2020: Quarter 3 Newsletter

Do I need a Salary Reduction Agreement for each participant?

Yes, the Salary Reduction Agreement authorizes you, the employer, to withhold a specified amount of compensation from an employee’s paycheck on a pre-tax or after-tax basis. It also authorizes you to send the contribution to the provider that each customer indicates.

This form is required for all employees for whom a 403(b) and/or 457(b) contribution is being deducted. Deductions cannot be remitted, and the plan cannot be monitored, without an approved Salary Reduction Agreement from AFPlanServ.

As your administrative service provider, we are here to help. Part of how we help you stay compliant is by monitoring yearly contributions for each participating employee. However, we cannot do this without your assistance in obtaining properly completed agreements. Correct agreements also help ensure that contributions are only sent to your approved providers.

Salary Reduction Agreement►

Completed documents may be faxed to our office at 866-578-0962.

Did you know?

If your plan allows an additional catch-up contribution for participants with at least 15 years of service, a maximum allowable contribution (MAC) calculation worksheet must be completed by the participant. The worksheet determines if they are eligible to make the additional contribution up to the maximum of $3,000 per year.

A completed MAC calculation worksheet and corresponding Salary Reduction Agreement must be submitted to AFPlanServ for approval before the change in payroll can be processed.

Simplify Your Payroll Process with Consolidated Billing

Common remittance is a service that allows you to remit all plan contributions in a single payment. When processing these contributions from payroll, they must be in line with approved Salary Reduction Agreements.

How It Works:
You submit a census file of the plan participants, a policy file of the consolidated bill from all providers, and a register file of the deductions from all participants.

Upon receipt, we will separate contributions among the approved providers. Then, we will reconcile and forward detail and dollars to each provider to be posted. This remittance program may help you ensure timely submission of contributions, and this service is offered to our clients at no additional expense.

Learn more about consolidated billing►

Administrative Service Fee Options

Administrative service fees are currently $1.00 per person per month for any participant that maintains a balance in their 403(b) account, regardless of employment status or contribution frequency.
When establishing your 403(b) Plan, you choose if you want to pay this fee or pass on the cost to your plan's approved providers.

If you choose to pass the administrative fees to providers, there are some things you need to know:

• Because the Investment Provider Agreement did not obligate your providers to pay the fees, we have to notify each provider and they must agree to pay the fee.
• Some providers may agree to pay the fees but might directly or indirectly charge them back to your employee’s accounts.
• Providers must agree to pay the fees to remain an approved provider of your plan.

If you are currently paying our administrative services fee and would like to pass this cost on to your providers, please complete the 457(b) Investment Provider Agreement Approval form and/or 403(b) Investment Provider Agreement Form and fax it to our office at 866-578-0962 or email WG-Annuity-AF-PlanServ@americanfidelity.com.

We will notify you once we receive a response from your providers.

Frequently Asked Questions

Q: When should contributions be remitted?

A: Internal Revenue Service (IRS) best practices indicate that contributions should be remitted to the respective approved provider as soon as administratively feasible, but no later than the 15th calendar day of the month following the date of deduction. 

Q: Are salary reductions completed on a pre-tax or an after-tax basis?

A: Contributions to a 403(b) or 457(b) Plan may be deducted on a pre-tax or an after-tax basis. For after-tax contributions, the plan must allow for Roth 403/457(b) or other after-tax contributions.