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SAVINGS AND INVESTMENT - 401K
INTRODUCTION
The BUPERS Savings and Investment Plan puts more of your retirement
planning in your hands. When you join the Plan you decide how much to
save and how to invest it. As long as you stay in the Plan, you can
shape your savings program to fit your budget and achieve your goals
for financial security when you retire. Along with this flexibility,
the Plan also gives you a tax break.
Here are some interesting things to consider about the Plan:
- Once you begin regular full time or regular part
time employment, you can enroll in the Plan during the open enrollment
period(s) held quarterly (December, March, June, and September).
- You must be age 18 or over to be eligible to
enroll.
- You must be a U.S. Citizen.
- · You can save any percent of your pay in the Plan, as long
as it does not exceed the IRS annual limits. The company will match
up to 3% of your contributions, but in order to get the 3% match,
you must contribute at least 3%. Every dollar you save reduces your
taxable income, so you can pay lower current income taxes.
- The Plan has many investment funds to choose from. You can invest
your savings in one or all of them and add tax-sheltered earnings
to your account.
- Your account will be paid out when you leave
full-time or part-time employment or you retire or leave BUPERS for
some other reason. In some cases, you may be able to withdraw money
from the Plan before then.
ENROLLMENT
Eligibility and Enrollment
You are eligible to join the Plan if you are age 18 or over and a regular
full-time or regular part-time BUPERS NAF employee. Non-U.S. Citizens
are not eligible to enroll in the plan.
To enroll, you must complete an enrollment from and indicate:
- The percentage you want to contribute to the Plan;
- Where you want to invest your funds; and
- Name a beneficiary
Return the completed form to your benefits representative at least
30 days prior to the next calendar quarter.
Changing your Enrollment
You can change your enrollment choices after you join the Plan. To make
a change, complete a Change Form and return it to your benefits representative
30 days before the change will be effective.
You can make three kinds of changes:
- You can increase or decrease the amount you save as often as four
times a year. Changes become effective at the beginning of each calendar
quarter: January, April, July and October.
- You can stop saving at any time and start again at the beginning
of any calendar quarter.
- You can change your investment choices at any time by calling the
automated voice response system (1-800-743-5274) or entering the Mass
Mutual website at www.massmutual.com and using your PIN number to
log into "The Journey". You can make a new election for
your future savings that will affect only the money you put in the
Plan after the change. You can also make a new election for the money
you already have in the Plan.
YOUR SAVINGS
Savings Election
You can save any percentage of your base pay in the Plan, as long as
it does not exceed the IRS Annual Limits. Make your election on your
enrollment form.
- Since saving in this Plan allows you to reduce
your taxable income, federal regulations limit the amount you can
save in the Plan each year.
- In 2005 it increased to $14,000.
Age 50 Catch-Up Contribution
Effective January 1, 2002, the BUPERS 401k Plan is amended to allow
for Catch-Up Contributions as authorized in the Economic Growth and
tax Relief Act (EGTRA) of 2001. Participants 50 years of age and older
may defer up to $3,000 more than the plan limit.
The following applies:
- A catch-up contribution is an elective deferral made by an eligible
participant that is in excess of the maximum limit ($18,000 for 2005).
- The employer match will not apply to catch-up contributions.
- A determination will be made at the end of the year as to whether
contributions are considered catch-up contributions or not.
- A participant is deemed to be age 50 on January 1 of a year if the
participant is projected to attain age 50 during that year.
How Pre-Tax Savings Work
The money you save goes into your account before income taxes - federal
and state - are figured on your pay. You will not pay current income
taxes on you savings as long as they stay in your account. Meanwhile,
since the IRS does not count your savings as taxable income, you will
owe less income tax on your BUPERS pay.
Pre-tax savings will not affect your other pay-related benefits like
disability, life insurance and pension. These benefits, as well as your
pay raises, will be figured on your full pay. Your pre-taxed savings
will not affect your future Social Security benefit, since you pay Social
Security taxes on your full pay.
What Pre-Tax Savings Can Mean For You
You get immediate benefits from saving before taxes- in your paycheck.
Because of the money you save on taxes, you put more in the Plan than
you lose in take-home pay. For example, you earn $18,000 and you save
4% of pay before taxes. Although you are putting $720 in the Plan, your
take-home pay will be reduced by only $590. Here is how it works:
* Social Security taxes are based on the 1998 rate of 7.65% of gross
pay. Income taxes include 1990 federal taxes for a married person filing
jointly using the standard deduction and two exemptions, plus state
taxes.
INVESTING YOUR SAVINGS
You decide how to invest the money in your account. Any earnings will
be credited to your account and reinvested for you. You will not owe
income taxes on your investment earnings until you take them out of
the Plan.
Your Investment Election
Click
here for New Investment Selections
You decide how to invest your savings when you enroll. You can put
all your money into one fund or divide it in multiples of 10%. For example,
you can put 40% in one fund and 60% in another.
You will get a statement of your account quarterly, so that you can
follow the performance of your investment choices.
It is important that if you move or change your address, that you notify
the Plan Administrator. You can complete a Change Form and send it to
the Plan Administrator or go online to the Mass Mutual website www.massmutual.com
and using your PIN number to log into "The Journey" make the
change to your address.
How Your Account Can Grow
If you earn $18,000 a year and save 4% of your pay - or $720 - as long
as you are in the Plan. If your investments earn 8% a year, your balance
after 15 years would be more than $20,000.
| Savings |
$3,600 |
5 Years |
| |
$ 7,200 |
10 Years |
| |
$10,800 |
15 Years |
| Interest |
+ 722 |
5 Years |
| |
+ 3,520 |
10 Years |
| |
+ 9,390 |
15 Years |
|
Total Balance
|
$4,322 |
5 Years |
| |
$10,720 |
10 Years |
| |
$20,190 |
15 Years |
The amounts in this example are conservative.
The total balance does not reflect pay increases or inflation over
that 15-year period. They also do not guarantee any rate of return
on investments.
RECEIVING MONEY FROM YOUR ACCOUNT
The Savings and Investment Plan is designed to help you save for a long-term
goal like retirement. The longer you leave your money in the Plan, the
greater your final benefit.
If You Leave BUPERS
You will receive the money in your account when you retire, or if you
become disabled or leave BUPERS for some other reason. Your beneficiary
will receive the balance of your account if you die before it is paid
to you.
Your balance will be paid to you or an IRA if elected in about 60 days
in a lump sum. You will owe current income taxes, and may also have
to pay a 10% excise tax on your payment if we cut a check payable to
the individual.
In-Service Withdrawals
Because of the tax advantages of pre-tax savings, federal law limits
withdrawals from the Plan while you are still working. The committee
that administers the Plan must approve all withdrawals to be sure they
meet federal requirements.
Before you reach age 59 1/2, you can withdrawal money from your account
only if the withdrawal is due to a participant's immediate and heavy
financial need as authorized by IRS; and the withdrawal must be limited
to the amount necessary to satisfy the financial need. Under the IRS
safe harbor determination, the following events are deemed to satisfy
the "immediate and heavy" condition:
- Unreimbursed medical care expenses for the participant,
the participant's spouse, or dependents.
- Costs directly related to purchasing the participant's
principal residence (excluding mortgage and rental payments).
- Tuition, related educational fees, and room-and-board
expenses for the next 12 months of post-secondary education for the
participant, spouse, children, or other dependents.
- Amounts necessary to prevent the participant's
eviction from his or her principal residence or foreclosure on the
mortgage on that residence.
The "amount necessary" condition is satisfied
under the safe harbor determination only if the following requirements
are met:
- The amount to be distributed does not exceed the amount necessary
to relieve the financial need and it must be at least $1,000.
- All other distributions available to the participant, have been
met.
- The employee is suspended from making elective contributions for
at least six months after the hardship occurred.
- Only 1 (one) hardship and/or In-service Withdrawal is allowed per
year
The "amount necessary" condition is satisfied under the safe
harbor determination only if the following requirements are met:
- The amount to be distributed does not exceed the amount necessary
to relieve the financial need and it must be at least $1,000.
- All other distributions available to the participant, have been
met.
- The employee is suspended from making elective contributions for
at least six months after the hardship occurred
- Only 1 (one) hardship and/or In-service Withdrawal is allowed per
year
You can withdraw only your own contributions; investment income and
employer match will not be available.
After you reach age 59 1/2, you can make a withdrawal for any reason.
All the money in your account will be available.
A Word About Taxes
You will owe current income taxes on any money you take out of your
account. You may also have to pay a 10% excise tax on pay out you receive
before age 59 1/2; this includes hardship withdrawals. You will not
have to pay the excise tax if the early pay out is made because of death
or disability.
When you receive final pay out from the Plan, you can transfer it to
an IRA account and continue deferring taxes on it.
You will receive information about the tax implications of your pay
out or withdrawal when you apply for it. You may find it helpful to
talk to a tax advisor before your account is paid out.
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