Showing posts with label deferred compensation. Show all posts
Showing posts with label deferred compensation. Show all posts

BackDROP & State Taxes

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Does my backdrop withdrawals add to my state pension income which adds to my state taxable income that effects my state tax exemption?
Yes, the BackDROP distribution is considered taxable income for the year in which you receive the payment unless you roll it over to a traditional IRA or another eligible employer plan, such as MO Deferred Comp. A popular reason to roll the lump-sum payment into the deferred compensation plan is that it allows employees to defer taxes on the payment until those assets are distributed in retirement. There is a helpful publication on MO Deferred Comp’s website called Thinking About the BackDROP? 

Any withdrawal after retirement is taxable in the year of the withdrawal.

We suggest you speak to a tax professional or financial advisor for advice specific to your situation. For more information about state taxes, or the Public Pension Exemption, please contact the Missouri Department of Revenue or go to: www.dor.mo.gov/personal/ptc/pension.php.

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Saver's Tax Credit

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A friend under tier 2011 wants to know if their 4% contribution towards retirement is eligible for the federal saver's tax credit. Some places on the web seem to call the employee contribution a 457 (deferred comp) plan. No where else is it referred to by any plan name (IRA, 403B, 401K) that would clarify what it is. To make it more confusing, the contribution is in box 14 of their W-2 with code EE after it. If it was in box 12, code EE would mean it was a 457 plan and would be saver's credit eligible, but there is no definition of what this means in box 14. Did they make a mistake?
No, the 4% employee contributions made by members of the MSEP 2011 or the Judicial Plan 2011 to MOSERS do not qualify for the retirement Savers Credit because these contributions are mandatory contributions. The MOSERS defined benefit plan is classified as a qualified retirement plan. However, only voluntary contributions to a qualified retirement plan are eligible for the retirement savers credit. The 4% contributions are made on a pre-tax basis and used to help pay the cost of future retirement benefits. On the W-2 form, contributions to the MOSERS defined benefit plan should be listed in Box 14, but there are no standard codes to indicate the type of contribution. It is optional for the employer to report these contributions on the W-2.

The MO Deferred Comp Plan is a voluntary governmental 457(b) plan designed to help employees save additional income to supplement their defined benefit pension and social security benefits in retirement. The deferred compensation plan provides a convenient way to save extra money for retirement through payroll deduction. Voluntary contributions to MO Deferred Comp, or another governmental 457(b) plan, are eligible for the Saver’s Credit. Keep in mind, the credit is for low- to moderate-income taxpayers and calculated using their adjusted gross income (AGI) and filing status. Learn more about the Saver’s Credit on the IRS website. On the W-2 form, contributions to MO Deferred Comp, a 457(b) plan, are listed in Box 12. A code of G indicates a 457(b) plan and a code of EE indicates designated Roth contributions under a governmental section 457(b) plan.

Please see the instructions for IRS Form 8880 for more information concerning this credit.

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Roth IRA & Deferred Comp

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Are retired MO state employees who have an income from part or full time employment (other than through the State of MO) permitted to open a ROTH IRA through Deferred Compensation ?  If so, how would they go about opening a ROTH IRA and what would be the annual limit for a ROTH contribution? 
No. Once you have left state employment, you can no longer make contributions to the MO Deferred Comp Plan. However, you can keep your money in deferred comp, even if you're retired or simply working outside state employment. If you leave your money in the plan, you must begin taking required minimum distributions (RMDs) in the year you turn 70 ½. By staying in the plan after you separate from service, you will enjoy:

•        Penalty-free access to your 457 savings before age 59 ½
•        Competitively priced, custom investment solutions
•        Convenient online account access
•        Dependable customer service

Keep in mind, you may lose these privileges — specifically the penalty-free access to your assets — if you roll your deferred compensation plan balance to another account type after leaving state employment.

If you have any additional questions, please feel free to contact MO Deferred Comp at 800-392-0925 or stop by our local office 3349 American Ave, Ste A, Jefferson City, MO 65109.

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Educational Seminars

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Is MOSERS still hosting informative seminars on retirement? I'd love to sit down in a small group or individually to ask some questions about saving for retirement. 
Yes! MOSERS still hosts PreRetirement seminars in various locations around the state from February through November. You can bring your spouse or a guest as well (registration required). These seminars are usually announced in mid-December for the next year and fill up fast. They focus on your eligibility for MOSERS retirement, calculating your benefit amount, differences between MSEP and MSEP 2000, BackDROP, COLAs, and life insurance. They also include presentations from MO Deferred Comp, Missouri Consolidated Health Care Plan (MCHCP), and Social Security.

MO Deferred Comp offers seminars and one-on-one consultations throughout the year for employees at all career stages. If you are an early or mid-career state employee, deferred comp has specifically designed educational opportunities, like Pocket Change and the Completing the Retirement Paycheck Puzzle seminar,  to help you learn more about saving for retirement. To find a seminar near you, visit modeferredcomp.org and click the yellow Event Registration button at the top of the page or call (800) 392-0925 to schedule a meeting with your local education specialist.

If you would like to schedule an individual appointment with a MOSERS benefit counselor, please call (800) 827-1063 or (573) 632-6100 and select option 2.

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MOST Deduction from Deferred Comp Distribution?

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Is it possible to direct a 2017 mandatory Deferred Comp distribution to a retiree's current grandchildren's MOST 529 account that would also eliminate the requirement of paying state and federal taxes on such directed mandatory distributions?
No, it is not possible to eliminate the requirement of paying state and federal taxes on a required minimum distribution (RMD) from the deferred compensation plan. You can however take after-tax money from the RMD and make a contribution to a MOST 529 account and possibly receive a state tax deduction. For more information on this deduction, visit the MOST 529 website.
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Deferred Comp Early Withdrawal Penalty for Beneficiary?

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I am retired and I am 60. My wife is 56 yrs old, not a state employee, and is the beneficiary of my deferred compensation account. If I were to die, would she be subject to the 10% federal penalty for withdrawing money before 59 1/2 from my deferred comp fund?
No, as your widow, she would have penalty-free access to your pre-tax savings in the 457 plan prior to her attaining the age of 59½.

As a participant in MO Deferred Comp, you have penalty-free access to your pre-tax savings in the 457 plan prior to age 59½ as long as you are separated from state service. This great benefit carries over to your beneficiary as well. Keep in mind, a 10% penalty will apply to distributions from any employer contributions and earnings in a 401(a) account or rollover dollars (such as BackDROP) from other qualified accounts withdrawn prior to age 59½ by you or your surviving beneficiary(ies).

You may also be interested to know, that you can keep your money in the deferred comp plan throughout your retirement. Furthermore, you are not required to start withdrawing your savings until you reach age 70½. If you pass away before this time, or even after you begin taking Required Minimum Distributions (RMDs), your beneficiary has several options for when they are required to meet the annual withdraw amount. Visit the IRS’ website for more detailed information on RMDs. Beneficiaries of a deceased MO Deferred Comp participant must complete the Beneficiary Account Setup and Withdrawal Packet to create an  account and initiate withdrawals from the plan. When you or your beneficiary are ready to start taking distributions, the deferred comp plan offers several automatic and manual payment options to help you easily access your retirement savings. The Distributions Options Guide goes over these payment options in more detail.

Remember, it’s crucial that you annually review and update your beneficiary information with MO Deferred Comp, as well as with MOSERS. Keep in mind, you can designate contingent beneficiaries for circumstances when a primary beneficiary precedes you in death. To review your deferred comp beneficiary information, log on to Account Access and navigate to the Personal Information page under the Manage My Account tab.

For more information, visit www.modeferredcomp.org or contact a participant services representative at (800) 392-0925.

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Penalty for Early Withdrawal from Deferred Comp?

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When I retire I will be 56 yrs old, will I be penalized for withdrawing money from my deferred comp fund?
Many retirement savings accounts, will impose a 10% penalty on top of federal tax withholdings for any distributions made prior to age 59 ½; however a 457 plan, like MO Deferred Comp, isn’t one of them*.  In fact, one of the biggest benefits of saving with the deferred compensation plan is penalty-free access to your money before age 59 ½ as long as you are separated from state service.

Remember, you do not have to withdrawal your money from the deferred compensation plan after you retire or leave state employment.  Keeping your money with MO Deferred Comp is a smart way to maintain access to all of the great features you enjoyed while you were working. Actually, 60% of state retirees still have an account after five years of retirement and are still enjoying the plan’s low cost, custom investment options. Once retired, the deferred compensation plan provides a variety of manual and automatic payment options to help you access your hard-earned savings.

If you have additional questions, please visit the MO Deferred Comp’s website or call 800-392-0925 to speak with a participant service representative.

*A 10% penalty will apply to distributions from any employer contributions and earnings in a 401(a) account or rollover dollars (such as BackDROP) from other qualified accounts.

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State Retiree "Fees"?

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 It was rumored by an employee of DESE that a 9% fee was being charged to state retirees for services provided by MOSERS. If this is true, what services are being charged?
No, this is not true. We are not sure where the figure of 9% came from but tried to imagine how this rumor may have started. Here are a few possibilities:

Member Contributions: Members of the MSEP 2011 and the Judicial Plan 2011 (who first began working in a benefit-eligible position on or after 1/1/2011) are required by a law passed in 2010 to contribute, by payroll deduction, 4% of gross pay toward their retirement benefit. This contribution is not a fee—it is made on a pre-tax basis and members will receive no less than the amount contributed, either in future retirement benefits or through a refund of contributions plus interest. The individual member account is the member-financed portion of the retirement benefit eventually received. In fact, the majority of employees who do retire will receive substantially more in retirement benefits than the amounts they contributed. See the example of the value of your retirement benefit in our New Employee Orientation brochure. There are three sources of income for the MOSERS pension fund; (1) the 4% contributions from those first hired on or after 1/1/2011, (2) the employer’s contributions (currently, 16.97% of covered payroll), and (3) MOSERS’ investment income.

Deferred Compensation Administrative Fee: Whether it’s an account like the deferred comp plan offered to state employees or an outside IRA, it costs money to grow your savings in a retirement saving account. Retirement savings accounts charge account administrative fees in addition to investment management fees for each fund option. MO Deferred Comp prides itself on competitively-low costs and being transparent about any fees passed on to savers. In the MO Deferred Comp Plan, the “Per Participant Administrative Fee” is $15 per year plus 0.09% of assets (or 9 basis points). The 0.09% is included in each fund’s expense ratio. The average expense ratio of a Missouri Target date fund is 0.22% (0.09% administrative and 0.13% investment management).  The MO Deferred Comp Plan fees are among the lowest out-of-pocket participant fees (administrative and investment management) compared to a universe of peer retirement savings plans according to CEM Benchmarking, Inc. Learn more about low costs and other advantages on the MO Deferred Comp website

We hope this helps address your concerns. 
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BackDROP & Deferred Comp

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 I RETIRE IN DECEMBER WITH FIVE YEARS BACKDROP. CAN I PUT ALL OF THAT INTO MY DEFERRED COMP ACCOUNT? AND IF I NEED SOME EMERGENCY MONEY IMMEDIATELY, HOW LONG UNTIL IT IS AVAILABLE FOR WITHDRAWAL?
Yes, you can put all of your BackDROP distribution in your deferred comp account.  When you retire, you will be asked if you want to elect BackDROP (if eligible), and, if so, how you want to receive that distribution. The payment options are:

1. Cash Option
This distribution will be paid directly to you in one lump-sum payment at retirement or in three annual installments (less the 20% income tax MOSERS is required by the IRS to withhold).

2. Rollover Option
This distribution will be paid directly to the State of Missouri Deferred Compensation Plan (which offers a self-directed brokerage account, custom target date funds, an actively managed asset allocation fund, and a stable income option), a traditional IRA, or another eligible employer plan.

3. Cash & Rollover Option
If you elect this option, you may specify the amount of a tax-deferred distribution to be paid directly to your State of Missouri Deferred Compensation Plan, a traditional IRA, or another eligible employer plan. The remaining balance will be paid to you in cash (less the 20% income tax MOSERS is required by the IRS to withhold).

Here is how you can access the money:  BackDROP funds that are rolled to the deferred compensation plan will be placed in the 401(a) source of your account. If you’re 55 or older the year you separate from service (terminate employment), then you can access 401(a) funds without paying a 10% penalty (the Plan is required to withhold 20% of each payment for federal income taxes). If you’re younger than 55 when you retire, you still have access to 401(a) assets, but you must pay the additional 10% penalty for any distribution that occurs before age 59 ½. As a reminder, you will have penalty-free access to the assets in your 457 source (these are monies you have contributed to the plan throughout your career), at any age once you separate from service. After separation from service, you can withdraw funds online in Account Access at www.modeferredcomp.org or by calling the Plan Information Line at 800-392-0925.

For a detailed explanation of the payment methods and tax consequences, please review our Special Tax Notice. More information on the BackDROP is also available in the BackDROP for General State Employees brochure on MOSERS’ website. We recommend you contact a tax consultant or financial advisor before electing a payment method.

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Deferred Compensation Match?

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What ever happened to the proposed $75.00 per month that was to be a benefit to state employees that are in the deferred compensation plan?
State statute (Section 105.927) provides for an employer match of up to $75 dollar per month, however this match is subject to annual appropriation approval by the General Assembly.  The maximum match that has ever been appropriated was $35.00 per month.  The state has not provided any match since 2010.

The General Assembly did appropriate a $25 monthly match in the FY15 budget, but that money was withheld and therefore the match was not provided.  Each year, there is a possibility of a match being appropriated, but until the state budget is passed in late April/early May, we do not know what is included in the final state budget and even then, that approved budget is subject to withholdings by the Governor’s office.  In the 2016 legislative session, the General Assembly will provide appropriation approval for the state’s FY 17 budget.

As always, we will keep our members updated on pension-related information on our website, Rumor Central, and social media. 
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Designating Retirement Beneficiaries

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Since I have no spouse and my children are over 21 can I withdrawal all the money I contributed over the years, without a fee or penalty, and invest somewhere else where I can be sure my children will receive the money when I die and it will not go to the state? 
MOSERS administers both defined benefit (DB) and defined contribution (DC) retirement plans. It is unclear which you are asking about, so we will respond about both.

The Defined Benefit (DB) Plan
The DB plan is non-contributory for members hired before January 1, 2011. As such a member, you do not pay money toward your DB plan. Your employer pays the necessary contributions to MOSERS while you are actively employed so that you may receive a future monthly retirement benefit and potential survivor benefits. Since you do not pay contributions, you are not eligible to withdraw funds from the retirement system. You do not have a separate account, rather the state’s annual contribution toward your benefit is pooled with investment returns and employee contributions (from members first employed on or after 1/1/2011) to fund the retirement system.

At retirement, you will elect a benefit payment option that determines whether or not a benefit will be paid to anyone after your death. Since you are single, one of the options you may wish to consider is life income with a set number of guaranteed payments. This allows you to name a beneficiary or beneficiaries to receive any remaining payments if you do not live long enough to collect the minimum guaranteed amount. Your monthly payment will be reduced in order to provide this potential survivor benefit. However, you will receive a payment each month for YOUR life, even if you live beyond the guarantee period. No survivor payments will be paid if you have received ALL payments in the guaranteed period (other than the final payment due at the end of the month in which you die).

For example, if you elect Life Income with 120 Guaranteed Payments (10 years), but die after collecting only 60 monthly payments (5 years after you retire), MOSERS will pay the remaining 60 monthly payments to the beneficiary(ies) you named.

It is true that as a member of MSEP or MSEP 2000, if you die PRIOR to retirement, with no eligible spouse or minor children, no DB retirement benefits are payable on your behalf. (Survivors of members first hired on or after 1/1/2011 will either receive monthly survivor benefits or a refund of contributions plus any interest, depending upon various factors.)

Please see our website to determine which plan you are in, find more information in your retirement handbook, or contact a benefit counselor to discuss all your options.

On a related issue, we encourage you to make sure your life insurance beneficiaries are current (if you have life insurance with MOSERS) so proceeds will be paid according to your wishes.

The Defined Contribution (DC) Plan
As for any money you’ve contributed to the State of Missouri Deferred Compensation Plan (the DC plan), you can keep those dollars invested in the Plan after you leave state employment. In order for your savings to be transferred to your children after you die, you must designate beneficiaries for your account. You can do this by logging on to your account at www.modeferredcomp.org, clicking on My Profile in the left menu, then Beneficiaries. You can also call the Plan at 800-392-0925 to make your designations over the phone. The dollars you contribute to the deferred compensation plan are yours and will remain invested until you withdraw them. As a general plan guideline, you cannot access your savings in the deferred compensation plan until after separation from state employment. Those distribution guidelines differ when your beneficiaries assume control of your savings after your death. We encourage you to carefully read the Distribution Options Guide for more information.

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Retirement Crash Insurance

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Forbes and other major financial magazines have declared "We are on the precipice of an unstoppable financial crisis," and RETIREMENT CRASH INSURANCE is being advocated. Does MOSERS have any such insurance? Is this a fraud? 
MOSERS does not have “retirement crash insurance” and prior to your question, we had not previously heard of such a concept or product.

We researched this topic and found a quote similar to the one you referenced in a 2013 Forbes article. However, nowhere in that article was “retirement crash insurance” mentioned. But we did find a blog post that quotes the Forbes piece and promotes a Retirement Survival Kit and Wealth Building Guide which includes so-called retirement crash insurance and other questionable investment products.

We reached out to the Missouri Attorney General’s office and the Secretary of State’s Investor Protection & Securities Division to find out if they have any information on “retirement crash insurance”. If we receive any information from them about this being an issue in Missouri, we will share on the MOSERS website.

While many people would agree that, as a whole, American workers are ill-prepared for a financially secure retirement, as a member who meets eligibility and retires under a MOSERS defined benefit (DB) pension plan, you will get a monthly benefit payment for as long as you live. It is calculated according to law and based upon a formula which is:

 Final Average Pay x Credited Service x a Multiplier = Monthly Benefit

While many state retirees receive modest benefits, they are assured of some level of financial security. Furthermore, the overall plan design is sustainable. MOSERS receives revenue from employer contributions, employee contributions (from members of MSEP 2011 & the Judicial Plan 2011), and investment income. The state of Missouri has consistently done the right thing by fully funding the contribution rate certified by the MOSERS board of trustees.

Because 1) MOSERS’ investments are professionally managed, 2) we have a long-term investment horizon, and, 3) our risks are pooled over a large population, we are better situated to withstand the ups and downs in the financial markets than a person who has less control over the timing of their individual retirement relative to the markets and economy. For more information, see our Key Facts regarding funding of MOSERS.

Social Security can also provide an additional level of guaranteed retirement income that, when coupled with a pension benefit, will form a solid financial foundation for state retirees. Simplistically speaking, both your MOSERS pension and Social Security benefits can be viewed as a steady, guaranteed stream of income in retirement.

To add some flexibility to that equation, more than 70% of state employees also save money in the State of Missouri Deferred Compensation Plan, which MOSERS administers. The deferred compensation plan provides a convenient way to save extra money for retirement through payroll deduction. Unlike pension and Social Security benefits, YOU have control over how much you save in this plan throughout your career, how your dollars are invested, and how you will withdraw those savings in retirement. While voluntary, many employees find this plan crucial for accumulating additional savings that can add another layer of financial security in retirement. We encourage all state employees to enroll or resume their participation in this plan as a smart, simple way to save for retirement.

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Friday Top Five: Retirement Related News for 10/02/2015

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From PLANSPONSOR: Retirement Readiness in the Age of High Tuition

Adults who think it’s their duty to put the kids through college may want to think a little further—that is, if they are also saving for retirement. A recent LIMRA Secure Retirement Institute study explored the incidence of parents and grandparents helping, or being willing to help, finance a four-year college education and their attitudes behind that. More than collecting numbers, the researchers wanted to give a warning, if needed, to self-sacrificing family who might later find they’ve given up more than they bargained for.

From Forbes: Four Must-Know Social Security Facts

When it comes to Social Security, far too many retirees — and future retirees — are in the wilderness. Not only are most Americans not fully informed about the program, they don’t know how to maximize their benefits.

Of course, knowing what Social Security offers and how to get the highest-possible benefits are two different things. There’s a lot you have to know.

From CBS News: Is more money the key to a happy retirement?

With so many people approaching their retirement years with meager retirement savings, rather than aiming to fully retire and not work at all, it might be more realistic to aim for being happy. To help you get there, it's important to think about how much money you really need to be happy. A long time ago, someone said "money can't buy you happiness," and indeed considerable thought and research has gone into the question of whether having more money makes you happier. The so-called "Easterlin paradox" maintains that once your basic needs are met, having additional income won't add to your happiness.

From CNN Money: Low gas prices may doom Social Security raise

Cheap gas is good news for most people -- except senior citizens. Falling prices at the pump mean that retirees probably won't get a boost to their Social Security benefits next year.

The amount of money that Social Security pays out is adjusted each year to taken into account the rate of inflation in the 12 months leading up to September. This is known as the cost of living adjustment, or COLA. This year benefits rose 1.7%, and they've climbed by less than 2% for three years in a row.

From Daily Finance: How to Start Investing, & Why Now Is a Good Time

There is a big percentage of Americans who don't like complex financial problems. It's why things get crazy around tax season. It's why personal debt and credit are out of control for many. And it's why so many Americans don't invest for their retirement. Sure, there are plenty of people who rightly say they don't have the extra money to invest. But I suspect that these people are actually in the minority. With careful planning, it's possible for most people to invest in such a way that -- at least -- they will be somewhat financially secure upon retirement.

Related:  As a Missouri state employee, you can easily start investing through the State of Missouri Deferred Compensation Plan by using Target Date Funds or a Self-Directed Brokerage account.
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BackDROP options

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What do most retirees elect to do with backdrop funds? What are options with keeping them with the state for disbursement?
To answer your first question, 78% of the total amount of BackDROP distributions was rolled over to tax favored savings arrangements such as IRAs or the Missouri State Employees Deferred Compensation Plan as of January 2015.

State employees eligible to receive a lump-sum BackDROP payment can choose to roll that money into the State of Missouri Deferred Compensation Plan at retirement.  This option is available to all state of Missouri employees, even if they have never participated in the deferred compensation plan. Doing so is an attractive choice for many because it allows employees to consolidate the lump-sum payment with their existing retirement savings. This makes managing their savings in retirement easier and grants them continued access to the Plan’s low fees and custom investment solutions. Another popular reason to roll the lump-sum payment into the deferred compensation plan is that it allows employees to defer taxes on the payment until those assets are distributed in retirement. In 2014 alone, just under 500 state of Missouri employees rolled their BackDROP payment in to the deferred compensation plan.

We suggest you speak to a tax professional or financial advisor for advice specific to your situation and to discuss all of your options at retirement.  


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Tax Rates & Deferred Compensation

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When i retire, i want to pull what i have out of my deferred comp account. I am over 59 1/2 so i shouldn't have to pay any penalty, but what tax rate will i have to pay? And, do i have the option of pulling all of my money out of my account?
All withdrawals (distributions) from the deferred compensation plan will be subject to a 20% federal tax withholding. You also have the option of withholding additional state income taxes from your distribution, although you are not required to do so. As for how much you can withdraw, you do have the ability to receive a lump sum of your entire balance with the deferred compensation plan, but we encourage savers to read over the Distribution Options Guide prior to doing so.

It's important to note that the early withdrawal penalty you mentioned in your question does not apply to your savings in a 457 savings plan like the deferred compensation plan. Generally speaking, once you separate from service, you will not pay a penalty for accessing that money, even if you were younger than 59 ½. It's also important to remember that you are not required to immediately withdraw your money from the deferred compensation plan when you retire or leave state employment. Because it is an important employee benefit that provides low-cost access to custom investment solutions, a majority of retirees choose to keep their money in the Plan throughout retirement.

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Rolling Your MOSERS Benefit to a Deferred Compensation Plan

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I have heard you can roll your Moser retirement over to the deferred comp and receive 1 check?
State employees who are eligible for and elect to receive the BackDROP payment option can roll that lump sum into the deferred compensation plan at retirement. As for the lifetime monthly base benefit payment from MOSERS or MPERS, you cannot roll that amount into the deferred compensation plan. If you’ve saved money in a previous-employer’s retirement account (like a 401(k) or 403(b)) or in an IRA, you can also roll those savings into the deferred compensation plan. Note: Roth IRA assets cannot be rolled to the deferred compensation plan. Consolidating all of your savings into one account allows you to take advantage of the low fees, custom investment options and specialized customer service available within the deferred compensation plan. For more information on rolling funds to the deferred compensation plan, view this blog post from August 2014.


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Getting Started

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I am completely lost when it comes to planning for retirement. I grew up in a family that my parents will work until they die. So when I am trying to figure all this out to plan ahead I am lost. I am now 23 and have worked for the state for 2.5 years. I want to make sure that I am on track to retire. Obviously I have quite a few years ahead of me. I just really need some help
Congratulations to you on thinking about your financial future now!  It’s never too early to start planning for retirement.

Here is the big picture--as a state employee, your benefit package includes three sources of potential retirement income:
  1. The MOSERS defined benefit (DB) plan. You automatically participate in this plan when you are hired.
  2. The State of Missouri Deferred Compensation Plan. New employees hired after July 1, 2012 are automatically enrolled in this plan.
  3. Social security. You and your employer both pay into social security.
All three of these arrangements will contribute to a financially secure retirement for you.
In a DB plan, once you are vested (work in a MOSERS-benefit eligible position for 10 years for employees first hired on or after 1/1/2011), and meet the age and service requirements, you are guaranteed a monthly benefit for life. This benefit is calculated using your final average pay and years of service. So, the longer you work and the higher your salary – the higher your benefit will be. You will get a set amount each month and it will not run out as long as you live. It, along with social security, forms the foundation of your financial security in retirement.

Your deferred contribution plan allows you to save and invest money to supplement your DB and social security retirement benefits. The amount of income it produces for you in retirement depends on a number of factors, like  how much and how long you contribute, the investment returns you receive on those contributions, and when you start accessing your accumulated savings in retirement. The deferred compensation plan offers many tax advantages, investment options that are both simplified and low cost, and convenient payroll deductions that making saving with each paycheck easy.

Now that you know how it works, what should you do?
  • MOSERS: For your DB plan, all you have to do is keep working in a MOSERS-benefit eligible position.
  • State of Missouri Deferred Compensation Plan: If you’re unsure how to invest your money, the deferred compensation plan offers custom Target Date Funds. These are unique investment options designed specifically for state of Missouri employees. You simply choose the fund that’s closest to your anticipated retirement year and the target date fund will automatically rebalance your portfolio – from aggressive to conservative – as you move toward retirement. Since you’re 23, you have the power of time on your side. The sooner you start saving, the better.  The good news is, because you were hired after July 1st of 2012, you were automatically enrolled in the deferred compensation plan and defaulted into the 2055 Missouri Target Date Fund. That means you’ve already been saving 1% of pay with each pay check. You can log on to view your balance through the ESS portal or by visiting www.modeferredcomp.org and clicking on the blue, “New User – Register Now” button. Remember, you can adjust your contributions at any time or schedule your contributions to increase by a specific percentage using the auto increase feature mentioned in this DC Update.
If you’d like to learn more about financial topics like pension and social security benefits, budgeting, the value of state employee benefits, saving, and investing, then be sure to attend a Pocket Change financial seminar.  This new training session, presented by deferred compensation plan education specialists, will address many of the questions you seem to have and should help point you in the right direction as you begin your financial journey.

The Pocket Change seminar is available via special HR request only, so be sure to have your human resource department contact the deferred compensation plan’s local plan manager, Tasha Reinkemeyer, at 800-392-0925, option 2, ext. 15 to bring the training to your agency.

Retirement benefit estimates are available from the various benefit providers and you can access them at any time during your career:
The RetiremenTrack calculator on the State of Missouri Deferred Compensation Plan’s website can be used to calculate your future savings and see if you should be doing more to reach your goals. Print Friendly and PDF

Returning Withdraws to Deferred Compensation Plans

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A previous Rumor Central answer says that retirees can keep their savings in the Deferred Comp plan, but after age 70 aren't we required to make annual withdrawals which are then taxed? Can those withdrawals be put back into another Deferred Comp plan?
Per IRS rules, you are not allowed to rollover any part of a required minimum distribution (RMD). The following is a detailed description of required minimum distributions from the State of Missouri Deferred Compensation Plan.

Required Minimum Distributions (RMDs)
Tax laws require you to begin annual withdrawals, known as Required Minimum Distributions (RMDs), from your retirement accounts in the year you reach age 70½, or when you retire, whichever is later. The State of Missouri Deferred Compensation Plan reviews your account each year to ensure that you are withdrawing the minimum amount required by law. If you do not withdraw enough to satisfy your RMD, the difference will be paid to you by December 31st. If this is the first year you are required to receive a distribution, you will be sent your RMD in March of the following year.

If you are receiving periodic payments, your payment schedule will continue unchanged. However, if you have requested payments equal to your RMD, the State of Missouri Deferred Compensation Plan will adjust your payment amount(s) so that your RMD is satisfied. This adjustment will take place every January or at the time you establish an RMD-only schedule.

If you are not receiving periodic payments, you may establish one at any time, but you are not required to do so. Your account will be reviewed annually to ensure compliance with the regulations and any remaining RMD will be distributed automatically.

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Are Post-Retirement Contributions Possible?

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After I retire from State Service, may I continue to contribute to the Missouri Deferred Plan?
No. Once you retire from state service, you may no longer contribute money to the deferred compensation plan. However, you can keep your account balance within the Plan for the duration of your retirement. In fact, many state employees taking advantage of BackDROP roll their lump-sum payment into the deferred compensation plan at retirement. There are several advantages to keeping your money in the Plan after you leave state service, including:
  • Access to free training and consultation services from the Plan’s education specialists. These are trusted professionals who do NOT earn commissions on the amount of money you hold in your account or the investment options you choose within the account.
  • Access to custom, low-cost investment products not commercially available elsewhere.
  • Convenient online account access where you can perform a number of transactions, like setting up automatic installment payments during retirement.
  • Account consolidation features that allow you to roll other retirement savings accounts (from previous employers, for instance) into the deferred compensation plan. This approach combines your accounts in retirement, making it easier to manage your savings.
For more information, go to www.modeferredcomp.org.

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Out of State Taxes

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After retiring, relocating to a state that doesn't have state tax. Will MO. still deduct state taxes from retirement checks/ money withdrawn from Deferred Comp.
For your retirement benefit payment, MOSERS will not withhold taxes for any state other than Missouri. We recommend you contact the appropriate state and local tax authorities to determine the taxability of your MOSERS benefit.

For the State of Missouri Deferred Compensation Plan, a mandatory 20% federal tax is withheld from all plan distributions. State taxes are not withheld, (unless you elect to do so), regardless of where you are living.

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