement funds, the expense ration is much higher than the UC one which I have in much pre-tax accounts. At my age and probably yours too target retirement funds are almost all stock anyway so I just go with buying stock funds in the IRA.

standupguy
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Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by standupguy » Wed Jun 22, 2016 12:23 am

Yeah as of right now, I'm defaulting into the UC target fund for my pre-taxDCP. I haven't even created the ROTH yet as I haven't had any paychecks yet. I'm just trying to get squared away before things get busy. Still doing my do diligence on contributing to post-tax dcp vs 403b/457. My tax bracket will be at 25%, possibly 15% if I decided to max out the 18k next year, not sure if it'd be worth it.

stochastic
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Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by stochastic » Wed Jun 22, 2016 1:21 am

Since this is the lowest tax bracket you are likely to be in from now on then I'd probably say go with the ROTH particularly if your marginal rate is 15%. In the 25% bracket it may not make much of a difference unless you have a very high income in retirement which is quite possible with two high income. You can also do a mix of the two if you can't decide. Of course who knows what the tax rates will be in several decades time at retirement.

I'm about to leave UC and moving has made me appreciate how good it is in terms of letting you save a lot. Take advantage while you can.

standupguy
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Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by standupguy » Wed Jun 22, 2016 8:58 am

stochastic wrote:Since this is the lowest tax bracket you are likely to be in from now on then I'd probably say go with the ROTH particularly if your marginal rate is 15%. In the 25% bracket it may not make much of a difference unless you have a very high income in retirement which is quite possible with two high income. You can also do a mix of the two if you can't decide. Of course who knows what the tax rates will be in several decades time at retirement.

I'm about to leave UC and moving has made me appreciate how good it is in terms of letting you save a lot. Take advantage while you can.


Either way I'd do the roth whether its through trad ira +backdoor conversion (and save rest in 403b) or rollover from post-tax dcp into ROTH

DVMResident
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Re: UC DCP Questions

Post by DVMResident » Wed Aug 03, 2016 6:49 pm

standupguy wrote:After my HR meeting yesterday, they proposed that I could and/or should go the 401a DCP route and roll it over into a ROTH and that the 403b pretax shelter may not be of much tax benefit given my lower tax bracket at this time. Realistically, I could put 6-7k in addition to the $5500 by December of this year and then contribute the 17500 and 5500 for next year. My question is, should I do the


That's what I did. Good idea.

Been a couple of years. Good to hear the option is still there. The 401(a) is not limited to the $18k limit (it's $18k now, not $17.5k). You can go up to $53k/yr including the mandatory. The $18k limit is the tax advantaged limit. $53k is the 'after-tax' limit-which is a mute point after the ROTH conversion as it will all be tax advantaged. Of your two options, #2 is simpler, but both get you the same place.

As an aside, I'm shocked HR would know about it let alone suggest it (for liability). But kudos to them.

Happy savings :beer

standupguy
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Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by standupguy » Sun Aug 07, 2016 12:36 am

It wasn't outright suggested, just mentioned. I did a lot of thinking and running numbers and have changed my views on these next three years for me.
170k at 6%
I have decided to prioritize my student loans. After my required dcp contribution, I make $3700 per month. As my wife supports us on her salary, I will be putting $2700 to my loans every month and saving the $1000 in either a short term savings vs. bonds that would be easily accessible with the goal being saving for a house and fund yearly vacations. By the end of residency $97k will be paid off.

StarTrekFan
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Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by StarTrekFan » Wed Sep 14, 2016 1:11 am

As a general rule of thumb, paying off any loan (short of mortgages) is better than savings/earnings.

Caveat to student loans -- depending on your Post-Residency destination, often times one can garner medical loan paybacks. One large employer offers this -- The VA. I took advantage of that program and they paid nearly $45,000 in Federal Loans off.

That said, for savings of any high earning family: the UC - DCP Post-Tax Plan is THE plan to utilize fully before the 403b and 457 plans. 'distribution' out to your Roth IRA is easy and any earnings during that short time can be swept into a Rollover IRA at the same time to keep the DCP account 'clean'.

Taxes are at historic lows for high earners and will not last. Getting money into Roth IRA any way possible is key. It's also a great Generational Estate tax avoidance mechanism for those really lucky few that estate plan.

malbecman
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Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by malbecman » Tue Feb 07, 2017 7:45 pm

UC employee here, just stumbled on this thread...lots of great information here. Just to clarify for any future readers, any
post-tax contributions to the DCP post-tax account must be made through payroll deductions. You can't just write a check from some
account outside UC and send it in (which is what I was originally thinking of doing).

If you had outside money, however, you could conceivably do the payroll deductions (up to 53K per year) into the DCP, backfill that amount into your daily
checking account from the outside acct and probably also lower your tax bracket. :)

plan
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Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by plan » Wed Feb 08, 2017 8:15 pm

Same question: are after tax DCP contributions limited?
I contribute the maximum permitted pretax, and 100% of the rest to after tax DCP and then do regular roll-overs.

The UCB/Fidelity website does not balk at the 100%, but I wonder if some other IRS limitation applies that I may not be aware of?

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inittowinit
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Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by inittowinit » Wed Feb 08, 2017 8:21 pm

plan wrote:Same question: are after tax DCP contributions limited?
I contribute the maximum permitted pretax, and 100% of the rest to after tax DCP and then do regular roll-overs.

The UCB/Fidelity website does not balk at the 100%, but I wonder if some other IRS limitation applies that I may not be aware of?


I am also a UC employee. From the UC DCP plan booklet:

"The maximum amount participants may contribute annually to
the After-Tax Account is determined by the IRC §415(c) limit.
Generally, this amount is the lesser of:
• 100 percent of the participant’s adjusted gross UC salary or
• $53,000 (in 2016)
This limit applies to all annual additions as defined in IRC
§415(c)."

Link to PDF: https://www.google.com/url?sa=t&rct=j&q ... 0w&cad=rja

I believe there may also be a combined limit on your 457, 403b and 401a (DCP) contributions of $53k. This is the important point and worth calling a Fidelity rep and asking (sometimes they are wrong on these points as well, especially when it comes to after-tax voluntary contributions, so I would make sure you are speaking to a true expert in this area before trusting their advice; I've been burned before...).
Last edited by inittowinit on Wed Feb 08, 2017 8:24 pm, edited 1 time in total.

stochastic
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Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by stochastic » Wed Feb 08, 2017 9:07 pm

inittowinit wrote:
I believe there may also be a combined limit on your 457, 403b and 401a (DCP) contributions of $53k. This is the important point and worth calling a Fidelity rep and asking (sometimes they are wrong on these points as well, especially when it comes to after-tax voluntary contributions, so I would make sure you are speaking to a true expert in this area before trusting their advice; I've been burned before...).


The 53k limit is combined with the DCP and 403b but not the 457.

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inittowinit
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Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by inittowinit » Thu Feb 09, 2017 3:47 pm

stochastic wrote:
inittowinit wrote:
I believe there may also be a combined limit on your 457, 403b and 401a (DCP) contributions of $53k. This is the important point and worth calling a Fidelity rep and asking (sometimes they are wrong on these points as well, especially when it comes to after-tax voluntary contributions, so I would make sure you are speaking to a true expert in this area before trusting their advice; I've been burned before...).


The 53k limit is combined with the DCP and 403b but not the 457.


Thanks. Is this cited in a plan document somewhere?

plan
Posts: 19
Joined: Sun Aug 26, 2012 6:45 pm

Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by plan » Fri Feb 10, 2017 3:23 pm

IRS document https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-failure-to-limit-contributions-for-a-participant lists the distribution limits:

The types of contributions subject to the limit include:
- elective contributions (pre-tax or Roth) made to 401(k), and salary reduction SEP plans;
- after-tax employee contributions;
- employer matching contributions;
- employer profit-sharing contributions; and
- any employer contributions.


Neither 457 nor 403b is listed, though perhaps the 403b counts as 401(k)?

The IRS document also appears to imply that it's the employer's responsibility to guard against exceeding contributions and taking remedial steps. Further it implies that the 10% early distribution penalty does not apply to the correction.

@inittowinit implies running into problems before ("I've been burned before"), can you elaborate?
In particular, what's the best course of action by the plan participant to "fix" a potential excess contribution?

StarTrekFan
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Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by StarTrekFan » Sun Feb 26, 2017 1:34 am

I've asked our HR without any answer beyond the limits that Fidelity quotes back; so feasibly, one could take out 18k 403b 18k 457 and 50k for DCP.

I've asked about 'highly compensated' limits too without any answer. Unfortunately, haven't had the opportunity to max all three out to date!

Digressador
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Joined: Tue May 02, 2017 7:17 pm

Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by Digressador » Tue May 02, 2017 7:31 pm

As a incoming intern, I am glad to have found this thread. Just a follow-up question from a new investor. In addition to the mandatory pre-tax DCP, I plan to contribute to a Roth IRA (likely Vanguard). Is there any benefit in contributing to the post-tax DCP first and then rolling it over to Vanguard?

stochastic
Posts: 29
Joined: Sun Sep 06, 2015 5:09 pm

Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by stochastic » Tue May 02, 2017 8:56 pm

Digressador wrote:As a incoming intern, I am glad to have found this thread. Just a follow-up question from a new investor. In addition to the mandatory pre-tax DCP, I plan to contribute to a Roth IRA (likely Vanguard). Is there any benefit in contributing to the post-tax DCP first and then rolling it over to Vanguard?
The advantage is that you can contribute more that way. Contributing to a Roth IRA is simpler with fewer steps so I'd only do the post-tax DCP + rollover if plan to contribute more than $5500.

Digressador
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Joined: Tue May 02, 2017 7:17 pm

Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by Digressador » Wed May 03, 2017 1:32 pm

stochastic wrote:
Digressador wrote:As a incoming intern, I am glad to have found this thread. Just a follow-up question from a new investor. In addition to the mandatory pre-tax DCP, I plan to contribute to a Roth IRA (likely Vanguard). Is there any benefit in contributing to the post-tax DCP first and then rolling it over to Vanguard?
The advantage is that you can contribute more that way. Contributing to a Roth IRA is simpler with fewer steps so I'd only do the post-tax DCP + rollover if plan to contribute more than $5500.
That makes sense - thanks!

PeteL
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Joined: Wed May 31, 2017 11:30 pm

Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by PeteL » Wed May 31, 2017 11:35 pm

Hi guys, very helpful information above.

In a similar situation with a 403(b), 457, DCP, and Roth IRA.

I spoke with a retirement planner at Fidelity who said that the way UC is setup you can put 18k into the 403(b), 18k into the 457 and 54k (for 2017) into the DCP which you can then convert to a Roth IRA.

I'm personally a bit confused about the 54k limit and whether you can really put that much into the roth via the DCP as well as max out the other accounts with 18k each year?

Anyone have any similar experience or thoughts?

SandDollar
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Joined: Tue Apr 01, 2014 11:08 am

Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by SandDollar » Thu Jun 01, 2017 8:00 am

I'm personally a bit confused about the 54k limit and whether you can really put that much into the roth via the DCP as well as max out the other accounts with 18k each year?
I'm 24 yr UC employee and only recently discovered the beauty of the UC DCP after tax benefit. :oops:

I just wish I could afford to completely max it out. Because I plan to be in a higher tax bracket at retirement I stopped contributing to 403B and increased my after tax contributions. I still max 457 as a tax hedge.

About once a month I call Fidelity and roll my after tax DCP to my Roth. It's usuallly about a 7 minute calll. Wish this could be done on-line but otherwise easy as pie.

Yes you can do $54k/year after tax. It's incredible.

Avo
Posts: 1097
Joined: Wed Jun 11, 2008 2:21 am
Location: California

Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by Avo » Fri Jun 09, 2017 1:24 am

I'm confused as to how the rollover to the Roth from after-tax DCP can be done without running afoul of the pro-rata rule on distributions.

Here is one article on this point:
Another issue is the pro-rata rule ... The only time this becomes an issue with your 401k is if they allow in-service distributions. You MUST take a FULL withdrawal to avoid the pro-rata (rule 72e8) when you have both pre-tax and after-tax balances.
https://www.whitecoatinvestor.com/the-s ... tribution/

spec007
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Joined: Tue Aug 29, 2017 1:31 am

Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by spec007 » Tue Aug 29, 2017 1:35 am

Any advise is appreciated for my situation as i am completely lost:

UC screwed up my DCP plan account and there is some restriction flag on my Account, that does not allow me to make any changes/withdrawals via Fidelity. Over last 5 months I made multiple calls to UC retirement - they keep saying they are working to resolve it, and there is some mess that happened.

What are the options to get them to fix it? I cannot find any entry point how to arrange magic kick to get them moving. Please advise.

Thank you.

growingup
Posts: 8
Joined: Thu Aug 06, 2015 6:21 am

Re: UC DCP Questions [Univ. of CA Defined Contribution Plan]

Post by growingup » Wed Oct 04, 2017 11:56 am

SandDollar wrote:
Thu Jun 01, 2017 8:00 am
I'm personally a bit confused about the 54k limit and whether you can really put that much into the roth via the DCP as well as max out the other accounts with 18k each year?
I'm 24 yr UC employee and only recently discovered the beauty of the UC DCP after tax benefit. :oops:

I just wish I could afford to completely max it out. Because I plan to be in a higher tax bracket at retirement I stopped contributing to 403B and increased my after tax contributions. I still max 457 as a tax hedge.

About once a month I call Fidelity and roll my after tax DCP to my Roth. It's usuallly about a 7 minute calll. Wish this could be done on-line but otherwise easy as pie.

Yes you can do $54k/year after tax. It's incredible.

Don't feel bad.. I'm 38 and *just* discovered this (through reading bogleheads threads). I have no idea why I was never told about this completely straight-forward and legitimate savings option before. And its really easy (so far).

I called Fidelity and spoke to a representative to confirm: $54K yearly contribution limit, must come directly out of my paycheck (there is not a way for me to make a one time large contribution for 2017 at this point). So I went online and set up a monthly contribution to start next month.
Then, each month after the deposit is made, I can call Fidelity and request that the balance be rolled over to my Roth IRA (which conveniently is already at Fidelity).

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