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Frequently Asked 457(b) Questions regarding by Employees (Employee 457(b) FAQ)

Very Frequently Asked 457(b) Questions by Employees

CCC is neither qualified nor licensed to provide financial or tax advice. To the extent answers to questions below deal with Federal or State income tax information, any information provided is not intended or written by CCC to be used, and cannot be used by any taxpayer, for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code. Information from CCC relating to Federal tax matters may not be used in promoting, marketing or recommending any entity, investment plan, or arrangement to any taxpayer.

  1. My employer is offering an Early Retirement Incentive (ERI) program in which I may elect a lump-sum payment, a monthly stipend for a specified number of years, or a combination of these two. If I decide to participate, will I have the option to defer any portion of these payments into my 403(b) or 457(b) accounts?
  2. Should I take a hardship withdrawal to meet needs resulting from the depressed economy?
  3. Does CCC provide financial or investment advice?
  4. What are my 403(b) or 457(b) rollover options and the taxation concerns connected to distributions from my account(s) once I have obtained a qualifying event for distribution?
  5. Where should I go for financial or investment advice?
  6. Does PERS affect my 403(b) or 457(b) contributions?
  7. What is the process to add a preferred provider to my employer's list of vendors?
  8. Can I move 457(b) funds to another Vendor? to an IRA?
  9. Are my 403(b) and/or 457(b) contributions subject to FICA (Medicare and Social Security) withholdings?
  10. What is meant by "Normal Retirement Year"?
  1. My employer is offering an Early Retirement Incentive (ERI) program in which I may elect a lump-sum payment, a monthly stipend for a specified number of years, or a combination of these two. If I decide to participate, will I have the option to defer any portion of these payments into my 403(b) or 457(b) accounts?

  2. No, ERI stipends are not eligible for 403(b) or 457(b) plan deferrals. If the agreement you are contemplating signing includes an option to contribute portions of the ERI stipend into a 403(b) or 457(b) account, please contact CCC and we will discuss this issue with your employer.

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  3. Should I take a hardship withdrawal to meet needs resulting from the depressed economy?

  4. If you do so, you need to be aware of the tax implications. Click here to read important warnings in a Wall Street Journal Digital Network article.

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  5. Does CCC provide financial or investment advice?

  6. No. CCC provides only compliance monitoring and plan administration services to its client Employers.

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  7. What are my 403(b) or 457(b) rollover options and the taxation concerns connected to distributions from my account(s) once I have obtained a qualifying event for distribution?

  8. When taking a rollover or distribution from a 403(b) or 457(b) account, one must consider all options available to them and the tax consequences associated with those options. Most vendors provide a notice called a "402(f)" that describes the various rollover options and the applicable taxes associated with distributions and rollover options that comes as a part of or addendum to the vendor's distribution and rollover forms. Usually the participant's authorization section of one of these forms requires the participant to attest to the fact they have read the notice pertaining to taxation and understand the applicable tax consequences of the transaction they are submitting. (Please note: the IRS provided generic model language for 402(f) Notice in 2009 (Notice 2009-68), this model language is viewable here.) CCC strongly encourages participants to seek the advice of a qualified and trusted financial advisor and/or tax consultant concerning investment and distribution choices.

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  9. Where should I go for financial or investment advice?

  10. A number of resources are available on the web, but many people have neither the time nor the inclination to investigate these resources. Whatever your preference, check out useful links and the left-hand column of the vendors page of your Employer's section of this website, both for doing your own research and for information on financial planners and investment advisors located in your area.

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  11. Does PERS affect my 403(b) or 457(b) contributions?

  12. The general answer is no. You are allowed to contribute right up to your elective deferral limit into either or both of the 403(b) and 457(b) plans, irrespective of employee and employer PERS contributions.

    The only situations in which PERS contributions impact your ability to contribute to 403(b) and/or 457(b) plans is when your gross salary is fairly low (about $13,000 per year for a single plan or $26,000 per year for both plans during 2004). Since contributions are limited to 100% of compensation, if employee PERS contributions are pre-tax salary deductions, they reduce your compensation. Consequently, they reduce the amount you can contribute to the 403(b) and/or 457(b) plans.

    Important Observation: If you are employed by a CCC client Employer, you may request a free calculation of your maximum allowable contribution (MAC). Contact us to request your MAC calculation.

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  13. What is the process to add a preferred provider to my employer's list of vendors?

  14. The process for adding a "preferred provider" (our terminology is "Vendor with an Active Payroll Slot") may be found in your employer's 457(b) Plan Document.

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  15. Can I move 457(b) funds to another Vendor? to an IRA?

  16. 457(b) funds cannot be exchanged with or moved to a new vendor's 457(b) account.

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  17. Are my 403(b) and/or 457(b) contributions subject to FICA (Medicare and Social Security) withholdings?

  18. Yes. Employee contributions to both 403(b) and 457(b) plans are subject to FICA withholdings.

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  19. What is meant by "Normal Retirement Year"?

  20. In many 457(b) plans, a option may be allowed called the 3 Year Catch-up which (depending on an employees prior plan contributions) a participant may utilize if eligible in the 3 full calendar years prior to the applicable normal retirement year. "Normal Retirement Year" refers to the year an employee reaches the minimum age required by the state retirement system when they may retire with unreduced benefits. This will vary from person to person depending on the Tier or Plan in which you are a member. For more information concerning your "Normal Retirement Year" under your state retirement plan, visit the Oregon PERS website or the Washington State Teachers' Retirement System website.

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