COP 05-0405: Special Pay Plan

Purpose Statement

The Special Pay Plan ("Plan") is authorized under Section 401(a) of the Internal Revenue Code to provide the maximum tax advantages for vacation and sick leave payouts to employee and Florida SouthWestern State College (the "College").

Guidelines

This procedure applies to eligible employees and eligible compensation as defined in Human Resources College Operating Procedures Sections 05-0504 ("Sick Leave") and 05-0505 ("Vacation Leave").

Procedures

1. Eligibility.
   1. Any employees participating in the Florida Retirement System, the local annuity program or other optional retirement plan that receive a combined vacation and/or sick leave pay out in excess of $5,000 as a result of termination, retirement, enrollment in DROP, as well as other forms of special pay will participate in this Plan. Contributions cannot exceed the Section 415(c), Internal Revenue Code annual limits.
   2. Employees classified as either contracted Full-Time Executive or Administrative employees are required to participate in this Plan for payment of days in excess of the maximum accrued Vacation Leave (referred to as Excess Vacation) at calendar year end up to a maximum of twelve (12) days for administrators and fifteen (15) days for executives.
2. Enrolling in the Plan.  All eligible employees are enrolled automatically. Due to the tax advantages for this Plan, the Internal Revenue Service ("IRS") requires consistent application of enrollment for all eligible participants. Brochures for the Plan are available from Human Resources.
3. Vesting.  All Plan contributions are 100% vested when deposited.
4. Distributions.
   1. Distributions from the Plan may be made after an employee terminates employment, upon total disability, or death. After severance from employment with the College, the participant may choose to leave money in the Plan or receive a lump-sum distribution.
   2. Withdrawal and Potential Penalties.   
      1. There is no 10% early withdrawal penalty for participants who are at least age fifty-five (55) in the year of separation from employment. 
      2. For employees under fifty-five (55) in the year of separation from employment, the College provides a “make whole" provision who elect to withdraw funds, and therefore subject to a 10% early withdrawal penalty.
         1. The participant must submit a BENCOR withdrawal form along with a letter requesting that they want to take advantage of this provision to the FSW Payroll Department within thirty (30) days of separation from employment.
         2. The percentage paid to the participant will be 2.35% (10% penalty minus 7.65%) unless he/she has reached the maximum limit for Social Security. If the maximum limit for Social Security is reached, the percentage paid to the employee will be 8.55% (10% penalty minus 1.45%).
   3. The College provides the participant with a termination letter detailing payment and the contact information for BENCOR.