Temporary Employee Retirement Plan (TERP)
The Omnibus Reconciliation Act of 1990 (OBRA 90) introduced into the law IRS Section 3121(b)(7)(f). As a result, temporary employees of a government entity may deposit money into a private retirement plan instead of Social Security.
The Temporary Employee Retirement Plan, or TERP, is a defined contribution plan authorized under Section 401(a) of the Internal Revenue Code. BENCOR, Inc. is the plan administrator for the University of South Florida.
For more information about individual investments, participants may contact BENCOR Administrative Services at 1-888-258-3422 or visit the BENCOR website (see FIND IT).
How the plan works
Social Security payroll taxes are collected under authority of the Federal Insurance Contributions Act (FICA). Social Security is currently withheld at 6.2% of eligible wages and matched by the university. Participants (Temporary, formerly OPS, employees) in this plan do not contribute to the Social Security Administration, nor is the amount contributed by the employee matched by the university. Instead, employees contribute 7.5% of their wages into an investment account in their name. Medicare contributions at 1.45% are still withheld and matched by the university. The plan is mandatory for eligible employees. Employees are automatically enrolled or un-enrolled based on their salary plan status during the affected pay period. There is no minimum age or service requirement.
Once a contribution has been made to the plan, the employee will receive an Enrollment/Designation of Beneficiary form and an introduction letter from BENCOR, the Plan Administrator. Employees may choose between a Guaranteed Pooled Fund (an interest bearing account) and a variable investment option, and will be asked to designate a beneficiary. If employees do not direct the investment of their funds, they will automatically be placed into the Guaranteed Pooled Fund.
Withdrawals from the plan
Withdrawals from the plan may be made at the following times:
- Separation/termination of employment (a 10% IRS penalty will apply if you are younger than 55 years of age)
- After age 70 Ĺ or retirement, if later, when the IRS requires that the minimum distributions be made to the participant each year
- Participantís total disability
- Participantís death
Distributions can be made to the participant one month (30 days) after the date of termination from the university.
Withdrawals from an account may be made in a lump-sum cash payment (the IRS 10% penalty on early withdrawals does not apply to withdrawals upon separation at age 55 or later), or plan balances may be rolled over to an IRA or other eligible retirement plan. No IRS penalty applies to these transfers.
To obtain the necessary form for a Withdrawal/Rollover from the account, log on to the Bencor website - BENCOR, Inc
Who is eligible?
Employees who are not covered by the universityís retirement plans are eligible. Adjunct faculty, Postdoctoral Scholars, medical residents and hourly and exempt Temporary employees who are not otherwise exempt from Social Security taxes are eligible to participate in TERP.
Who is not eligible?
Faculty, Staff, Administration and Executive Services employees participating in a university retirement plan are excluded from TERP. Also excluded are most students, graduate assistants, phased retirees, rehired retirees and any employees covered by current university retirement plans.
Advantages of the plan
- Participating employees are not subject to Social Security taxes while covered by this plan, and Social Security taxes are never due on these funds.
- Any benefits previously earned under another retirement plan (including Social Security) will not be reduced by participation in this plan.
- Contributions to this plan are pre-tax. Therefore, the total amount of taxes paid will be reduced.
- No taxes are paid on the contributions until they are withdrawn.
- The account balance is portable upon separation from the university.