LOANS ARE HERE!

You are now able to take out a loan against your Defined Contribution Accounts for a down payment on a house or a general purpose loan. Why not pay yourself back with interest instead of a financial institution? If you are interested, please contact Stephanie Henry or Great West Customer Service at the above numbers for more information.

ROTH 457

Your Defined Contribution Plan (aka Deferred Compensation Plan) is now accepting Roth 457 contributions effective November 15, 2011 giving you the flexibility to designate all or a portion of your 457 elective deferrals as Roth contributions.

Roth contributions are made with after-tax dollars, as opposed to the before-tax dollars you have traditionally contributed to the 457 Defined Contribution Plan.

You will have to determine whether contribution to the Plan on an after-tax Roth basis or the traditional before-tax basis makes more sense for your situation.  The Roth 457 option essentially “locks in” today’s tax rates on all contributions.  For some people – especially those who expect to be in a higher tax bracket when they retire – the Roth 457 option may make the most sense.  If you’re one of those people, the Roth option allows you to pay taxes on your contributions when they are contributed (presumably at a lower tax rate than you would expect to pay at retirement).

If you expect to be in a lower tax bracket when you retire, you might want to consider contributing to your 457 on a before-tax basis.  You won’t pay taxes on your contributions or any earnings on your contributions until you take a distribution, which is usually at retirement (when many people expect their retirement earning power and tax burden to be lower than it is today).

If you are interested in doing the Roth 457 after-tax contributions, go online and sign up by November 25  to get your first contribution in before the end of the 2011 year.  There is a $10 minimum contribution to sign up.  If you contribute before December 31, 2011, the 2011 tax year will count towards your five years that are needed to receive your Roth 457 earnings back tax free.  This is one of the requirements you must meet to be able to ultimately receive the earning on your Roth 457 contributions without being taxed on them.  See the table on page 2 for additional details.

 

 

Before-Tax 457 (Current)

Roth After-Tax 457 (New)

Is my contribution taxable in the year I make it?

No

Yes

Is my contribution taxed when distributed?

Yes

No

Are the earnings on my contributions taxed when distribution?

Yes

No, provided the distribution occurs after age 59 ½ , death or disability and no earlier than five years after your first Roth 457 Contribution.

If I change jobs, can I roll over my account?

Yes, to a qualified plan, traditional IRA, 403(b) plan or governmental 457(b) plan if the plan allows it.

 

Yes, to a Roth IRA, Governmental 457(b) plan, 401(k) Plan or 403(b) plan if the plan has a designated Roth account and accepts rollovers.

What is the maximum amount I can contribute?

Combined limit for contributions in year contributing.  See article in this newsletter edition regarding 2012 limits.

If I experience an unforeseeable emergency, can I apply for a withdrawal?

Yes

Yes

Do I have to take a minimum distribution at age 70 ½?

Yes

Yes

 

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