[May 15, 1998]

The Internal Revenue Service recently issued new guidelines that affect student employees who have been required to contribute part of their salary to a defined contribution plan in lieu of paying FICA (Social Security) taxes. Under the new guidelines, undergraduate and graduate student employees who are enrolled in a course of study for at least "half time" will not have to pay FICA taxes, nor will they be required to contribute to the University's Defined Contribution Plan (the DC Plan). The exemption applies regardless of the number of hours a student is appointed to work at UC.

The determination of what constitutes half-time enrollment must be made in accordance with the regulations issued by the Department of Education. Those regulations state, for instance, that an undergraduate student must take a minimum of 6 units to be considered half time.

For student employees at UC, the new guidelines will be effective with May earnings (June 1 paychecks for employees paid monthly); there will be no deduction for DC Plan contributions or FICA taxes as long as the course-load requirement is satisfied.

If you were formerly required to contribute to the DC Plan as a non-exempt student employee, the money and any earnings you accumulated must remain in the Plan until you are no longer actively employed at UC and elect to take a distribution. You will continue to receive statements of account activity and have access to your account information through UC Benefits' interactive telephone service, bencom.fone (1-800-888-8267).

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