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401(k) FAQ's
Defined Benefit Pension Plan
Frequently Asked Questions - 401(k) Plan

What exactly is a 401(k) Plan?

A 401(k) Plan is a Defined Contribution Plan designed to help you save money for your retirement. A 401(k) Plan is a "tax advantaged" or "qualified" Plan since it allows you to contribute pre-tax dollars and your money can grow tax-deferred. Unlike a Defined Benefit Pension Plan where the benefit you receive in retirement is "defined" by a formula, the amount you "contribute" to a 401(k) Plan is defined by a percentage of your pay.

So, can I contribute as much of my pay as I want each pay period?

No. The IRS has limits on how much you can contribute each year. For calendar 2017 the limit is $18,000. If you will be 50 or older in 2017, you can contribute an extra $6,000, which is known as a "catch-up" contribution.

How do I know how much of each paycheck to contribute?

There is no "one size fits all" answer to that question. You need to evaluate what you think your requirements in retirement will be and balance that against your current financial needs. The advantage of tax-deferred contributions cannot be over-estimated, however. If you choose to contribute 8% of your pay, your paycheck will only decrease by 5 - 6% percent, based on your tax bracket.

Is it worth joining the 401(k) Plan if I can only afford to save a little money each pay period?

Yes. Small amounts of money can become large amounts of money if they have time to grow. The power of compounding is truly great. If you save $2.50 per day or just $17.50 per week, and invest that money in your 401(k) Plan and earn 8% per year, you can accumulate over $400,000 in 40 years.

Can I take the money in my 401(k) Plan with me if I change jobs?

Yes, as long as your new company allows you to "rollover" those funds into their Plan. You can also rollover funds from your 401(k) Plan to an IRA account. If you have more than $1,000 in your 401(k) Plan when you leave your current job, you are allowed to leave the funds in your current Plan.

If I have money in a 401(k) Plan from another job, can I rollover those funds into my SBERA 401(k)?

Yes. All SBERA Plans allow you to rollover funds from previous employers. There is a form on the website that you can send to your previous employer to start the rollover process. Your Human Resources Department can assist you with this process or you can call SBERA directly for help.

When can I access the funds in my 401(k) Plan?

The standard answer is that you can access the funds without penalty at age 59 ˝. You must begin taking what are called "required minimum distributions" in the year after you turn 70 ˝ years of age or retirement, whichever is later. In most circumstances, if you take the funds prior to age 59 ˝ you will have to pay a 10% penalty.

What about "hardship withdrawals"?

The IRS very clearly defines what qualifies as a hardship withdrawal - education, medical expenses, purchasing a primary residence, preventing eviction or foreclosure of a primary residence, burial/funeral expenses or specific repair of damage expenses for a primary residence. If you withdraw the money from your 401(k) Plan, however, that money is no longer growing tax-deferred for your retirement.

What about loans?

Some 401(k) Plans allow loans and some do not. Loans are limited to 50% of your vested balance or $50,000 which ever is less, and there is a maximum of two loans outstanding at any one time. Again, remember that money you borrow from your 401(k) Plan is not growing tax-deferred for your retirement. If you leave your current job then the loan must be paid back in full within sixty days or it will be considered a distribution.

What are the investment options in my SBERA 401(k) Plan?

The Investment Committee and SBERA’s outside consultants, NEPC, have diligently researched and assembled a list of well-diversified investment options for your 401(k) Plan. The options range along the risk spectrum from a Money Market Fund to International and small-cap stock funds. For a complete list of the available investment options, please click here.

How do I get more information about my 401(k) Plan?

You can read the Summary Plan Description, talk to your Human Resources Department or call SBERA whenever you have questions or need more information.

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