Revisions to Board Policy 425.5 University of Arkansas Retirement Program will be considered at the next Board of Trustees meeting on January 29-30.
Below is a summary describing the proposed changes to the policy and the reasons behind them. Click here for a red-lined version of the policy draft. We plan to present this to the Board at the January 29-30 regular board meeting.
Members of the University of Arkansas System community may submit feedback on the proposed changes to to firstname.lastname@example.org.
The proposed changes include:
- A change to the definition of eligible employees to exclude Non-Resident Aliens hired after December 31, 2019 who are residing and working in locations outside of the United States – The University has a small but potentially growing number of non-resident aliens employed in locations outside of the United States. Typically these individuals began their employment as foreign nationals working at a University campus within the United States and transferred employment locations from the U.S. to their home country. Banking regulations and tax laws significantly complicate and potentially diminish the benefit of future distributions of retirement income to these individuals. Within current banking laws it could be impossible in some situations to actually distribute retirement income to a foreign national residing outside the U.S. Further, IRS regulations do not require the participation of non-resident aliens in a retirement plan. The University recognizes the challenges of retirement plan participation for foreign nationals outside the U.S. and believes these employees would be better served by salary supplements designed to offset retirement plan contributions.
- A change in the required order of employee contributions to the 403B and 457b plans – The retirement plan currently mandates that employee contributions are made first into the 403(b) program to the maximum allowed before contributions are made into the 457(b) program. The current structure was provided to assist campuses in streamlining and managing the contribution process. There are no IRS regulations mandating a particular order of contributions. In some unique situations, following the current order may limit overall employee and employer contribution opportunities to the plan. Removal of the required order of contributions will allow the University to address unique situations to provide for the maximum allowable employee and employer contributions.
- A change in the contribution formulas at the two-year campuses – Other than PCCUA, employees with the University’s two-year campuses have been required to contribute an amount equal to 6% of their salary. Campus contributions have varied by location with no additional employer matching contribution on employee contributions of over 6%. The proposal will apply the University’s standard 5% employee and employer base contribution requirement with the one-to-one match for additional contributions to 10% (20% total) for all new participants on and after July 1, 2020. Current participants entering the plan before July 1, 2020 will continue in their respective campus formula as currently established. With this change a uniform System-wide contribution formula will apply for all future hires.