Find out if Deferred Compensation Plan is right for you

The State of Florida’s Deferred Compensation Program allows participants to “defer,” or delay, receiving a portion of their income until a later date.  

By Trudy Fernandez

Are you interested in building up your retirement savings? The information listed in this article will provide you with the tools you need to get started in a retirement savings plan. All FIU employees are eligible to participate and enroll in the State of Florida’s Deferred Compensation Program at any time during their employment. Participants in the plan “defer,” or delay, receiving a portion of their income until a later date – generally upon retirement.

Within the next few weeks, the Bureau of Deferred Compensation will be mailing information about the plan directly to the home addresses of university employees. The Deferred Compensation Plan is a participant-directed investment program pursuant to Internal Revenue Code section 457. 

For additional information, and a complete list of Frequently Asked Questions, please contact the Bureau of Deferred Compensation toll free at 1-877-299-8002 or visit its website.

Below are just a few of the most Frequently Asked Questions about the State of Florida’s Deferred Compensation Plan.

1. How do I enroll in the plan?

Simply call or visit the website of the investment provider that you have chosen. You may download an enrollment package or call them so they can answer any questions that you may have. All representatives are licensed to enroll state employees in the plan and can discuss their investment products in detail.

2. Why should I enroll?

Deferred compensation is an excellent way to provide for a comfortable retirement as well as realize a variety of tax advantages. The benefits you will receive from the Florida Retirement System (FRS) and Social Security Administration will most likely provide less income than you currently receive. In fact, retirement experts estimate that the average person’s benefits from pension plans and Social Security will provide for only 50 percent – 75 percent of the yearly income earned while working. For example, a person who has worked for the state for 30 years, with a $30,000 average of the highest five annual salaries, will on average receive $14,400 annually in benefits from the FRS (under FRS option #1). The majority of employees do not work for the state for 30 years, so for many the percentage will be even less. You should obtain an FRS handbook that will allow you to evaluate your own situation. Social Security benefits will provide you with additional income; however, the age to receive unreduced benefits continues to rise. You are virtually unable to influence the amount of benefits you will receive from the FRS and the SSA unless you work past the normal retirement age. You can invest in your future and take control of your financial security by actively participating in the Deferred Compensation Plan.

3. How does the plan work? How do I invest into the plan?

Once you enroll with an investment provider company, you participate in the plan by authorizing an amount of money or a percentage of your gross salary to be automatically deducted from your paycheck before any federal income taxes have been withheld. On payday, the Deferred Compensation Office wires your invested amount to your chosen investment provider, where it is immediately deposited into your account.  The only way you can invest in the plan is through an automatic payroll deduction.

4. Does participation in this plan affect the calculation of my benefits due from the Florida Retirement System (FRS) or the Social Security System (SSA)?

No. Your eligibility for FRS and SSA benefits are not affected in any way. You continue to earn creditable service towards benefits from the FRS. You also continue automatic contributions into the Social Security system each time you are paid. 

5. Am I “locked into” the plan for a certain period of time? Can I stop or start my investment at any time? What are the deadlines for making changes to the amount of my payroll deduction?

You are not “locked into” the plan for any period of time. You may stop, decrease, increase or restart your deductions at any time. Of course, there are administrative deadlines associated with these changes. However, you cannot receive your benefits until you separate from state employment, or incur an unforeseeable financial emergency.

6. What choices do I have once I have decided to join the plan?

You have the opportunity to choose from five (5) investment provider companies and one (1) online brokerage firm. All of the companies offer mutual funds and some type of a fixed account. The fee structure for the companies and their products differ.