403(b) Special Pay Plan
A tax-deferred retirement plan for various forms of special pay such as accumulated sick pay, vacation pay and annual leave.
If you are entitled to sick pay, annual leave pay and vacation pay, as well as other forms of special pay, your employer’s contribution of these amounts to the Special Pay Plan means you will defer payment of the related federal income taxes until you receive distributions, generally after retirement.
Participation in the plan is mandatory for all eligible employees who have accumulated sick pay, annual leave pay and vacation pay, as well as other forms of special pay.
Benefits to you
The 7.65% of your special pay income that would otherwise have gone toward Social Security and Medicare tax is now an eligible plan contribution.
Employer contributions are made on a pretax basis. Income tax on this compensation is deferred until distributions are taken. Annuities are long- term investments. Income taxes are payable upon withdrawal. Federal restrictions apply to withdrawals prior to severance from employment and a 10% federal early withdrawal tax penalty may apply to withdrawals prior to age 59½.
You are immediately 100% vested in all contributions to your account.
All contributions are invested, based on your instructions, in the fixed and variable investment options available in your plan. Investment values will fluctuate so that your investment units could be worth more or less than the original cost. Bear in mind investing involves risk, including possible loss of principal.
Annuity contracts typically include limitations, exclusions and expense charges. Fees may apply, including Separate Account Annual Expenses and Annual Fund Operating Expenses. Fee and expense waivers or reimbursements are subject to change. See your financial professional for more detailed information regarding fund fees.
All active participants receive an account statement each quarter.
- Corebridge Financial provides administrative services.
- For general plan information, specific account information or to change investment options, please call 1.800.448.2542. Enter your SSN and then press “5” to access the automated, toll-free voice system, 24 hours a day.
- Visit the website at corebridgefinancial.com/retirementservices to view your account information online. Simply click on “Sign In” and follow the prompts.
- To view fund performance, click on “Prospectuses & reports” at the bottom of the screen, then “Annuities.” Select your annuity product then “Fund Performance.”
Withdrawals and distributions
It may be more advantageous under federal tax laws to delay taking distributions or withdrawals until a later tax year in which your tax rate may be lower. For loan availability and provisions, contact your financial professional.
If you, as an eligible participant, terminate employment, you may leave your money in the plan to continue to benefit from tax-deferred growth. You may take distributions as you choose or set up periodic payments to be paid monthly, quarterly, semiannually or annually. Or you may take a lump-sum distribution. However, distributions must begin by April 1 following the year you reach age 73 (age 72 if you were born after June 30, 1949 and before January 1, 1951 & age 70 ½ if you were born before July 1, 1949) or sever employment with the plan sponsor, whichever is later. In addition, you may be able to roll the assets to an IRA or another employer’s tax-qualified retirement plan.
Withdrawals are not generally subject to the 10% federal early withdrawal tax penalty if you are age 55 or older at severance from employment. Penalty-free distributions will also be made upon total disability, to your beneficiary upon your death, or under certain other circumstances. Please consult your tax advisor for information regarding taxes on plan withdrawals and distributions.
How the Special Pay Plan works
In a 403(b) Special Pay Plan, former employees are deemed to have monthly compensation through the end of the year in which they sever employment and for each of the next five years. Deemed compensation ceases upon the former employee’s death. The amount of the deemed monthly compensation is equal to 1/12 of the former employee’s includible compensation during the most recent year of service prior to severance from employment.
For example, let’s assume that you participate in your 403(b) Special Pay Plan and retire on December 31, the last day of the fiscal year. Assume also that you earn $60,000 a year and have accumulated $20,000 in unused sick, annual leave and/or vacation pay, which your employer will deposit in your Special Pay Plan account. The remainder will be paid to you in cash. The maximum contribution for the 403(b) Special Pay Plan may be reduced by, or require coordination with, contributions to other 403(b) plans of the employer in the same tax year.
Corebridge: Moving financial futures forward
At Corebridge Financial, we believe everyone deserves financial security. We're helping people take action toward their future goals with our broad suite of retirement solutions and insurance products. Every day, we work hard to make it possible for more people to take action in their financial lives—because action is the bridge from planning to outcomes, from today’s financial needs to tomorrow’s aspirations.
To learn more, contact your financial professional.
Important considerations before deciding to move funds either into or out of a Corebridge retirement services account. There are many things to consider. For starters, you will want to carefully review and compare your existing account and the new account, including: fees and charges; guarantees and benefits; and, any limitations under either of the accounts. Also, you will want to know whether a surrender of your current account could result in charges. Your financial professional can help you review these and other important considerations.
This material is general in nature, was developed for educational use only, and is not intended to provide ﬁnancial, legal, ﬁduciary, accounting or tax advice, nor is it intended to make any recommendations. Applicable laws and regulations are complex and subject to change. Please consult with your ﬁnancial professional regarding your situation. For legal, accounting or tax advice consult the appropriate professional.
Securities and investment advisory services oﬀered through VALIC Financial Advisors, Inc., member FINRA, SIPC and an SEC-registered investment adviser. Annuities are issued by The Variable Annuity Life Insurance Company, Houston, TX. Variable annuities are distributed by Corebridge Capital Services, Inc., member FINRA. All companies above are wholly owned subsidiaries of Corebridge Financial, Inc. Corebridge Retirement Services, Corebridge Financial and Corebridge are marketing names used by these companies.
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A1013802 - 02/2023