Mayo 403(b): A Simple Guide
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The Mayo 403(b) Plan helps employees save for retirement while offering tax benefits and employer contributions. Here’s an easy-to-follow guide on what you need to know:
Who Can Participate?
Most Mayo Clinic employees can join if they work at least 20 hours per week or reach 1,000 hours in a year (Page 6). If you're eligible, you’re automatically enrolled at 4% of your salary, but you can adjust this rate if you want to contribute more or less (Page 6)
How Do Contributions Work?
You can make two types of contributions:
- Pre-tax Contributions: These lower your taxable income now, but you pay taxes when you withdraw the money (Page 8)
- Roth Contributions: You pay taxes now, but the money grows tax-free, and withdrawals are tax-free if certain conditions are met (Page 8).
You can change your contribution amount at any time and contribute up to 50% of your pay, up to the IRS limit of $23,000 in 2024 (Page 9)
What Is Employer Matching?
Mayo Clinic matches a portion of your contributions if you are eligible, based on how long you’ve been with Mayo. Here’s how it works:
- Less than 20 years: Mayo matches 50% of your contributions up to 4% of your pay.
- 20-29 years: Mayo matches 75% of your contributions up to 4% of your pay.
- 30 years or more: Mayo matches 100% up to 4% of your pay (Page 10).
How Does Vesting Work?
Vesting means how much of Mayo’s contributions you get to keep if you leave. You are always 100% vested in the money you contribute yourself. Mayo’s matching contributions vest 100% after three years of service (Page 14).
What Are the Investment Options?
You can choose how your money is invested through:
- Lifecycle Funds: Professionally managed based on your retirement date.
- Core Investment Options: A mix of stocks, bonds, and short-term investments.
- Self-Directed Brokerage: This is for those who want to select individual mutual funds (Page 16).
You can change your investment choices at any time through the Fidelity website or by calling them.
Can You Take Out Money Early?
- Loans: You can borrow up to 50% of your vested balance, with a minimum loan of $1,000 and a maximum of $50,000 (Page 19).
- Hardship Withdrawals: These are available for specific financial emergencies, like medical bills or avoiding foreclosure (Page 19).
Remember that taking out money early could mean paying taxes and penalties, especially if you’re under the age of 59 ½.
How Do You Receive Payments When You Retire?
Once you stop working, you can withdraw your money as a lump sum or in regular monthly payments (Page 20). Payments must start by April 1, after the year you turn 73.
Tax Implications
Your pre-tax (traditional) 403(b) payments are subject to state and federal income taxes. If you take a lump sum, 20% will be withheld for federal taxes and any applicable state income taxes unless you roll it into an individual retirement account (IRA) (Page 21). Be sure to consult a tax advisor for the best approach for your situation.
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Disclosures
Fortress Financial Group, LLC (“Fortress”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Fortress and its representatives are properly licensed or exempt from licensure.
All information provided is from sources believed to be accurate and updated. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
References:
Mayo 403(b) Summary Plan Description, January 2024: Pages 6, 7, 8, 9, 10, 14, 16, 18, 19, 20, 21, 26
