Special Pay Plan – 401(A)

The Special Pay Plan was implemented in 2001 as a mandatory program for administrators and instructional staff. Non-instructional employees approved the plan in 2002. The plan is designed to provide permanent savings of social security taxes and deferral of federal income tax on payment of accumulated sick leave, annual leave/vacation pay and bonuses upon termination of employment. The plan is administered by Bencor Inc. with investment vehicles provided by Diversified/Transamerica Investments.

DROP participants will have their annual leave placed into the 401(a) plan subject to contribution limits at the beginning or end of their DROP period (whatever the employee has chosen). Also, an employee participating in DROP will have terminal sick leave pay deposited into their account as follows:

Year 1 - 20% of balance of terminal sick leave
Year 2 - 25% of balance of terminal sick leave
Year 3 - 33% of balance of terminal sick leave
Year 4 - 50% of balance of terminal sick leave
Year 5 - 100% of balance of terminal sick leave

Please note that sick leave payment is contingent upon the employee qualifying for payment of accumulated sick leave as follows:

1. After ten years of consecutive service, the daily rate of pay multiplied by 50%, or
2. After thirteen (13) years of consecutive service, the daily rate of pay multiplied by 100%

Employees terminating prior to their pre-selected DROP end date will be paid 100% of their eligible sick leave balance upon retirement. Employees that resign or retire and have over $2,500 in terminal pay will have these funds paid through the 401(a) plan with Bencor.

An employer-sponsored “stacking” 403(b) was recently added under the 401(a). The addition of this option provides a “rollover” for employees whose terminal pay exceeds the 401(a) annual limit. The remaining pay is subject to the 403(b) limit and is exempt from FICA taxes. Allowing employees to shelter their terminal pay in this fashion maximizes the terminal pay that can be sheltered.