Retirement Planning: Plan Highlights
What is a 457 Defined Contribution Program?
A number of Internal Revenue Code "sections" define contributory retirement programs. The most common sections include 457, 401(k), 401(a) and 403(b). Simply, these are types of retirement programs offered for employees of governments, corporations, hospitals, schools and so forth. Often generically referred to as "deferred compensation" or "defined contribution" programs when not adhering to the legal description, they are designed to help employees save for a more secure financial future.
County of Orange employees are eligible to enroll in the 457 Defined Contribution Program. This Program allows eligible employees to supplement any existing retirement or pension benefits, including Social Security, by saving and investing before tax. Contributions and any earnings grow tax-deferred until distribution begins, usually at retirement when you are typically receiving less income and in a lower tax bracket than while working.
Why should I participate in the Program?
Together with any other employer-sponsored retirement or pension benefits, Social Security benefits and personal savings you may have, participating in your County of Orange Defined Contribution Program can help ensure a more comfortable and secure financial future - not just because you can save and invest on a tax-deferred basis, but because the Program offers quality investment options, low fees, local service representatives, financial education and planning tools that can help you better prepare for retirement.
If you need to save and invest additional money for retirement, and/or reduce the amount of current state and federal taxes you pay each year, participating in the Program can be a very smart move.
Participants at certain income levels may also be eligible for a valuable tax credit of up to $1,000 annually.
How do I enroll in the Program?
Once you receive a Personal Identification Number (PIN), you can enroll online by entering your Social Security number and PIN in the "Enroll Now" section of this Web site. You will decide the whole dollar amount (no cents or percentages) you want to contribute and which investment options in which you would like to invest. Your contributions will be automatically deducted from your paycheck.
How much can I contribute?
There is no minimum on the amount you can contribute and you can contribute up to 100% of your includible compensation (less mandatory separate 414(h)(2) picked-up contributions to a governmental 401(a) plan if any), but no more than $16,500 in 2009.
If you are in one of the three years ending before your reach your normal retirement age, you may utilize the Standard Catch-Up provision. With standard catch-up, you may be able to contribute an additional $16,500 in 2007. That amounts to a total contribution of $33,000 in 2009.
If you are age 50 or older during the calendar year, you may contribute an additional amount into the DCP for all Program years except the years in which you are utilizing the Standard Catch-Up provision. The additional amounts are $5,000 in 2009, then indexed for inflation in $500 increments. This Age 50+ Catch-Up provision and the standard Catch-Up provision cannot be utilized in the same calendar year.
What happens to the money I contribute?
Your contributions will be automatically deducted from your regular paychecks and deposited to your investment selections. If you stop contributing, the money you have saved plus any investment earnings will remain in your account and in the investment options you have selected until you take a distribution.1
How do I increase or decrease my contribution amount?
You can increase, decrease, or stop your contribution amount at any time via this Web site or KeyTalk®.2 You will need your Social Security Number and your PIN. Your election will be sent to your employer to be deducted from your paycheck. For a new change to be effective for the upcoming pay date, the deduction change must be received by close of business Tuesday of the previous week before your pay date.
What are my investment option choices?
The Program offers a wide variety of professionally managed investment options ranging from conservative to aggressive in risk/return potential. Once you have decided a total amount to contribute, you will instruct Empower Retirement to invest that money in any combination of the available investment options that you believe can help you meet your financial goals. You can choose from among a diverse array of 18 investment options:
How do I make investment option changes?
If your investment goals change, you can change the dollar amount that you invest in each option, and you can also change the options you invest in. Just use your PIN and Social Security Number to access this Web site or call KeyTalk, toll free at (866) 457-2254, press "1." 2 Both services enable you to:
Can I participate in the County's 457 Program
and another employer's 401(k)/403(b) program?
Yes. You can now contribute the maximum amount allowed each year to your 457 program and your 401(k) or 403(b) program ($16,500 to each program in 2009) if eligible to participate in both programs.
Can I combine assets from my other retirement programs into this 457 Program?
Yes. If you have other retirement accounts, (such as a governmental 457, 401(k), 401(a) or 403(b) plan or Individual Retirement Account (IRA), you may now combine these accounts into your 457 program. 457 programs are the only retirement program that does not subject participants to a 10% early withdrawal penalty for distributions prior to age 591/2. However, all non-457 program assets transferred into a 457 program remain subject to that early withdrawal penalty. Governmental 457(b) program assets transferred into another program (IRA, 401(k), 403(b), etc.) become subject to the early withdrawal penalty when distributed from the new program.
Does participation in the Program affect
my pension or reduce my County pension/retirement benefits?
No. The Program is a supplementary program and does not replace or reduce any of your other County retirement benefits.
How are the Program's assets (my money) protected?
All Program assets are held in trust for the exclusive benefit of Program participants and their beneficiaries. This means that Program assets are not subject to the claims of County creditors in the event of the County's bankruptcy.
How do I keep track of my account?
A quarterly statement will be mailed to your address on file showing your account balance and activity for the quarter. It's quick and easy to check your account balance, move money among investment options, etc. on this Web site or KeyTalk toll free at (866) 457-2254, press "1." 2
When will I receive my quarterly statement?
Statements are mailed to you on a quarterly basis in the months of January, April, July and October. If you choose to receive your statements electronically, you will receive quarterly emails notifying you that your statement is available online. Some of the features your statement include are your account balance at-a-glance, graphics of your asset allocation and account summary by contribution source.
Do I have to report any current earnings or losses on my account to the IRS?
No. Do not report any current earnings from your Program on your federal income tax forms. Any earnings on your contributions are tax-deferred until you take a distribution, usually at retirement. 1
Can I defer money from the sick leave and
vacation payout into my 457 Program when I separate from the County?
Yes, you can defer money from your sick leave and vacation payout into your 457 Program under certain circumstances. Please see your Empower Retirement representative for more details.
What are my distribution options?
You now have more flexibility in deciding the start date of your distributions when you sever employment, and can tailor a payment schedule to meet your personal financial planning needs. When you are eligible for a distribution, you may:
Can I use my 457 account balance to purchase
Defined Benefit Plan service credits?
If you are eligible to purchase prior years of service in a government defined benefit pension plan (e.g., OCERS), you may transfer funds from your 457 account to pay for prior years of service with OCERS.
How much will my distribution be taxed?
Distribution withholdings will vary depending on the type of distribution you request. Generally, 20% federal income tax withholding will apply unless you elect a direct rollover of the entire amount or take a periodic payment which lasts 10 years or longer. If you are living in a state with a state income tax when taking distributions, state income taxes may also be withheld. A 1099-R for the distribution amount will be mailed to you by January 31 of the year(s) following the year(s) in which you receive a distribution.
What happens to my money when I die?
If you die before you select a payment distribution method, your designated beneficiaries will receive the full value of your account. If you die after you have selected a payment distribution method, the terms will determine how much your beneficiaries are entitled to receive under the method you chose. Your beneficiaries must contact Empower Retirement to apply for a distribution.
Who do I call if I have questions?
You can call KeyTalk toll free at (866) 457-2254 and press "2" 2 to speak with a local representative from 8:00 a.m. to 5:00 p.m. Pacific Time or press "0" to speak with a National Call Center representative from 6:00 a.m. to 5:00 p.m. Pacific Time.
Who is Empower Retirement?
Headquartered in Colorado, Empower Retirement is the division of Great-West Life & Annuity Insurance Company that focuses on providing the highest quality retirement plan services to employers and employees of government entities, such as the County of Orange. Empower Retirement is one of the leading providers of such services to county, city and state governments.
What seminars are available to me?
Empower Retirement offers a variety of educational seminars on financial topics. They are meant to provide you with a broad-based understanding of your County of Orange Defined Contribution Program and increase your knowledge of investment terms and concepts, from the most basic to quite advanced. They also provide you with the necessary tools to manage your account in a manner which promotes long-term financial security. Some of the available seminars are:
1 Withdrawals from all Plans are subject to ordinary income tax (no age requirement).
2 KeyTalk® is available 7 days a week, 24 hours a day. Transfer requests made by Web site or via KeyTalk® received prior to 1:00 p.m. Pacific Time on business days will be initiated at the close of the business day. The actual effective date of your transaction may vary depending on the investment options selected. Access to KeyTalk® and the Web site may be limited or unavailable during periods of peak demand, market volatility, systems upgrades/maintenance or other reasons.
Securities, when offered, are offered through GWFS Equities, Inc., a wholly owned subsidiary of Great-West Life & Annuity Insurance Company, 18111 Von Karman Ave., Suite 560, Irvine, CA 92612, 800-933-9808. Please do not hesitate to contact your Plan's Registered Representative for more information, including risks, fees and expenses, and to obtain applicable prospectuses and/or disclosure documents. Read them carefully before investing.
Your plan utilizes annuity contract number STACI-95. Not intended for use in New York.