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401 A

Information for you. 401 A. 401(a) . Simply put it is a tax code that allows for deferred (save now spend later) monies that will be used by the employee for retirement this money is pre-tax You reduce your current income taxes while you boost your retirement investments.

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401 A

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  1. Information for you 401 A

  2. 401(a) • Simply put it is a tax code that allows for deferred (save now spend later) monies that will be used by the employee for retirement • this money is pre-tax • You reduce your current income taxes while you boost your retirement investments. • You have the ability to rollover your savings to another public sector employer's 401 plan, a tax-sheltered 403(b) annuity plan, a 457 plan, or an IRA if you change employers. • Pre-tax contributions are not subject to federal and (in most cases) state income taxes until withdrawn. • Earnings accumulate tax-deferred. • You may also participate in a 457 Deferred Compensation Plan

  3. What is the benefit • To talk about the benefit you need to know how our retirement works • There are many misconceptions on how the drop program operates • So lets give a brief over view of the PSPRS (Public Safety Personnel Retirement System)

  4. Down a dirty on PSPRS • You are currently contributing 7.65% of your salary to your Pension (PSPRS) • This does not change! • The District is contributing a percentage based of how well the program is performing • Each District is contributing different amounts based on what a bean counter (actuary ) says • This year our District is contributing 14.1%

  5. PSPRS Drop • When you enter the drop you essentially leave employment in the eyes of the PSPRS • For up to 60 months (drop period) they divert your pension to an account (drop account) that will hold that saving until you are eligible. • Once you enter the drop you and your employer are no longer contributing to the PSPRS

  6. How the 401 a comes into play • In the past the employer has been able to encumber (keep) their contribution to the PSPRS during the drop • You also would see an increase in your pay check by 7.65% • By entering into this program the District has agreed to divert a portion of their contribution (7.65% ) into the 401(a) account during your drop period

  7. Whats the rub? • You also have to place 7.65 percent into the account during the drop period • You will not even know it happened, financially, because you never saw the contribution through out your career • You will have to plan ahead • The plan come into effect after 4 years of employment and is irrevocable (can’t opt out) • The minimum contribution is 1% if you make 50,000 a year that is $500.00 (pre-tax)

  8. The Good News Assuming you are making 60,000 (very conservative) when you enter the drop the district is going to contribute approx. 5000 dollars a year to the plan (free money). Number are hard to say they are very individual to the employee so I am giving a very bare bone estimate.

  9. This plan is a good thing it will be a benefit to all our members. • With the increase in retirement cost we need to constantly make sure we look towards our future for our selves and family • The Nation Wide reps will be coming around to all the stations and meeting with each member individually . Please make yourself available and ask lots of questions

  10. Last But Not Least Questions

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