NACo Deferred Compensation Program
Frequently Asked Questions
What is deferred compensation?
Deferred compensation, under Internal Revenue Code Section 457, is a tax-favored supplemental retirement savings program that generally allows public employees to contribute a portion of their salary before federal income taxes* to a retirement account. These programs are offered exclusively to public employees and non-taxable entities, and are designed to help you build your financial security.
* State income tax may also be deferred in certain states.
Who is eligible to participate in the program?
Any permanent employee of a participating NACo jurisdiction who is interested in the benefits of a supplemental retirement program can participate.
Do I have to participate?
No. This program is available for those public employees who choose to take advantage of this special opportunity.
What are the main advantages of my deferred compensation program?
Unlike most conventional savings or investment programs, deferred compensation offers you a variety of money management advantages:
- Payroll deduction -- automatic investment of your deductions
- Minimal contribution -- as little as $20 per month
- Pre-tax and tax-deferred benefits
What are the tax benefits associated with deferred compensation?
There are two main ways to benefit by participating in your deferred compensation program:
- You postpone current federal* income taxes on your contributions, reducing your taxable income, so you pay less in taxes today
- You postpone federal income taxes on the earnings credited to your account until you take money out of your account (usually at retirement).
For an illustration of the impact of tax deferral, please visit www.nrsforu.com.
Are there limits to the amount I can defer?
Yes, tax laws limit the amount that can be deferred. For an up-to-date list, please visit www.nrsforu.com.
Can I increase or decrease my deferral amount, or stop deferring?
Yes, at any time and for any reason. If you stop deferring to the program, you may start again at a later date.
Why is it beneficial to me that deferred compensation is a payroll deduction program?
The payroll deduction feature of the program provides an easy way for you to establish a regular and long-term savings pattern, the kind that adds up efficiently and effectively! It’s convenient, automatic and gives you a steady, planned accumulation of savings.
Does my deferred compensation program let me choose how my money is invested and how it will be paid out when I retire?
Yes. You can choose from a variety of competitive products now, and when you’re ready to retire, you can choose from a number of payment plans that provide you with income for the rest of your life.
To help you prepare for this important financial planning process, contact NRS at 1-877-NRS-FORU or visit www.nrsforu.com.
May I participate in other tax-deferred plans in addition to this one?
Yes. Your participation in this program does not prohibit you from participating in other similar plans; however, your contributions to one plan may limit your contributions to another. Contact NRS at 1-877-NRS-FORU (1-877-677-3678) or visit www.nrsforu.com for personalized retirement planning.
How can I monitor my account balance in this program?
You will receive quarterly statements that show the status of your deferred compensation account. You can be connected to a customer service representative toll-free at 1-877-NRS-FORU (1-877-677-3678) or access your account on-line at www.nrsforu.com.
When may I withdraw the funds from this program?
You may withdraw funds under the following conditions:
- When you terminate your employment or retire, according to the plan, at any age and for any reason
- When you have reached age 70 1/2, stop your contributions and elect to begin receiving your funds
- If you experience an unforeseeable emergency* as defined by the IRS
Unless one of these conditions occurs, you may not withdraw the funds while you are still employed. This restriction, part of the federal law which governs this program, protects your investment and its tax-favored status.
(*Unforeseeable emergencies are defined as emergencies that you normally cannot budget for which cause you severe financial hardship. Contact NRS at 1-877-NRS-FORU or visit www.nrsforu.com for further details about what is and what is not considered a true unforeseeable emergency.)
When will I have to pay federal income taxes on my deferred compensation account?
Income taxes will be payable in the year or years in which your deferred compensation account is paid or made available to you or your beneficiary. Since taxes are assessed only on the amounts made available in any given tax year, you may find that periodic benefit payments are preferable to a lump sum payment.
For more information on NACO's Deferred Compensation Program, contact Lisa Cole.
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