What Mayo Clinic offers its employees for retirement

Mayo Clinic, a large nonprofit health system with locations in Minnesota, Florida, and Arizona, offers its employees a 403(b) plan as the primary retirement savings vehicle. This is a tax-deferred retirement account available to staff at nonprofit organizations. Mayo Clinic also provides a defined benefit pension plan for may be able to access employees, meaning the organization guarantees a specific monthly payment in retirement based on salary history and years of service.

The retirement benefits available to you depend on your employment status — whether you work full-time, part-time, or as a contractor — and which Mayo Clinic location employs you. Full-time employees typically gain access to both the 403(b) plan and the pension plan. Part-time employees may have access to the 403(b) but often do not participate in the pension plan unless they meet minimum hour requirements.

Mayo Clinic also offers a 457(b) plan to certain employees in executive or highly compensated positions. This is a supplemental deferred compensation plan that allows additional retirement savings beyond the 403(b) limit for those who meet income thresholds.

Key Takeaways

  • Mayo Clinic employees can contribute to a 403(b) plan, with contribution limits set by the IRS each year (currently $23,500 for those under 50, plus catch-up contributions for those 50 and older).
  • The organization's defined benefit pension plan provides a may provide monthly retirement income based on your salary and tenure, vesting after a set number of years of service.
  • Full-time employees typically receive both the 403(b) and pension plan; part-time employees may only access the 403(b) depending on hours worked.
  • Mayo Clinic may match 403(b) contributions up to a certain percentage of salary, though the exact match formula varies and should be confirmed with your benefits office.
  • A 457(b) supplemental plan is available to select higher-earning employees for additional tax-deferred savings beyond standard 403(b) limits.

How the 403(b) plan works at Mayo Clinic

The 403(b) plan allows you to direct a portion of your paycheck into a retirement account before taxes are withheld. The money grows tax-deferred, meaning you do not pay income tax on contributions or investment earnings until you withdraw the funds in retirement. For 2024, the IRS contribution limit is $23,500 per year if you are under age 50. If you are 50 or older, you can contribute an additional $7,500 per year as a catch-up contribution, for a total of $31,000.

Mayo Clinic's 403(b) plan is administered through a plan document that outlines investment options, vesting schedules for employer contributions, and withdrawal rules. You typically choose from a menu of mutual funds or annuity products offered through the plan. The plan may also allow you to make Roth contributions, which are made with after-tax dollars but grow tax-free and can be withdrawn tax-free in retirement if certain conditions are met.

Employer contributions to your 403(b) account vest according to a schedule set by Mayo Clinic. Vesting means the percentage of the employer's contribution that legally belongs to you. Your own contributions are always 100 percent vested when ready. If you leave Mayo Clinic before your employer contributions are fully vested, you forfeit the unvested portion.

The defined benefit pension plan and how it calculates your benefit

Mayo Clinic's defined benefit pension plan is separate from the 403(b) and provides a may provide monthly income in retirement. The amount you receive is calculated using a formula that typically includes your average salary over a set number of years (often the highest-earning years) and your total years of service with the organization.

A typical pension formula might look like this: 1.5 percent of your average final salary multiplied by your years of service. So if you worked 30 years and your average final salary was $60,000, your annual pension would be $27,000 (1.5% × $60,000 × 30 years). The exact formula used by Mayo Clinic should be detailed in your plan documents or available through the benefits office.

You become vested in the pension plan after completing a required number of years of service, typically between 3 and 7 years depending on the plan rules. Once vested, you have a legal right to a pension benefit even if you leave Mayo Clinic before retirement age. If you leave before vesting, you generally forfeit the pension benefit entirely, though you keep any 403(b) contributions you made.

The pension benefit is typically paid as a monthly check for life once you reach retirement age, which is often 65 or a combination of age and service (such as age 55 with 10 years of service). Some plans offer lump-sum distribution options, allowing you to take the entire present value of your pension as a single payment instead of monthly installments.

Employer matching and contribution details

Mayo Clinic may provide an employer match on 403(b) contributions, meaning the organization adds money to your account based on how much you contribute. The match is typically expressed as a percentage of your salary — for example, the employer might match 50 percent of the first 6 percent you contribute. This means if you contribute 6 percent of your salary, Mayo Clinic adds 3 percent.

The exact match formula, the percentage of salary it applies to, and any conditions (such as minimum service time before you become may be able to access) vary by location and employment classification within Mayo Clinic. You should review your benefits summary or contact the Mayo Clinic benefits office to confirm the match structure for your specific role and location.

Employer matching contributions typically vest on a schedule as well. You may become fully vested in matching contributions when ready, or vesting may occur gradually over several years. Understanding your vesting schedule is important because if you leave before matching contributions are fully vested, you lose the unvested portion.

Withdrawal rules and access to your money before retirement

Money in a 403(b) plan is generally not accessible until you reach age 59½ without penalty. If you withdraw before that age, you typically owe a 10 percent early withdrawal penalty in addition to regular income tax on the amount withdrawn. Exceptions exist for certain hardships (such as medical expenses or home purchase), but these are limited and require documentation.

Once you reach age 59½, you can withdraw money from your 403(b) without the 10 percent penalty, though you still owe income tax on the withdrawal. You are required to begin taking minimum distributions from your 403(b) at age 73 (as of 2023, under current IRS rules). The amount of the required minimum distribution is calculated based on your account balance and life expectancy.

If you leave Mayo Clinic, you have options for your 403(b) balance: you can leave it in the plan if the balance is above a certain threshold (often $5,000), roll it into an IRA, or roll it into another employer's retirement plan if that plan accepts rollovers. Rolling over to an IRA or another plan allows you to consolidate accounts and may give you more investment choices.

The defined benefit pension cannot be withdrawn early in the same way a 403(b) can. You receive pension payments only once you reach the plan's retirement age, which is typically 65 or a combination of age and service. If you leave Mayo Clinic before vesting, you lose the pension benefit entirely.

Tax treatment of contributions and withdrawals

Contributions to a traditional 403(b) reduce your taxable income in the year you make them. If you earn $60,000 and contribute $5,000 to your 403(b), you only pay income tax on $55,000. This lowers your federal and state income tax bills in that year. However, when you withdraw the money in retirement, those withdrawals are taxed as ordinary income at whatever tax rate applies at that time.

Roth 403(b) contributions work differently. You make Roth contributions with after-tax dollars, meaning they do not reduce your current taxable income. However, the money grows tax-free, and withdrawals in retirement are tax-free if you have held the account for at least five years and are age 59½ or older. This can be advantageous if you expect to be in a higher tax bracket in retirement or if you want tax-free growth.

Distributions from a defined benefit pension are also taxed as ordinary income. The monthly pension payment you receive is subject to federal income tax, and possibly state income tax depending on where you live. Mayo Clinic may withhold taxes from your pension payment automatically, or you can adjust withholding through IRS Form W-4P.

Comparing Mayo Clinic's retirement benefits to other health systems

Large nonprofit health systems typically offer 403(b) plans and defined benefit pensions, similar to Mayo Clinic. However, the specific details — contribution match percentages, vesting schedules, pension formulas, and may be able to access for part-time staff — vary significantly between organizations.

Some health systems have moved away from defined benefit pensions in recent years, replacing them with enhanced 403(b) matching or profit-sharing plans. Mayo Clinic's continued offer of a defined benefit pension is relatively generous in the current landscape, as it provides may provide income that does not depend on investment performance or how much you saved.

The trade-off is that defined benefit pensions typically vest more slowly than 403(b) matches, and you must stay with the organization long enough to become vested. If you change jobs frequently, a 403(b) plan with when ready vesting of employer contributions may be more valuable than a pension you never become may be able to access for.

Frequently Asked Questions

What happens to my 403(b) and pension if I leave Mayo Clinic?

Your 403(b) balance remains yours regardless of when you leave — you can roll it to an IRA or another employer's plan, or leave it where it is if the balance is large enough. Your pension benefit depends on vesting: if you are vested, you receive a pension starting at retirement age; if not vested, you lose the pension benefit entirely. Contact the benefits office for your specific vesting status.

Can I contribute to both the 403(b) and the 457(b) plan?

Yes, if you are may be able to access for the 457(b), you can contribute to both plans in the same year. However, the contribution limits are separate: you can contribute up to $23,500 to the 403(b) and up to $23,500 to the 457(b) in 2024. The 457(b) is only available to certain higher-earning employees, so confirm your may be able to access with the benefits office.

When can I start receiving my pension from Mayo Clinic?

Pension payments typically begin at your plan's normal retirement age, often 65 or a combination of age and service (such as age 55 with 10 years of service). The exact retirement age depends on your specific plan document. You must be vested to receive any pension benefit. Review your benefits summary or contact the benefits office for the retirement age that applies to you.

Is my pension may provide if Mayo Clinic faces financial difficulty?

Defined benefit pensions at nonprofit organizations like Mayo Clinic are not insured by the Pension Benefit Guaranty Corporation (PBGC) the way pensions at for-profit companies are. However, Mayo Clinic is a large, financially stable organization. Your plan documents should explain how the pension is funded and what protections exist.

How do I know if my employer match is vesting?

Your benefits statement or online account should show your vested and unvested balances. The vested amount is yours to keep; the unvested amount is forfeited if you leave before it vests. If your statement is unclear, the benefits office can provide a detailed vesting schedule showing when each year's match becomes fully vested.