Current Pension Topics: Deferral Plan a NoBrainer

Current Pension Topics
Deferral Plan a NoBrainer

Over the years I have met all too many city employees who are still "thinking" about joining the city's Deferred Compensation Plan. What is there to think about? If I had my way, enrollment would be automatic, but it is not. So as much as I want the horse to drink, the best I can do is bring the horse to water. I cannot make it drink.

If you are not contributing to Deferred Comp, please read the following, which has been transcribed from the Plan's Web site at: www.nyc.gov/deferredcomp . Do yourself and your family a big favor and voluntarily start to make contributions to this fine retirement financial planning tool. In years to come you'll have no one to thank but yourself. Remember, the future belongs to those who plan for it. Please contact me with any questions.

The City of New York Deferred Compensation Plan (DCP) is an employee benefit available to New York City employees. The Plan is comprised of two programs: a 457 Plan and a 401(k) Plan. Eligible employees may choose to join either the 457, the 401(k), or both. In March 2006, the Deferred Compensation Plan added a Roth component to the 401(k) Plan. 401(k) Plan participants can now contribute on both a pre-tax or posttax (Roth) basis. In order to set up deferrals for either the pre-tax or Roth 401(k) Plan, you must first be enrolled in the 401(k). If you are already a 401(k) Plan participant, then you can add Roth contributions by simply making a deferral change through the account access section of this Web site to your existing 401(k) account. For more information, please access the Understanding the Roth 401(k) software located in the Planning Tools section of this Web site.

The purpose of the Deferred Compensation Plan is to encourage employees to make and continue careers with the City of New York and to provide eligible employees with a convenient way to save on a regular and long-term basis, thereby providing for their retirement.

For employees who are members of a City pension plan, DCP is a supplemental savings plan to their pension and Social Security. For non-pension member employees, DCP, if elected, is their sole retirement plan in lieu of FICA. For nonpension member employees who are contributing less than 7.5% to either the 457 Plan or the 401(k) Plan, DCP is a supplement to Social Security.

Through convenient payroll deductions, both programs allow employees to save regularly with before-tax dollars while deferring federal, state, and local income taxes. Both pre-tax contributions and their respective earnings will remain tax deferred until withdrawn through Plan benefit payments.

Eight in ten investors either feel they are not saving enough for retirement or aren't sure how much they need to save.

The Plan's Administrative Office is located at 40 Rector Street, 3rd Floor, New York, New York 10006. Office hours are 9:00 a.m. to 5:00 p.m. Monday through Friday.

The telephone number for the Plan's voice response system is (212) 306-7760.

Mr. Frank is a fee-only Retirement Financial Planner. He can be reached by telephone at (732) 536-9472, by fax at (732) 536-7373, or via e-mail at rollover@optonline.net.