Before-Tax Deductions

A before-tax deduction reduces your taxable wages. Some before-tax deductions will reduce your Federal and State, or W-2, wages, while others will also reduce your social security and Medicare wages.

Before-tax deductions that are not subject to Federal and State income tax withholding are as follows:

• Faculty Retirement Plan
• Minnesota State Retirement System
• Optional Retirement Plan
• Public Employee Retirement Association
• Thrift Savings Plan
• University of Minnesota Physicians (UMP) Savings Plan
• Local 880 Health & Welfare
• 457 Deferred Compensation Plan

The following list of before-tax deductions is not subject to Social Security and Medicare withholding, or to Federal and State income tax withholding:

• Parking
• Metropass
• Medical
• Federal Medical
• Dental
• Health Care Reimbursement Acct
• Dependent Care Reimbursement
• University of Minnesota Physicians Medical Reimbursement
• University of Minnesota Physicians Dependent Reimbursement

These deductions will show in the "Before-tax Deductions" section of your pay statement.

Retirement Deductions

Employee contributions to retirement plans are taken as "before-tax" deductions that reduce your Federal and State taxable, or W-2, wages. These deductions are taken before taxes are withheld, and therefore are not subject to Federal and State income tax withholding.

The most common retirement plans at the University of Minnesota are:

• Minnesota State Retirement System (MSRS) - The required retirement plan for Civil Service and Bargaining Unit employees
• Faculty Retirement Plan - The required retirement plan for faculty, and Professional and Administrative employees
• Optional Retirement Plan - Voluntary retirement savings and investment plan
• Public Employee Retirement Association (PERA) - Required retirement plan for University of Minnesota Police Officers
• Thrift Savings Plan - A 401K plan for Federal employees
• 457 Deferred Compensation Plan- Tax-deferred retirement savings and investment plan

University of Minnesota Police Officers and Federal Employees should contact their departments concerning the retirement plans offered to them.

After-Tax Deductions

After-tax deductions do not reduce taxable wages. They are taken only after taxes have been withheld from taxable wages.

After-tax deductions include, but are not limited to, the following:

• Union Dues
• Life Insurance
• Charitable Contributions
• Savings Bonds
• Athletic Tickets
• Disability Insurance
• Credit Union

These deductions will show in the "After-Tax Deductions" section of your pay statement.

Personal Deductions

Personal (or optional) deductions include both before-tax deductions and after-tax deductions. Some of the more common before-tax deductions are the following:

• Optional Retirement Plan
• Health Care Reimbursement Acct
• Dependent Care Reimbursement
• Parking
• Metropass

Listed below are just a few of the after-tax personal deductions available:

• U.S. Savings Bond
• United Way
• U of M Federal Credit Union
• Affinity Plus Federal Credit Union
• Recreational Sports Permit
• University of Minnesota Duluth Hockey Tickets
• Football Tickets
• Northrop Dance Series
• Morris Fitness Center

For more information about a particular deduction, you should contact the appropriate area, such as Employee Benefits, Parking and Transportation Services, Recreational Sports, Athletic Department, or the Credit Union. For information about U.S. Savings Bonds or United Way deductions, you should contact Payroll Services.

Court-ordered Deductions

Payroll Services is required to withhold amounts from an employee's compensation to satisfy a child support order, tax debt, or court judgment. Court-ordered deductions are often referred to as garnishments. There are several common types of court-ordered deductions, or garnishments.

Creditor Garnishment

This is a legal order that authorizes the withholding of a portion of an employee's wages to satisfy a debt owed to a creditor. Payroll Services is required to comply with the court order to withhold and remit the amount stipulated in the order, up to the maximum allowed by law.

Child Support Withholding

This is the process of withholding amounts from an employee's wages to satisfy a child support order from a court or a state child support enforcement agency. The enforcement of child support orders is a joint Federal/State responsibility, with Title IV-D and the Consumer Credit Protection Act providing the legal framework.

Tax Levy

Federal or State tax levies require the deduction of amounts from an employee's wages to satisfy a tax debt. Tax levies must be satisfied before all other garnishment orders, except for child support withholding orders.

Bankruptcy Orders

Bankruptcy orders issued under Chapter XIII of the Bankruptcy Act take priority over other wage claims, including tax levies and child support withholding orders received before the bankruptcy. All other garnishment orders are stopped because the trustee will pay them out of the amount withheld under the bankruptcy order.

Student Loans

In 1991, Congress amended the Higher Education Act to allow for garnishment of wages to repay delinquent student loans granted under the Federal Family Education Loan Program or Guaranteed Student Loan Program. Child support withholding orders will take priority over student loan garnishment orders.

Employer Paid Benefits

The University's contribution towards the cost of your benefits is displayed in the "Employer Paid Benefits' section of your pay statement. None of the Employer Paid Benefits are deducted from your pay.

However, those Employer Paid Benefits noted with an asterisk (*) on the pay statement are taxable and subject to Federal, State, Social Security, and Medicare tax withholding. The value of employer-provided group-term life insurance in excess of $50,000 is considered a taxable benefit added to your taxable wages and reported on your Form W-2.