Texas Deferred Compensation by joannecinc


									                              UNIVERSITY OF HOUSTON SYSTEM
                            ADMINISTRATIVE MEMORANDUM

SECTION:        Human Resources                                            NUMBER:       02.C.06

AREA:           Fringe Benefits

SUBJECT:        Deferred Compensation Program

1.       PURPOSE

         1.1.   The Deferred Compensation Program is a voluntary supplemental retirement
                program administered by the State of Texas. The purpose of this administrative
                memorandum is to describe certain policies and procedures applicable to the State
                of Texas Deferred Compensation Program.

2.       POLICY

         2.1.   All employees of the University of Houston System are eligible to set aside part
                of current salary, up to certain limits, without paying current income tax on that
                portion. This income tax deferment is available under the Deferred
                Compensation Program. Participation in this plan is voluntary. This plan is
                offered as a supplementary retirement program to the Teacher Retirement System,
                the Optional Retirement Program, and/or the Tax Deferred Annuity Program.

         2.2.   Under the Deferred Compensation Program, an employee may enter into an
                agreement with the state to reduce current earnings up to specified limits and to
                apply the proceeds of such reduction to the purchase of life insurance, fixed
                and/or variable annuities, mutual funds, or investment contracts with banks,
                savings and loan associations, or credit unions.

         2.3.   Each employee should recognize that: (a) participation in the Deferred
                Compensation Program represents a firm, long–term commitment; (b) withdrawal
                of benefits is contingent upon retirement, unemployment, serious financial
                hardship, or death; (c) there are no loan provisions in the plan; and (d)
                comparison of cost and benefits between plans offered by two or more companies
                or associations is the responsibility of the employee.

     January 25, 1996                                                                 Page 1 of 4
                                                                                   AM No. 02.C.06

         2.4.   Enrollment in the program is solely at the discretion of each employee. The
                University of Houston System assumes no liability or responsibility either for
                income tax aspects of the Deferred Compensation Program or the terms and
                provisions of any contract issued thereunder. Personnel of the University of
                Houston System are specifically prohibited from counseling employees in the
                various aspects of the Deferred Compensation Program. Employee counseling is
                to be performed by authorized representatives of approved insurance companies,
                banks, and savings and loan associations.

         2.5.   The Human Resources Department is responsible for notifying each new
                employee of the availability of the program and the necessity to file distribution
                agreements in accordance with Section 87.3(G) Deferred Compensation Rules.

         2.6.   New participants may enroll in the Deferred Compensation Program by executing
                the agreement prior to the first day of the month in which enrollment is to be
                effective. Participants may increase or decrease the amount of their contribution
                by executing an agreement prior to the first day of the month in which the change
                is to be effective.


         3.1.   Effective January 1, 1994, compensation which may be deferred under the
                Deferred Compensation Program is limited to the lessor of (a) $7,500 or (b) 25
                percent of the individual's eligible compensation. Contributions to the Tax
                Deferred Annuity Program and 401K Texa$aver plan, in combination with
                contributions to the Deferred Compensation Program, cannot exceed these limits.
                The term "eligible compensation" is the employee's gross pay less retirement
                (ORP or TRS) and TexFlex contributions. Gross pay includes base pay, longevity
                pay, hazardous duty pay, imputed income, special duty pay, and any form of

         3.2.   A participant may be eligible to defer up to $15,000 in the Deferred
                Compensation Program if retirement is planned within three years. During each
                of the last three years before retirement, the annual maximum limit is increased to
                include any amounts that could have been deferred January 1, 1979, but were not
                in fact deferred, up to a maximum of $15,000 for each of these three years.


         4.1.   All participants in the State of Texas Deferred Compensation Program are
                required to file a written distribution agreement within 50 days of separating
                employment. Failure to file a written distribution agreement will result in an
                immediate lump– sum distribution to the participant with the entire amount
                reported for federal income tax purposes. Written distribution agreement forms
                are available from the Human Resources Department and must be filed with ERS.

     January 25, 1996                                                                 Page 2 of 4
                                                                                AM No. 02.C.06

         4.2.   Participants should contact their Deferred Compensation Program vendor prior to
                separating employment with the University of Houston System to explore the
                distribution options available. Distribution of a Deferred Compensation Program
                account must begin between the date of separation of employment and 60 days
                following the end of the year in which one turns 70 1/2 years old. Once a date of
                distribution has been selected, the date cannot be changed. However, the manner
                of distribution may be altered if an amended distribution is filed with the
                Employees Retirement System (ERS) via the Human Resources Department at
                least 30 days before distribution begins. Once distribution begins, the plan of
                distribution cannot be changed.


         5.1.   The State may approve an application by a participating employee for an
                emergency withdrawal of funds, but only in the event of a serious emergency that
                is beyond the employee's control and that would cause that employee great
                hardship if the emergency withdrawal were not permitted. Any emergency
                withdrawal that is approved will be limited to the amount necessary to meet the
                emergency situation. Such request should be submitted to the Human Resources


         6.1.   The Employees Retirement System of Texas (ERS) is the Administrator of the
                Deferred Compensation Program. As Administrator, ERS executes all master
                agreements between the State of Texas and qualified insurance companies, banks,
                savings and loan associations, credit unions and investment companies; publishes
                lists of such approved companies and associations; and prescribes regulations
                necessary for the successful operation of the program.

         6.2.   ERS has delegated responsibility for recordkeeping and salary reduction
                processing to the University of Houston System. The component Human
                Resources Department will maintain the records and process the associated
                payroll documents prescribed by ERS.

     January 25, 1996                                                               Page 3 of 4
                                                                               AM No. 02.C.06


         Responsible Party:   Vice Chancellor for Administration and Finance

         Review:              Annually on or before September 1

8.       APPROVAL

         Approved:            William P. Hobby

         Date:                January 25, 1996

     January 25, 1996                                                            Page 4 of 4

To top