As a University Hospitals employee, you have several options to choose from when it comes to your employer benefits. This is a good thing because it means you have the flexibility to choose a plan that works best for you, your family, and your future goals. But having choices can also be overwhelming, and you may not be sure which retirement plan is best for you. Below, we describe the four retirement options University Hospitals Health Systems, Inc., provides, complete with a list of pros and cons for each. Although we recommend discussing your options with a qualified financial professional, we hope this simplified guide will help you better understand the options before you.
401(k) Retirement Savings Plan This plan is a matched defined contribution plan and covers substantially all employees who work under the entities University Compcare, University Primary Care Practices, Inc., and University Hospitals Management Services Organization, Inc.
A defined contribution plan is a plan in which you, the employee, contribute a defined or fixed percentage of your paycheck to your employer-sponsored account every pay period. This plan is tax-deferred, so your contributions are made with before-tax dollars and your investments will grow tax-free until you withdraw money from the account for your retirement.
Pros to the 401(k) Retirement Savings Plan • Eligible employees may enroll in the plan immediately upon their date of hire • High contribution limits • Self-directed investments, so employees can choose how they want to invest • Contributions reduce current annual taxable income • UHHS matches up to 50% of an eligible participant's contribution to the plan, up to 6% of compensation
Cons to the 401(k) Retirement Savings Plan • Self-directed investments, so employees may not know the best investments to choose • Employees must complete one year of service to receive employer matches • Employees must complete three years of service to be fully vested in the employer's contributions
403(b) Matched Retirement Savings Plan This plan is also a matched defined contribution plan and covers substantially all employees who work under University Hospitals Health System, Inc. Similar to the 401(k) plan, employees enrolled in the 403(b) plan contribute a fixed percentage of their income and are eligible to receive employer matching contributions after one year of service.
The main difference between the 401(k) plan and the 403(b) plan has less to do with your options as an employee, and more to do with the for-profit entities underneath the not-for-profit parent organization, which is University Hospitals Health System, Inc. The entity under which you work determines whether you have the option to enroll in the 401(k) plan or the 403(b) plan.
Pros to the 403(b) Matched Retirement Savings Plan • Eligible employees may enroll in the plan immediately upon their date of hire • High contribution limits • Self-directed investments, so employees can choose how they want to invest • Contributions reduce current annual taxable income • UHHS matches up to 50% of an eligible participant's contribution to the plan, up to 6% of compensation
Cons to the 403(b) Matched Retirement Savings Plan • Self-directed investments, so employees may not know the best investments to choose • Employees must complete one year of service to receive employer matches • Employees must complete three years of service to be fully vested in the employer's contributions
Retirement Plan A noncontributory defined benefit pension plan, this plan covers essentially all employees of University Hospitals Health System who are at least 21 years of age and who have completed at least one year and 1,000 hours of service with University Hospitals Health System, Inc. A defined benefit pension plan is a type of retirement plan in which the employer agrees to pay a specified monthly pension benefit (or lump sum) to an employee when they reach retirement age. The benefit amount is calculated based on the employee's earnings history, age, and years of service
Pros • Employer makes 100% of the contribution • Employees become eligible for a guaranteed monthly retirement benefit beginning at age 65 until employee passes away (or may receive early retirement benefits at age 55) • Monthly payments increase to account for inflation
Cons • Employer contributions may not provide enough income during retirement to act as the sole source of retirement income • Employee cannot choose investments
457(b) Plan The 457(b) plan is a supplemental retirement savings plan available to a select group of highly compensated employees as determined by the plan administrator. A 457(b) plan is a type of non-qualified, tax-advantaged deferred compensation plan that is only available to certain employees within governmental and some non-governmental organizations (such as hospitals).
Pros • No penalty for early withdrawals if withdrawal is used for qualifying hardship or employee has left the employer • High special catch-up provisions
Cons • Employee income must exceed a certain threshold to be eligible for this plan • No employer match with this plan
How We Can Help Whether you’re just beginning your career, or approaching retirement, the choices you make are extremely important to your future and should not be taken lightly. Meaningful participation in your employer's retirement plan or in self-directed retirement accounts with reasonable contribution rates should be considered as part of an overall retirement planning strategy. Investment selection matters and should be thoughtfully considered.
The decisions you make are too important to your future to go it alone. Before making these important decisions, consult with an experienced advisor, like LakePointe Advisors, to review your situation in detail to make informed choices that may impact your retirement. Let our 25 + years of experience guide you as you make these important choices.
Please Schedule a call if you have any questions or need clarification on any of these strategies or ideas.
About Sal D'Angelo
I am the founder and President of LakePointe Advisors LLC, a Northeast Ohio based financial solutions firm. I am a trusted advisor to entrepreneurs, physicians, and other healthcare professionals. I provide the experience and advice to help people build and protect their wealth, reduce their taxes, and build a secure future for themselves and those they care about.
I am a lifelong resident of Northeast Ohio. My wife and I are proud parents to three grown children. When not working, I enjoy sports, especially football and golf, and spending time with family and friends.
To learn more about LakePointe Advisors, connect with me on LinkedIn, like me on Facebook and follow me on Twitter.
The information used to write this article was obtained from readily available, on-line plan information. This article is an overview designed to provide basic information, not specific advice, or recommendations. It is also not a complete description of every plan offered by University Hospitals. For a summary plan description of all plans offered, contact your benefits department. LakePointe Advisors is not endorsed by University Hospitals.
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