RSS Feed |
|
|
|
|||||
|
Current Pension Topics
A.K. A.: Yes, you can. Use the DCP 401(k) Plan for rollovers. I am a strong advocate of Target Date retirement funds. Please invest your entire rollover distribution in the appropriate Target Date fund after factoring in the type of investment (stock, bond, etc.) you will retain in the 403(b) account. Reminder: while still employed by the city, you may effectuate a rollover transaction only upon attainment of age 59-1/2. If you are no longer working for the city, you may effectuate a rollover transaction regardless of your age. I would now like to focus on withdrawing money from the DCP. This information comes directly from the Plan's Web site: nyc.gov/html/olr/html/deferred/dcphome.shtml Withdrawing Assets Participants should attend a free Retirement Planning Seminar before submitting a distribution form. Severance from City Service
Participants do not need to contact the Plan immediately upon severance of city service if they do not wish to withdraw funds at that time. At the time a participant decides to withdraw funds, he must complete a Distribution Form. A participant can elect: When an employee rejoins the 457 Plan or the 401(k) Plan, a second account will be established for his new contributions. He will receive a statement each quarter, which will detail the contribution account and the distribution amount. A single fee will be charged for the two accounts. If the participant goes to work for another governmental employer or tax-exempt organization offering a 457 plan, he/she may transfer his/her account balance to the plan of his/her new employer without the withholding of any taxes. He/she must enroll in the other plan before the transfer can occur. Participants can attend a free Retirement Seminar at the Plan's administrative office to learn more about their distribution options. Direct Payment or Rollover 457 Plan: Upon severance from city employment, 457 Plan participants can receive direct payments in their own name, without penalty, regardless age. Participants can roll over their account to another eligible retirement plan (NYCE IRA, 457, 401(k), 403(b), or a retail IRA). However, subsequent distributions from those plans may become subject to a 10-percent early withdrawal penalty. Pre-Tax 401(k): Either upon severance from city employment or upon reaching age 59-1/2, participants in the Pre-Tax 401(k) Plan can choose either to receive direct payments in their own name or roll over their account directly to another eligible retirement plan (NYCE IRA, 457, 401(k), 403(b), or a retail IRA). Withdrawals taken before age 59-1/2 may be subject to a 10-percent early withdrawal penalty. Roth 401(k): Upon reaching age 59-1/2, provided their initial Roth contribution was more than five years ago, participants in the Roth 401(k) Plan can receive a tax-free distribution (Qualified Distribution). If a Roth distribution is a Non-Qualified Distribution, earnings are subject to all applicable taxes. Participants in the Roth 401(k) can roll over their account to another Roth 401(k). Rollovers to a Roth IRA are permitted, however, Non-Qualified Distributions may be subject to additional time requirements. Important: The Deferred Compensation Plan is a low-cost plan compared to retail IRA providers, therefore, participants should compare all fees before making any rollover decisions. The NYCE IRA has the benefit of the same investment options and, therefore, the same cost structure as the Deferred Compensation Plan. Method of Payment There are four alternative methods from which to choose: A Full Withdrawal: distribution of the account balance. An Amount Certain: a portion of the account, specified by the participant, that he/she would like distributed. The participant can elect either a dollar amount or indicate the percentage of the balance to be taken from the account. Periodic Payments: distributions taken over regular intervals (monthly, quarterly, semi-annually, or annually) totaling either the entire account or a portion of the account that the participant specifies. An Amount Certain With Periodic Payments: an amount certain followed by distributions made over regular intervals totaling either the entire account or a portion that he/she specifies. There are several advantages of choosing periodic payments: Savings on taxes: By taking periodic payments from the 457 Plan or the pre-tax 401(k), a participant will be able to spread his tax liability over the years that he is in distribution. Consequently, he will not have the tax burden of the full withdrawal option. Retirement Income: One of the primary goals of participating in the Deferred Compensation Plan is to supplement retirement income. Choosing periodic payments provides a stream of retirement income for years to come. Continued Account Growth: Just because a participant has stopped working does not mean that his/her money should stop growing. As long as he/she has a balance in his account, it will remain tax-favored and its earnings will continue to accumulate. Important: A participant can determine the length of his/her distribution by selecting either (a) the number of payments he/she wants to receive; (b) the dollar amount of the payments; or (c) elect to have distribution paid out over his/her life expectancy. However, in no event can a participant's account be distributed over a period of time that is longer than his/her life expectancy. Commencement Date A participant can elect to begin receiving payments at any time by submitting a Distribution Form to the Plan's Administrative Office and may defer distributions up until April 1 of the calendar year following the calendar year in which the participant attains age 70-1/2. Should a participant wish to change or stop distributions, he/she is permitted to do so at any time by submitting a new Distribution Form. There is no penalty for withdrawing funds from the 457 Plan. However, participants in the 401(k) Plan are subject to a 10-percent penalty on most withdrawals made prior to age 59-1/2. Direct Deposit Electronic Fund Transfers (direct deposit) are available to participants electing periodic payments. It is not available for participants electing a full withdrawal or an amount. | |||||
)