What is a 401(k) Plan?

A 401(k) is a qualified plan that allows for employee pre-tax contributions. The value of a 401(k) investment grows tax deferred until withdrawn, when it is taxed as ordinary income.

What are some of the advantages of a 401(k) Plan?

There are several advantages to saving in a 401(k) Plan. First, it offers you a disciplined way of saving as your contribution is automatically deducted from your paycheck. Each contribution made reduces the amount of taxes you pay as you are saving on a pre-tax basis. Second, your money grows on a tax-deferred basis allowing you to earn interest on the money from year to year without paying taxes until you withdraw the money. Last, you are investing your money in a variety of funds provided by your employer.

Where can I get information about my company's retirement plan?

Once you are eligible to join your organization's retirement plan, your employer will provide you with a Summary Plan Description (SPD). If you do not receive a copy of the Summary Plan Description, you can obtain one from your Human Resources Department. The Summary Plan Description provides detailed information about plan provisions, contribution limits, eligibility requirements, loans, hardship withdrawals, vesting rules for employer contributions as well as distribution rules.

When can I join my 401(k) Plan and what are the eligibility requirements?

Typically, employers have open enrollment periods either twice a year or quarterly. Eligibility requirements vary by employer; therefore, please check with your Plan Sponsor for further details about your specific Plan.

How much can I contribute to the Plan?

Please check with your Plan Sponsor to find out what your specific Plan allows for.

The IRS limits contributions to the following:

 What are Catch-Up Contributions?

As a result of the Economic Growth and Tax Relief Reconciliation Act of 2001, participants age 50 years or older are allowed to make additional “catch-up contributions” to their 401(k) plan. Before you can make a catch-up contribution, you must first contribute the maximum amount allowed under your plan or permitted by law.

The IRS limits catch-up contributions to the following:

Where can I get information about the funds offered in my plan?

Your Human Resources Department will have a copy of the prospectus for each of the funds offered in your plan. In the event you want information quicker, you may access it through AccountValue.com. Go to the Fund Summary screen and click on the fund for which you want to obtain additional information. You can also find information on each fund at the fund company's website, such as www.fidelity.com or www.janus.com.

 How can I access my account?

There are two ways you can access your account—through the Voice Response Unit (VRS) and the Internet.

Voice Response Unit (VRS)

The Automated 24-Hour Voice Response System (VRS) can be accessed by calling (800) 635-7756. If you are accessing this system for the first time, the system will ask you to enter your Social Security Number. It will then ask you to enter your Personal Identification Number (PIN) followed by the pound (#) sign. As a first time caller, you will enter the last four digits of your Social Security Number followed by the pound (#) sign.

The first time you call into your account, the system will require you to change your PIN to a new 4-digit number. If you have Internet account access, changes to your Voice Response System PIN will not affect your Password.

Once you have logged in successfully, you will be able to access Personal Account Information; Change your Personal Identification Number (PIN); Request General Information; or Speak to a Customer Service Representative.

Internet Account Access

You may access your account information by logging on to www.accountvalue.com. To log into your account, you will need a web browser program with 128-bit encryption. Before logging into your account, be sure to review the terms and conditions of the site.

Select the Login button and enter your User ID and Password. If you are accessing this system for the first time, your User ID will be your Social Security Number WITH NO DASHES, NO SLASHES OR SPACES. Your password will be the last four digits of your Social Security Number.

Once you have logged in, the system will require you to change your Password to something different than the last 4-digits of your social security number. You will find all the pertinent information on this page giving you specific instructions on changing your password. Remember, changes to the Password will not affect your Voice Response System PIN.

After you have logged in successfully, you may view your account and initiate transactions (if available). This includes viewing account balances by source and investment, changing your investment elections, transferring between funds, rebalancing your portfolio as well as several other options.

How do I increase/decrease the amount of money I contribute to the plan?

Plans generally allow changes to your contribution amount monthly, quarterly or semi-annually. Please check with your Plan Sponsor for further details.

When can I make changes to my investments/allocations?

You can make changes to your investments/allocations at any time. You may do this by either calling our toll-free number (800) 635-7756 or with Internet access.

When can I stop contributing to the Plan?

You can stop contributing to the Plan at any time. However, you will have to wait until the next enrollment period in order to commence contributing again.

Can I roll money from my previous retirement plan or IRA into my current plan?

Yes, although there are a few plans that do not allow rollovers. You may roll money between the following plans: 401(k) Plan, 401(a) Plan, Profit Sharing Plan, Money Purchase Plan, Defined Benefit Plan, 403(b) Plan, 457 Plan, and Traditional IRA (not a Roth IRA).

How do I roll my money from my previous plan into my current employer’s plan?

Many companies allow rollovers into their plan but you should check with your Human Resources Department first. You will need to complete withdrawal paperwork that your previous employer, or IRA, will provide you. Fill out the paperwork indicating the name of your new plan, how the check is to be issued and to whom it is to be made payable, and where to send the check. You can obtain all of this information from your Human Resources Department.

There is a possibility that you will need to provide proof that your previous plan is an IRS Qualified Plan or that your IRA is a Traditional IRA. If this should occur, you may provide a copy of the plan's IRS Favorable Determination Letter, or a letter from a trustee of the plan, or the Rollover Authorization Form available from your company.

What are the requirements for taking a loan from my account?

Many plans allow loans but you will need to check your plan’s Summary Plan Description (SPD) or contact your Human Resources Department in order to find out if loans are not allowed or if there are any requirements to meet.

How much can I borrow?

You can borrow up to 50% of your vested account balance not to exceed $50,000. The minimum loan is typically $1,000 which means that you will need to have $2,000 in your account before you may take a loan.

How long will it take to process my loan?

A loan typically takes from 2 to 3 weeks depending upon how quickly the paperwork is turned in.

If I rollover money from my other plan or IRA into my current plan, can I borrow against it?

Yes.

How many years can I take to pay back the loan?

You may pay back the loan within five (5) years or, if the loan is for the purchase of a primary residence, you may pay back the loan over a 30 year period. Proof will be required when requesting a loan for more than five (5) years for the purchase of your primary residence.

What is the interest rate--who gets the interest?

The interest rate is the Prime Rate plus one percent. The interest on your loan is deposited back into your account.

Can my loan be paid with my current payroll contributions?

No, the payment is withheld separately. Your payroll contributions are pre-tax dollars whereas loan payments are after-tax dollars.

What happens with my loan if I quit or get fired?

You have several options. You can pay off the outstanding balance in full and avoid the tax consequences associated with early withdrawal. In the event you cannot pay off the outstanding balance, you will receive an IRS Form 1099 at the end of the year which will indicate the amount of the loan. This amount will be subject to regular federal and state taxes as well as a 10% penalty if you are not age 59-1/2.

What is a hardship withdrawal?

Your plan may allow you to make a withdrawal in the event of financial difficulty. In most instances, you may take a hardship withdrawal in order to prevent foreclosure on your primary residence, to purchase your primary residence, to pay for medical bills not covered by insurance or pay for post-secondary education. You may be required to submit proof such as bills or a foreclosure notice.

How much will I be allowed to withdraw due to a hardship?

Generally, you are allowed to withdraw the total amount you have contributed to the plan from your pay, but not earnings on that money. You may also be allowed to withdraw employer contributions that are 100% vested. Please check your Summary Plan Description or contact your Human Resources Department for further details.

What are the consequences of taking a hardship withdrawal?

One of the consequences is that you will not be allowed to make contributions to the plan for six months. In addition, if you are not age 59-1/2, you will have to pay a 10% penalty to the IRS on the amount you withdraw. You will receive a Form 1099 at the end of the year to file with your tax return.

What are my options when I'm no longer employed with my employer?

You can roll your money over to another retirement plan, to an IRA, or you can take a cash distribution. If your company's plan is not a qualified plan, such as a deferred compensation plan, or if it is a 457 plan or 403(b) plan, there may be other rules regarding the payment or rollover of your money.

Do I need to have my spouse complete the Spousal Consent Form?

If your plan is subject to the Joint & Survivor Annuity rules (J & S), and your balance is over $5,000, then your spouse must consent to the distribution even if you are rolling it over to another plan or IRA.

What taxes or penalties are there when I make a distribution?

If you roll your money into another plan or to an IRA there are no taxes or penalties. However, if you take a cash distribution, 20% will be withheld for federal taxes and 10% for state taxes for residents of California . If you are under age 59-1/2 and you take a cash distribution, there will be a 10% penalty paid to the IRS when you file your tax return. The federal and state taxes that are withheld are the IRS and State of California required withholdings and may not represent the amount you may actually owe when you complete your tax return.

Can I withdraw my money if I become disabled?

In most plans if you become permanently disabled, you will be able to withdraw money from your retirement account. Certain criteria must be met in order to obtain a disability distribution.

What happens to my account if I get a divorce?

In some divorce cases, the court will award some or all of a retirement account's assets to the participant's ex-spouse. If this is done, the court order must meet the conditions of a Qualified Domestic Relations Order (QDRO) as stipulated by the IRS and the U.S. Department of Labor. If the court order does not meet all of the requirements for a QDRO, the plan is prohibited from paying plan benefits to anyone other than the plan participant.

What happens to my account if I die?

Your retirement benefits will go to the beneficiary or beneficiaries you named on the beneficiary form you completed when you signed up for the program. If you did not list any beneficiaries, the assets will be counted as general assets of your estate. If you have a will or living trust describing how your estate should be distributed, the retirement plan benefits will then be distributed along with your other estate assets according to those documents. If you don't have a will, your assets are distributed according to the laws of the state in which you live.

Can my spouse roll my retirement account into an IRA if I die?

Yes. The spouse is the only person that may roll your money into an IRA.

How will I know how to complete my tax return?

You will receive a Form 1099 by January 31 of the year following the year in which you receive your distribution. If you made a rollover to another plan or IRA, you will still receive a Form 1099 but it will be marked that you made a rollover and no taxes are due.

Do my creditors have access to my account?

Under the Employee Retirement and Income Security Act most employer sponsored retirement plans are not subject to creditors.

How long will it take to process my distribution?

Distributions take anywhere from 4 to 6 weeks depending upon how quickly you submit the paperwork.