If you meet all of the following criteria, complete the enclosed contribution worksheet and return it to Fidelity Investments by March 9, 2026:

• You own controlling interest (more than 50 percent) of an outside business; and
• The outside business made contributions on your behalf to a qualified retirement plan or SEP-IRA during 2025 and
•  You were eligible to participate in the American University Defined Contribution Retirement Plan at any point during 2025.

If you do not meet all of the above criteria, you do not need to complete the accompanying contribution worksheet. If we do not receive a worksheet, we will assume that this is confirmation that you do not have any outside business contributions.

If you were an active employee at American University in 2025, you will be sent an annual communication outlining the information that you need to provide regarding your contributions to qualified retirement plans or SEP-IRAs through any outside business for which you have a controlling interest. If you remain an active employee at American University during the period January 1, 2026, through December 31, 2026, you will receive the next notice and worksheet specific to 2026 in February 2027. If you were an active employee at American University during the period January 1, 2025, through December 31, 2025, you will receive the notice and worksheet specific to 2025 only.

If aggregate contributions exceed the annual additions limit, as defined below, the amount in excess of the limit will be taxable to the employee and will be segregated in the University Plan and accounted for separately until it is distributed.

A qualified plan is one that meets the requirements of the Internal Revenue Code and is eligible to receive certain tax benefits. Qualified plans include 401(a), 401(k), 403(b), SEP-IRAs, profit-sharing plans, and Keogh plans.

For example, if an employee provides consulting services to third parties through a partnership unrelated to the work performed for the university, and the outside business makes a $30,000 contribution to the profit-sharing plan on the employee’s behalf. Under the university retirement plan, the employee contributes $13,500 of elective deferrals and receives an employer-matching contribution of $27,000. The employee’s contribution total is $70,500 (30,000 + 13,500 + 27,000). However, the 2025 annual additions limit is $70,000.

Outside Business Profit Sharing Plan Contributions

$30,000

University Employee Retirement Elective Deferrals

$13,500

University Employer Retirement Matching Contributions

$27,000

2024 Annual Additions Limit

$70,000

Internal Revenue Code Section 415(c) Excess

$500

The combined contributions exceed the annual additions limit. The amount in excess of the limit will be taxable to the employee and will be segregated from the University Plan and accounted for separately until it is distributed.

To avoid an excess contribution situation, the employee should confirm that the total of the contributions placed into their outside business profit sharing plan and the university employee and employer contributions do not go over the annual additions limit.

Employee contributions as well as the American University Matching contributions can be found on your payslip in Workday. From the Workday homepage, click "Menu," expand the "Navigation Pane" if needed, click "Benefits & Pay," then click "Pay" and select "Payments."

A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a kind of defined contribution retirement plan, which may be offered to employees of government and tax-exempt groups, such as schools, hospitals, and churches. Eligible employees can defer money from their paychecks into their 403(b) accounts, which works similar to a 401(k) plan. American University retirement plan is a 403(b).

An elective deferral is the amount an employee elects to deduct from their pay to contribute towards certain types of employer-sponsored retirement plans. An elective deferral is not included as part of an employee’s gross income unless it is designated by the employee as a Roth deferral. For example, an employee earns $30,000 per year and elects to contribute 10 percent of total pay as an elective deferral that is not a Roth deferral. $3,000 will be contributed to the plan on the employee’s behalf and $27,000 is includable as gross income. If the employee had, instead, designated the contribution as a Roth deferral, then the $3,000 contribution would also be included as part of the employee’s gross income.

A Simplified Employee Pension Individual Retirement Account (SEP-IRA) is a variation of the Individual Retirement Account used in the United States. It is a plan in which the sponsoring employer makes contributions to an IRA on an employee’s behalf. SEP-IRAs are adopted by business owners to provide retirement benefits for themselves and their employees. Since only the sponsoring employer can make contributions to a SEP, the contributions are considered non-elective contributions.

A Salary Reduction Simplified Employee Pension Plan (SARSEP) is a special type of SEP established prior to 1997 that allows employees to make elective deferrals to their Individual Retirement Accounts (IRAs) through salary reduction. A SARSEP also permits sponsoring employers to make additional non-elective contributions on an employee’s behalf.

While personal Roth IRAs are not included in this request, if your outside business’ qualified retirement plan includes a Roth feature, it would need to be included in the calculation. If you have a personal Roth that is not connected to your outside business retirement plan, it would not need to be included.

In general, all employee pre-tax and Roth after-tax contributions to the qualified plan should be included, including any catch-up contributions. Employer contributions or reallocated forfeitures credited to your account during the testing year are also included. It may be necessary to include other amounts. For assistance with determining 415 testing annual additions, consult with your public accountant or tax advisor.

A limitation year is the 12-month cycle for which contribution testing is performed (if not stated in the plan document, you should presume a calendar year). If the limitation year is not a calendar year, please respond for the limitation year beginning in 2025 (e.g., 4/1/2025 to 3/31/2026).

Internal Revenue Code Section 415(c) provides that annual additions made to defined contribution plans on an employee’s behalf cannot exceed 100 percent of compensation up to $70,000 in 2025 (which may be indexed in future years depending on cost-of-living adjustments). For the 2026 limitation year, the annual additions limit is $72,000.

IRC Section 415 total compensation means the amount that is includible as gross income. This includes compensation from both AU and the outside business. Please note that your spouse’s compensation is not included in this limit. For the 2025 limitation year, the compensation limit is $350,000, and will increase to $360,000 in 2026.

The tax consequences of noncompliance are potentially severe for both you and your employer and may include jeopardizing the favored tax status of our retirement plan. Consequently, the university will take the necessary corrective actions to maintain the qualification of the plan. Failure to correct the violation may also subject you to penalties for failure to report income and/or penalties for failure to pay income tax.

If this applies to you, this information needs to be reported to Fidelity Investments no later than March 9, 2026 for the period January 1, 2025 through December 31, 2025, or your limitation year beginning in 2025 (if different). 

If you or the outside business make any contributions to your outside business qualified retirement plan or SEP-IRA for the prior year after reporting that year’s total contributions to your plan sponsor, be aware that you will need to report these additional contributions to your plan sponsor.

This notice is a summary of complicated regulations. Please contact your certified public accountant or tax advisor to ensure that you understand what is required of you.

If you would like to obtain additional information, call Fidelity at 800-343-0860 Monday through Friday (excluding New York Stock Exchange holidays) between 8 a.m. and midnight Eastern time.

If you would like to obtain additional information, you may speak to a TIAA consultant at 800-842-2252 Monday through Friday between 8 a.m. to 10 p.m. Eastern time.