Contributions to the Plans
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Choose How You Pay Taxes
Annual Limits on Contributions
Penn's Contributions
Maximize Your Contributions
Choose How You Pay Taxes
Your contributions, which are deducted from your paycheck, can be made on a pre-tax or Roth basis. This allows you to choose the tax treatment that best supports your long-term goals.
Pre-tax contributions
Pre-tax contributions are tax-deferred, so you don’t pay taxes on the contributions, or on any investment earnings, until you take the money out of your account.
Example: Suppose your monthly pay is $4,000 and you contribute 5%. Your monthly contribution amount would be $200, but your net pay would be reduced by only $144 (at 28% tax bracket). Your tax savings is $56 per month, or $672 per year.
Roth contributions
Roth contributions are taken from your pay after taxes, but all earnings are tax-free if they are taken as a Qualified Distribution (you must be at least 59 ½ years of age, and you must have made your first Roth contribution to the plan at least five years ago).
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Annual Limits on Contributions
The Internal Revenue Service specifies annual limits for the maximum amounts you can contribute to the retirement plans in any calendar year.
- Employee Contributions: Your combined pre-tax and Roth contributions (for the Matching and Supplemental plans combined) cannot exceed $19,000 in 2019 ($19,500 in 2020).
- “Catch-up” Contributions: If you turn 50 anytime during the year, you can contribute an additional $6,000 in 2019 ($6,500 in 2020).
The IRS limits the amount of annual compensation that can be considered when calculating employer contributions. The Annual Compensation Limit for 2019 is $280,000 (for 2020, $285,000).
| Age | General Limit | Catch-Up Contribution | Maximum Annual Total |
|---|---|---|---|
| 2019 - Up to Age 49 | $19,000 | N/A | $19,000 |
| 2019 - Age 50 or Above | $19,000 | $6,000 | $25,000 |
Penn's Contributions
If you are eligible for the Basic and Matching Plans, Penn will begin making contributions to those plans after you complete “one year of service”. One year of service is defined as having worked 1,000 hours in your first year of employment, or in any calendar year after that.
Penn’s contributions are pre-tax.
Basic Contributions
Penn makes regular, automatic contributions to your Basic Plan account as long as you are eligible, regardless of whether you make your own contributions. These basic University contributions are a percentage of your base salary, according to your age as of January 1 of each year.
Penn’s match
If you make contributions to the Matching Plan, Penn will match your contributions dollar-for-dollar (subject to the IRS contribution limits discussed above).
| Your Age | University Basic Contribution | Matching University Contribution | Total Potential University Contribution | Total Potential Employee + University Contribution |
|---|---|---|---|---|
| 21-29 | 1.5% | Dollar-for-dollar match on employee contributions up to 5% | 6.5% | 11.5% |
| 30-39 | 3% | 8% | 13% | |
| 40 or over | 4% | 9% | 14% |
Maximize Your Contributions
- If you want to maximize your contributions, contact the Retirement Call Center at 877-PENN-RET (1-877-736-6738) for help in calculating how much you need to contribute.
- If you stopped your contributions because you reached the maximum early in the calendar year, you’ll need to call 877-PENN-RET in early January of the following year to have your contributions restored. To ensure your contributions will restart in time for your January pay, please call in the first two weeks of January.
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Retirement Call Center
(877) 736-6738