Nancy Wyman
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This issue of "Getting There" provides some important news you should know about the State of Connecticut's Deferred Compensation Plan, including investor education seminars, a national recognition award and answers to frequently asked questions. Please read on to learn more about what's happening with your plan. | |
| State Comptroller Nancy Wyman |
Due to the overwhelmingly positive response to the investor education seminars held last year, the State has decided to offer them again. If you haven't already attended, be sure to come to a meeting where we'll address basic plan features, outline investment opportunities and provide tips on how to design the right investment strategy based on your personal circumstances.
This seminar was designed especially for employees, like yourself, who are eligible to participate in the State of Connecticut's Deferred Compensation Plan. Be sure to join us to learn more about how to plan for a secure financial future. Please check with your local Payroll Personnel Office for information about dates, times and locations in your area.
Now, let's answer the questions you've been asking the most!
What's the Contribution Limit for 2000?
As you may already know, the Internal Revenue Service (IRS) limits the amount a participant can contribute to a 457 deferred compensation plan each year. For 2000, that limit is $8,000 - the same maximum as 1999. Of course, the plan limitation on contributions - 25% of your taxable pay - also still applies.
Mutual Funds Versus Annuities - How Do They Compare?
The plan's three financial services organizations offer a wide selection of mutual fund and variable annuity options in which to invest your contributions. Here's a brief overview of how these two investment options compare.
The State of Connecticut recently received a "1999 Recognition Award for Plan Design" from the National Association of Government Deferred Compensation Administrators. This award honors the recent enhancements made to the State's Deferred Compensation Plan, including broadening the categories of investment options, improved employee communications and reduced investment expenses. What's more, the award demonstrates the State's ongoing commitment to provide you with a quality plan in which to invest your hard-earned dollars.
| What's The Same |
|---|
| Money you invest is pooled with that of other investors and is professionally managed |
| Both options invest in a portfolio of stocks, bonds, and cash or cash equivalents |
| Rate of return varies based on performance of underlying investments |
| What's Different | ||
|---|---|---|
| Mutual Fund | Variable Annuity | |
| Available Benefits | Fund's rate of return is only benefit you receive | Generally includes insurance-related benefits in addition to a rate of return |
| Annuity Charges | Not applicable | May be deducted on an annual basis to provide insurance-related features mentioned below |
| Cancellation Charges | Not applicable | Fees charged by some financial services organizations when you make a withdrawal before the money has been at the financial services organization for a certain minimum period (these fees will be eliminated within the next several years) |
| Insurance-Related Features | ||
| Minimum Death Benefit | Not available | Amount you contributed to the plan |
| Lifetime Income Option | Fund distributes account value | Ability to purchase future income you cannot outlive in cash; you can purchase an annuity to provide lifetime income |
| Minimum Annuity Purchase Rates | Annuity purchase rates may vary | Fixed minimum rate for converting your account value into a life annuity |
Can I Make a Withdrawal If I Have a Financial Emergency?
In general, IRS rules prohibit withdrawals from 457 deferred compensation plans while you're still employed. However, if you have an unforeseeable emergency - that is, a situation that you could not have planned for and that causes you a severe financial hardship - you may apply for a withdrawal from your plan account. (Foreseeable expenses such as tuition or tax payments, or the purchase of a home or automobile do not qualify.) Be aware that before you can request a withdrawal for an unforeseeable emergency, you must exhaust every other source of funding available to you.
Each withdrawal request will be reviewed on a case-by-case basis against IRS guidelines. To request a withdrawal application, please call 1 (888) 716-9796, Monday through Friday between 9 am and 5 pm Eastern Standard Time, to speak with a plan representative.
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