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FAFSA Experts: How are INVOLUNTARY 403(b) contributions reported on the FAFSA app?

scubasuescubasue Registered User Posts: 530 Member
My son is transferring to UW this fall. Originally he was awarded a $4000 need based grant, but upon review of our tax returns from this year, our EFC went up $600. I did not report our involuntary 403 (b) contributions. Both my DH and I work for the state college system--our retirement contributions are mandatory, and unlike most people, NOT accessible or usable for ANY reason-i.e. we can't borrow from our funds for education expenses or home purchases.

This $600 increase has put us over this year's threshhold for need based grant eligibility and the entire grant has been canceled. I spoke with an FA rep at the school to clarify. According to her, ALL untaxed income must be reported, and voluntary/involuntary has nothing to do with the reporting requirement. I swear I read otherwise when I checked into this before.

Please tell me I am right. And, if so, can you point me to a link that I can provide to the FA office?

Post edited by scubasue on

Replies to: FAFSA Experts: How are INVOLUNTARY 403(b) contributions reported on the FAFSA app?

  • swimcatsmomswimcatsmom Registered User Posts: 15,648 Senior Member
    Well, I thought you were right - I seem to remember reading the same thing at some point. In fact when I google it I keep finding the same information. But I can't find anything on the FAFSA instructions that you can use to prove your point. Hopefully an expert like Kelsmom will weigh in.
  • 2collegewego2collegewego Registered User Posts: 2,708 Senior Member
    I found this from the author of Finaid. I would suspect, though, that you would need something from the govt to convince the financial aid office:

    Part 4: Answers on the Fafsa and Financial Aid - NYTimes.com

    "Money in qualified retirement plans is ignored as an asset on the Free Application for Federal Student Aid (Fafsa). The current year’s contributions to the retirement plan, however, are treated as untaxed income and included in total income when calculating the expected family contribution. This includes untaxed contributions to 401(k), 403(b), deductible I.R.A.s and annuities, as well as SEP, SIMPLE and Keogh plans. The only exception is for nonelective mandatory contributions to a retirement plan, like certain state public employee retirement systems, like IPERS, KPERS and OPERS."

    Here you go. Look on the left-hand side of page AVG-20. (Easiest way: do a search for contribution):



    Box 14 items on the W-2
    Schools are not required to review income
    listed in box 14 of the IRS’s W-2
    form. There are a few reasons for this:
    several of the items the IRS suggests
    could be reported in box 14 are captured
    already on the FAFSA (in adjusted
    gross income for instance); also, employers
    could include in box 14 certain
    non-elective pension plan contributions,
    and non-elective contributions
    should not be counted in the need
    analysis; finally, because no employer is
    required to provide information in box
    14, it is unlikely that employers will be
    consistent in what they report there.
  • scubasuescubasue Registered User Posts: 530 Member
    Thank you! I was beginning to think I'd made this up in my own desperate head.

    Now what should I do with this information. The FA rep I spoke with today thought I was an idiot. Of all the people on that campus I don't want to annoy it's the FA officers. Who should I ask for and what should I do.
  • 2collegewego2collegewego Registered User Posts: 2,708 Senior Member
    I would ask for an appointment with a financial aid officer. I would print out the entire handbook, highlighting the applicable section and show it to them. If that doesn't work, I would write a letter to the financial aid office and include the handbook with the section highlighted and a paperclip on the page. I would assume the person has never run into this so I would be very, very nice about it and just point out that FAFSA instructions say it's not to be included so you would please appreciate having it removed and having your grants reinstated.
  • scubasuescubasue Registered User Posts: 530 Member
    2college: Thank you for the advice. In an effort to avoid a long drive to the big city, I'm going to make another phone call tomorrow. If that doesn't work, I'll definitely follow the steps you suggest. Regarding the novelty of this situation, the sad thing is that UW, for all intents and purposes, has exactly the same retirement system under which DH and I are working. All the UW faculty and the FA office director/ assitant director are contributing to their own non-elective 403(b)s in the same "system"/agreement that we are.

    I am wondering if the confusion is that the mandatory contribution amounts are not reported on our W-2, in box 14? I understand from what I've read tonight that there is considerable variation in the way payroll departments detail the 403(b) contributions on the W-2s. It could be that the reviewer quickly scanned our W-2s, but didn't bother to read the name of the employer. That wouldn't explain the information I got from the rep in my first phone call when I pointed out that the contributions were mandatory.

    Kelsmom--still hoping you'll chime in here......
  • kelsmomkelsmom Super Moderator Posts: 14,514 Super Moderator
    Mandatory contributions to retirement plans are not counted on the FAFSA ... but any voluntary contributions you made to a 403b or other plan are counted. To be honest, I have never seen an involuntary contribution anywhere but box 14 on the W-2. If I were verifying your file and you told me that the amount on your W-2 box 12 is for an involuntary contribution (I am assuming that is where it showed up, which is why it is being counted as voluntary), I would ask you to submit a statement from your employer's payroll department verifying the amount of involuntary contribution that is included on your W-2, box 12.
  • kelsmomkelsmom Super Moderator Posts: 14,514 Super Moderator
    Or is the mandatory contribution showing up elsewhere (not in box 12)? If so, where? How does the aid office know about it??
  • scubasuescubasue Registered User Posts: 530 Member
    Thank you Kelsmom. Box 1 of both of our W2s is less than Box 3 by exactly the amount of our employee contribuations to the 403(b). Box 14 is empty. DH and I both work for different colleges, but our wages are reported in the same way on both of our W2s.

    This is definitely a non-elective/teacher/TIAA CREF system.
  • scubasuescubasue Registered User Posts: 530 Member
    OK.....I just got off the phone with a more helpful person, but I am still just as confused. Today, the rep said that the difference in EFC didn't have anything to do with our untaxed income. She said there was a note that our IRA contributions were not reported. However, they are clearly reported on line 92. I pointed that out to her and she seemed surprised. However, she did go on to explain that the entire source of the increase was that I transposed 2 numbers in our "taxes paid". (I entered $1913 when it should have been $1319). This has resulted in a $279 increase in our EFC (not the $600 that I originally thought). However, we are still $122 over the limit for any grant aid.

    So, does that sound right? Would the "ding" to our efc be be 46% of the difference between what I reported and what we paid? (279/594) I still think I am not getting a clear picture. I may have to drive to the big city after all. :) Darn.
  • annoyingdadannoyingdad Registered User Posts: 3,026 Senior Member
    Here's a link to the fafsa formula worksheet. If you want, you can go through the formula manually with your numbers and see what effect each change has.

  • kelsmomkelsmom Super Moderator Posts: 14,514 Super Moderator
    The explanation you just got sounds like it could be correct. I remember being amazed at how much adding back the Making Work Pay credit changed the EFC when we had to do that in 2011-12. Annoyingdad's suggestion of working through the formula is a great idea!
  • scubasuescubasue Registered User Posts: 530 Member
    Thank you everyone. Annoyingdad--I'll try a couple of different scenarios to see if I can figure out the source of the difference for sure.

    Kelsmom--shoot! Not what I wanted to hear. I'm *hoping* you are wrong, but I've been around these boards long enough to know that that is probably not the case. :)

    Having said that, I will definitely be making a Big City trip. I called and spoke to another person who tried to give me yet a THIRD explanation for the change. She explained to me that it is very very difficult with the "system" to tell exactly what changes have been made to the original FAFSA app on their end, and that if I wanted to know specifics, I needed to come down there.

    To those of you who are reading this let one of my mistakes be your lesson: My DS has a $2500 mutual fund account in his name. He wanted to cash that in last year to use for his "half" of the expenses and I encouraged him to leave it where it was until his senior year so that he could afford to work less, or take an unpaid internship then. Of course reporting it was the right thing to do AND I thought that the resulting $500 increase in EFC wouldn't make an important difference to our bottom line. Had he spent out those funds we'd qualify for the grant. Moral of this story: spend the kid's money FIRST. Every $ could count.

    This is all news to me. Two months ago I was positive we'd get 0 grant aid from the public university, so we're no worse off than we were then. I'd assumed that the only students who were getting grants were those who had EFC's low enough to qualify for PELL. AND, it never would have occurred to me that there was any kind of all-or-nothing system with no sliding scale type of eligibility either. But that's how it is at UW this year. EFC < 12000 = $4k in grant aid. EFC = 12122 = no grant aid. Having seen that $4000 award in his initital aid offer, we all got "attached" to that money pretty quickly and now I want it back!
  • kelsmomkelsmom Super Moderator Posts: 14,514 Super Moderator
    I am sorry that you weren't able to speak with someone who could answer your questions. Even if the school uses paper files that are kept in a locked room, there should be someone who can look at your information and explain to you exactly what happened. After all, if the file is audited, the auditor needs to be able to see what changed from the original & why! I was fortunate to have worked at a school where everything was available on the computer server ... BUT the folks who answered the phones did not have access to the information due to privacy issues. Fortunately, our computer system had a "notes" area that could be viewed by all. I always left notes as to why an EFC changed. I wish other aid officers would haunt CC ... they would see the importance of conducting business in such a way that the customer (student) gets the information she needs.
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