Catch-up for lost time with your Lump Sum Separation Pay
When you retire, you will have to determine what to do with the value of your unused leave time. This can include a cash payment to you, which would result in taxable income, or you can contribute all or a portion of this amount into your Savings Plus account.
Contributing your Lump Sum Separation Pay allows you to:
You can defer this payment - and the associated tax - by transferring your lump sum payment to a Savings Plus 401(k) or 457(b) account, and you will avoid paying taxes on the funds until withdrawn.
If you separate between November 1, and December 31, you may be able to transfer up to the maximum contribution limit for the current tax year and for the following tax year. This may help you avoid a large tax bill. To maximize the amount you can contribute, use both the 457(b) and the 401(k) to defer up to $61,000 for 2024. If your Lump Sum Separation Pay is more than this, you may be able to utilize Traditional Catch-up.
How it works
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Frequently asked questions
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The opportunity to defer a portion or all of one’s unused vacation and annual leave (minus Social Security and Medicare) upon separation from state service to the Savings Plus 401(k) and/or 457(b) plan.
Yes. When using both accounts you can contribute up to the max IRS limit for each plan type, for the year.
There are two catch-up provisions that allow you to contribute more than the standard annual IRS deferral limits if you are closer to retirement and eligible. You can only use one of these catch-up options per plan year, so consider which will work for your personal situation. The options are:
1. Age 50+ Catch-Up: In a tax year when you are 50 or older and are actively employed, you can defer up to $7,500 over the normal deferral limit.
2. Traditional 457(b) Catch-Up: If you are within the three years prior to your Normal Retirement Age, you may be eligible to make a one-time election to defer additional money into your retirement plan. Normal Retirement Age is the age specified in your employer’s 457(b) plan and is typically the age you choose for the purpose of initiating your Traditional 457(b) Catch-Up election.
If you have questions about either of these two catch-up options, please call our Solution Center at 1-855-616-4776.
Your Lump Sum Separation Pay should show in your Savings Plus Account within two-and one-half months after your separation date. If this is not showing within this timeframe, please reach out to Human Resources for status.
If you are not currently enrolled in the Savings Plus plan, you will need to enroll prior to receiving your funds. You can enroll online now. If you are already enrolled in one plan type, but not the other, no further action is needed.
We recommend that you open your account before you submit your Lump Sum Separation Pay Contribution Election Form to your Personnel Office. This allows you to select your investments and sign up for online access.
Please submit your completed form to your Personnel Office 30 days before your separation date.
In accordance with California Labor Code Sections 201(b) and 202(b), you must submit your form to your personnel office no later than five (5) workdays prior to your separation date. Therefore, we strongly encourage you to submit the form as early as possible. If it is submitted less than five workdays prior to your separation date, it cannot be accepted, and you will instead receive a lump sum cash payment.
Workdays are counted as each day, Monday through Friday, excluding Saturdays, Sundays and legal holidays. Please note when the legal holidays occur, and the days in which they are observed.
Please see below example of how to calculate five (5) workdays prior to your separation:
Your election is irrevocable once signed and submitted to your Personnel Office. The form cannot be changed, amended, or revoked. If you have any questions about the form or process, please contact Savings Plus before you submit it to your Personnel Office.
If you have already submitted your form and have questions about your elections, please consult your tax professional.
Your election is irrevocable once signed and submitted to your Personnel Office. Please consult with your tax professional for assistance with managing your elections.
With Pre-tax accounts, you don't pay taxes on contributions when you make them but will when you later withdraw money.
With Roth accounts, you pay taxes on contributions when you make them but won't when you later withdraw money, as long as you meet certain requirements.
You will need to review your W2s and the Traditional Catch-Up Guide to complete the Form and return to Savings Plus with your W2s. We will then send you an approval letter that you will need to provide to your Personnel Office with your Lump Sum Separation Pay Contribution election form. You may also wish to attend a webinar or review the tutorial video on the website for assistance.
We suggest that you submit your Traditional Catch-Up Form at least 60 days prior to your separation date. This will allow time for processing and receipt of your approval letter which must accompany your Lump Sum election form.
We recommend that you locate all underutilized amounts in previous years and apply for an increased amount beyond existing limits as these limits typically do increase each year. Allowing an additional $1,000 to $1,500 should be adequate. Amounts cannot be changed after the Lump Sum Separation Pay Contribution form is signed and submitted to your Personnel Office.
Savings Plus can indicate if the funds have arrived. If they have not yet posted to your account, please contact your Personnel Office for more information.
If you select the Default Hierarchy box, or if no box is selected, your Lump Sum Separation Pay contribution will automatically be processed in the following order: (1) 457(b) pre-tax, and (2) 401(k) pre-tax, and (3) 457(b) pre-tax (in the second tax year, if eligible to contribute), and (4) 401(k) pre-tax (in the second tax year, if eligible to contribute), until the funds are exhausted.
No. This would make the form not in good order and will be rejected by the State Controllers Office. You must write in an amount. As an example, you could write in $30,500 for 2024 in 457(b) Pre-tax if you are over age 50.
Please work with your Personnel Office to determine the value of your leave balances.