Under the tax law passed in July, some county employees can benefit from a tax credit if they contribute to their retirement programs. After Dec. 31, lower income retirement plan participants will receive a non-refundable tax credit of up to 50 percent on a maximum $2000 in contributions to IRA, 401(k), 403(b) or 457 plans. This credit is in addition to the tax deduction already associated with these contributions.

County employees whose adjustable gross income is less than $30,000 and joint filers, whose adjustable gross income is less that $50,000, are eligible for a tax credit.

Why this is so important for county employees
The Federal Reserve estimates that 13 percent of U.S. household residents don’t own a checking account and that nearly 10 percent have no bank account at all.

Instead of traditional banking services, many workers turn to “fringe” institutions such as check cashiers and pawnshops, which now outnumber banks and credit unions. This makes it tough for many employees to even consider saving for retirement through options like deferred compensation programs.

Analysts at Washington, D.C.’s Progressive Policy Institute say no single reason explains why so many low-income employees are “unbanked,” but factors include distrust of financial institutions and a desire to keep financial records private.

This suggests an enormous educational challenge, but also an opportunity for counties to help such employees manage and save their money through NACo’s deferred compensation program and its other services.

(For more information on the new tax law or on NACo’s retirement programs for county employees, please contact Lisa Cole, director, NACo sevices operations at lcole@naco.org or NACo’s retirement programs administrator, Nationwide Retirement Solutions at (877) 677-3678 or www.nrsforu.com. This article was developed from information from benefitnews.com, 8/15/01 and Nationwide Retirement Solutions.)