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The Frequently Asked Questions (FAQ) page gives you quick access to some of the most common questions about your plan. This lets you save time you might spend on a call with our call center or your HR department.

Click here to view FAQs covering Defined Benefit Plans.

Click here to view FAQs covering Defined Contribution Plans.
When am I eligible to participate in the retirement plan?

If you are an eligible Employee, you will participate in the plan once you have satisfied the eligibility requirements of the plan. See the plan document or Summary Plan Description.

Can I opt out of participation in the plan?

All eligible Employees are automatically enrolled in the plan. You may not opt out of participation in the retirement plan.

What’s the difference between a defined benefit plan and a defined contribution plan?

A defined benefit (DB) pension plan is a retirement plan in which your retirement benefits are known, but the contributions necessary to cover your benefits are not known. Benefits from DB plans are usually calculated based on a set formula using compensation and length of service, and benefits do not change due to market and economic fluctuations. DB plans are valued by actuaries each year to determine what level of contribution is needed by the participating Employer to fund future retirement benefits. A defined contribution (DC) plan, however, is a retirement plan in which contributions to the plan are known, but a participant’s retirement benefits are not known. You make known contributions to your own DC plan account but your ultimate benefit from the plan will be impacted by market and economic fluctuations.

Can I contribute to the retirement plan?

No. Benefits from the plan are completely paid for by your Employer. You are not required or permitted to make any contributions to the plan.

What’s the difference between Vesting Service and Credited Service?

Vesting Service determines whether you are eligible to receive a benefit. Credited Service is a component in the benefit formula to determine the amount of benefit you earn.

What is vesting?

Vesting refers to the amount of Vesting Service you must earn before having a non-forfeitable right to your Accrued Benefit. When you are fully vested, your Accrued Benefit belongs to you, even if you leave the organization before reaching retirement age.

How is my retirement benefit calculated?

Your retirement benefit is generally a monthly benefit payable to you for your lifetime. It is calculated following the Accrued Benefit formula specified in the plan and is based on your Final Average Earnings and your Credited Service. In general, the higher your pay and the longer your service, the greater your retirement benefit will be.

When can I receive my benefit?

You may receive your benefit unreduced at your Normal Retirement Date. If you are eligible, you may receive a reduced benefit at your Early Retirement Date. Your benefit is reduced to account for the longer period of time it will be paid.

Where can I find more information?

Please refer to your Summary Plan Description or the plan document for more information regarding your retirement benefit.

How does a 401(k) work?

A 401(k) is a fairly simple plan. It is set up by your employer as a set contribution retirement agreement. That means you are the one who pays into the plan, although your employer and the plan provider who offers your 401(k) do just about all the work.

Your 401(k) contribution is automatically deducted from your paycheck each pay period. This money is taken out and invested before your paycheck is taxed. After you have decided what percentage you want deducted from your check, and how you want to invest it, your work is pretty much done.

Once the money is deducted from your paycheck, you can't spend it, but it is yours. It grows in your personal 401(k) account. Although you can withdraw the money for certain emergencies or in some cases borrow against your investment, the money is intended to stay in your account until you are at least 59 1/2.

While the investment is growing in your 401(k) account, you do not pay any taxes on it. When you withdraw the money at retirement, you pay taxes on the amount you withdraw from your account (so you pay taxes little by little instead of being hit with one big bill).

And in some cases, your employer makes their own contributions to your 401(k) plan. This is an option for your employer and they are not required to make a contribution. If they do chose to make a contribution, it takes the form of an employer match on your contribution. Usually the employer matches a certain percentage of your contribution. For example, an employer may elect to put in 50 cents for every dollar you contribute. That's an immediate return on your contribution, regardless of how you invest your 401(k) money. This contribution can be anywhere from a small percentage to an exact match of your contributions.

What are the advantages to a 401(k) plan?

There are many advantages to 401(k) plans.

  • The employee is able to contribute to his/her 401(k) with pre-tax money, it reduces the amount of tax they pay out of each pay check.
  • All employer contributions and any growth in the investment is able to be tax-free until withdrawal.
  • The employee can decide where to invest future contributions and/or current savings, giving much control over the investments to the employee.
  • If your company matches your contributions, it's like getting extra money on top of your salary.
  • Unlike a pension, all contributions can be moved from one company's plan to the next company's plan, or a special IRA, should a participant change jobs.
  • Because the program is a personal investment program for your retirement, it is protected by pension (ERISA) laws, which means that the benefits may not be used as security for loans outside the program. This includes the additional protection of the funds from garnishment or attachment by creditors or assigned to anyone else, except in the case of domestic relations court cases dealing with divorce decree or child support orders (QDROs; i.e., qualified domestic relations orders).
  • While the 401(k) is similar in nature to an IRA, an IRA won't enjoy any matching company contributions, and personal IRA contributions are subject to much lower limits.
What are the disadvantages to a 401(k)?

There are, of course, a few disadvantages associated with 401(k) plans:

  • It is difficult (or at least expensive) to access your 401(k) savings before age 59 1/2.
  • 401(k) plans don't have the luxury of being insured by the Pension Benefit Guaranty Corporation (PBGC). (But then again, some pensions don't enjoy this luxury either.)
  • Employer contributions are usually not vested (i.e., do not become the property of the employee) until a number of years have passed.
  • Each year, the Internal Revenue Service sets a maximum contribution limit for 401(k) accounts. For the 2011 tax year, the employee contribution limit is $16,500.
How much money can I put into my 401(k) account?

The maximum pre-tax contribution dollar amount is set by law and adjusted for inflation annually. The 2011 pre-tax contribution limit is $16,500. If you are age 50 or older you may also make an additional catch-up contribution of $5,500 per year. Some plans may offer you the option to contribute on an after-tax basis which is not included in the $16,500 limit. Note that plans may restrict employee contributions to an amount less than $16,500, and may also choose not to permit catch-up contributions.

In addition, there are special non-discrimination rules to prevent highly compensated employees (HCE) from being able to save substantially more than lower paid employees. If you earn more than $110,000 a year, or own 5 percent or more of the company, additional contribution caps may apply for you.

Can I stop contributing if I feel I can't afford to continue?

Most plans allow you to stop contributing at any time though employers are not required by law to do so. Some plans may require specific percentage contribution for a full plan year so be sure to check your plan rules.

Can I withdraw money from my account while I am still working?

Some plans offer loans allowing you to borrow money from your 401(k) account, but you have to pay yourself back with interest. If you fail to pay back the loan it is treated as a withdrawal and the outstanding loan balance will be subject to current income taxes as well as a 10% early withdraw penalty. If your plan doesn't offer loans, you may be able to qualify for a severe financial hardship withdrawal if no other resources are available to you. According to the IRS a hardship withdrawal includes the following:

  • down payment of primary residence
  • college tuition for you or your dependents
  • unreimbursed medical expenses
  • prevent eviction or foreclosure from your home

Some companies are more lenient than others. Because of the complexity surrounding this issue and varying plan designs, you need to reference your plan document or ask your Human Resources representative for further information regarding plan withdrawals.

What are the general rules regarding loans from a 401(k)?

The rules governing 401(k) plans allow plans to provide loans, but do not mandate that an employer make it a plan feature. Your summary plan description (SPD) will state whether or not your employer allows loans in your plan.

Most of the time loans are only allowed for the following reasons: (1) to pay education expenses for yourself, spouse, or child; (2) to prevent eviction from your home; (3) to pay un-reimbursed medical expenses; or (4) to buy a first-time residence. You must pay the loan back within five years, although this can be extended for the first-time home purchase.

Usually you are allowed to borrow up to 50% of your vested account balance to a maximum of $50,000 (set by law). Because of the cost, many plans will also set a minimum amount and restrict the number of loans you can have outstanding at any one time. Loan payments will generally be deducted from your payroll checks and, if married, you may need your spouse to consent to the loan. Funds obtained from a loan are not subject to income tax or the 10% early withdrawal penalty. If you should terminate your employment, often any unpaid loan will be distributed to you. This distribution will be subject to income tax and, if you are not at least 59½ years of age, the 10% withdrawal penalty.

What are the rules regarding hardship withdrawals from my 401(k)?

Hardship withdrawals are allowed by law but your employer is not required to provide this option in your plan. The cost of administering such a program can be prohibitive for many small companies. Your summary plan description (SPD) will state whether or not your employer allows withdrawals in your plan.

The IRS code that governs 401(k) plans provides for hardship withdrawals only if: (1) the withdrawal is due to an immediate and heavy financial need; (2) the withdrawal must be necessary to satisfy that need (i.e. you have no other funds or way to meet the need); (3) the withdrawal must not exceed the amount needed by you; (4) you must have first obtained all distribution or nontaxable loans available under the 401k plan; and (5) you can't contribute to the 401(k) plan for 12 months (only six months after January 1, 2002) following the withdrawal.

The following items are considered by the IRS as acceptable reasons for a hardship withdrawal:

  • Un-reimbursed medical expenses for you, your spouse, or dependents.
  • Purchase of an employee's principal residence.
  • Payment of college tuition and related educational costs such as room and board for the next 12 months for you, your spouse, dependents, or children who are no longer dependents.
  • Payments necessary to prevent eviction of you from your home, or foreclosure on the mortgage of your principal residence.
  • For funeral expenses.
  • Certain expenses for the repair of damage to the employee's principal residence.

Hardship withdrawals are subject to income tax and, if you are not at least 59½ years of age, the 10% withdrawal penalty. You do not have to pay the withdrawal amount back.

What happens to my 401(k) account balances if I choose to leave or am fired from the company?

Your distribution options are the same whether you voluntarily leave or are terminated. If your account balance is more than $5,000.00 ($1,000 in some plans), you can leave your money in the plan. If you want to take your money with you, your vested account balance can be rolled into another 401(k) plan with your employer or put into an IRA to avoid early withdrawal penalties.

What does it mean to be "vested" in my retirement plan?

If you are vested in your retirement plan, you can take it with you when you leave the company. If you are 50% vested, you can take 50% of it with you when you go. In the case of a 401(k) plan, you are always 100% vested in the salary you defer into the plan.

I still have a 401(k) account with my former employer. I would like to transfer this account into my IRA. Can this be done? If so, are there any penalties?

Yes, this can be done and is referred to as a trustee to trustee transfer. You need to request the distribution forms from your former employer. Make sure you open your new IRA before the transfer so that you can provide the account information on the required forms. There are no penalties with a trustee to trustee transfer, but if you allow your former employer to send the funds directly to you and not to your new IRA, they will be required to deduct and remit 20% of the total to the IRS.

What information and reports is my employer required to provide me with on my 401(k) plan?

Your employer must provide you with a Summary Plan Description and an annual statement of your account information. You have a legal right to ask the plan administrator for a copy of the plan's latest Form 5500 or Form 5500-C/R, the summary plan description, the plan document, the trust agreement setting up the plan, if separate from the plan, and any collective bargaining contract, if appropriate, and any other instrument under which the plan was established or is operated.

In addition, you will often be provided a prospectus for every fund offered in the plan, but this is not legally required. If your company's stock is offered in the plan you are required to receive a prospectus on the company stock fund.

Is my retirement plan protected from creditors?

Most employer plans are safe from creditors, thanks to the Employee Retirement Income Security Act of 1974, commonly known as ERISA. ERISA requires all plans under its purview (generally, qualified plans) to include provisions that prohibit the assignment of plan assets to a creditor. The U.S. Supreme Court has also ruled that ERISA plans are even protected from creditors when you are in bankruptcy.

Unfortunately, Keogh plans that cover only you -- or you and your partners, but not employees -- are not governed or protected by ERISA. Neither are IRAs, whether traditional, Roth, SEP or SIMPLE.

But even though IRAs are not automatically protected from creditors under federal law, many states have put safeguards in place that specifically protect IRA assets from creditors' claims, whether or not you are in bankruptcy. Also, some state laws contain protective language that is broad enough to protect single-participant Keoghs, as well.

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