S&L SAVINGS INVESTMENT PLAN

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Transcript S&L SAVINGS INVESTMENT PLAN

SARGENT & LUNDY SAVINGS INVESTMENT PLAN CONTRIBUTION SOURCES INCLUDING ROTH 401(k) & CONVERSION

(

Current S&L Employees

)

June 2014

SIP History

             1977 1981 1984 1986 1987 2000 2001 2003 2006 2007 2009 2010 2013 Voluntary Employee Contribution Plan (VECP) started at S&L (after-tax contributions only) Renamed Savings Investment Plan, employer match added 401(k) pretax contributions added Tax Reform Act of 1986 (Created after-tax Pre-87 and Post-86 sources, changed withdrawal rules) Loan program added Changed record keeping from in-house to Fidelity, added daily accounting & processing Economic Growth & Tax Relief Reconciliation Act (Added catch-up contribution for employees age 50 and older, and rollovers from other 401(k) plans) Employer Non-Matching Contribution added Roth 401(k) added Pension Protection Act (Allowed SIP to IRA rollovers for non-spouse beneficiaries, direct rollover to Roth IRA for those eligible) Addition of lower cost share class investments, such as Fidelity “K” shares Expanded eligibility for rollovers to Roth IRA (January), allowed Roth In-Plan Conversion (December), (Income eligibility removed for rollover to Roth IRA) American Taxpayer Relief Act of 2012 allows all types of money to be converted to Roth within the plan, even if the amount is not otherwise eligible for a non-hardship distribution.

Sources of Money

  Your Savings Investment Plan account is segregated into several different “Sources.” Rules for contributions, taxes, and distributions vary by the Source designation: Pretax 401(k) Employer Match Contribution Employer Non-matching Contribution Post-86 SIP After-tax Pre-87 SIP After-tax Employee Pretax Catch-up Rollover (from a pretax IRA or another qualified plan) After-tax Rollover Roth 401(k) Roth Catch-up Roth Rollover Roth In-Plan Conversion Roth In-Plan Conversion Employee Roth In-Plan Conversion Employer A list of Sources in your account can be found under the Summary “Sources” tab.

Roth 401(k)

        Only available through employer-sponsored plans, but not all plans Must be contributed through payroll deductions Limits for 2014: $17,500 and $5,500 catch-up (for those age 50 and over) Eligible for pretax employer matching contributions Available to all employees, regardless of income Contributions and earnings withdrawn proportionally for IRS-approved hardship only (if <59-1/2) Earnings can be withdrawn tax free if “qualified”, five years after the first contribution

ONLY

if: You are at least age 59-1/2 Payment is made to a beneficiary after your death You are disabled Can be rolled into a Roth IRA or employer-sponsored retirement plan (but not all plans)

Roth IRA

       

Only available through banks and financial institutions (SIP is not an IRA)

Eligibility rules (2014): Single or Head of Household Married Filing Jointly Married Filing Separately Wages <$114,000 Wages <$181,000 Wages $10,000 or less Contribution limits (2014) - $5,500 ($6,500 if age 50 or over by year end) Contributions are separate from, and in addition to, any Roth 401(k) contributions Your contributions can be withdrawn at any time, for any reason Earnings can be withdrawn tax free if “qualified”, five years after the first deposit

ONLY

You are at least age 59-1/2 if: Payment is made to a beneficiary after your death You are disabled Money is used for a qualified exception (see

www.IRS.gov

) Withdrawals from a Roth IRA that was created from a converted traditional pretax IRA are more complicated (see your IRA provider) Can accept rollovers from a Roth 401(k), but cannot be rolled into an employer-sponsored retirement plan

Benefits of Roth 401(k) & Roth IRA

      Earnings grow tax free, not taxed upon withdrawal if “qualified” Roth IRAs are exempt from minimum distribution requirements (MRD) at age 70-1/2. However, SIP Roth sources

are

included in the Plan’s MRD calculations & distributions. May be passed to heirs tax free, both SIP Roth and Roth IRAs It could be more advantageous to pay taxes now on the Roth 401(k) contributions; tax rates may be lower now than in the future, even at retirement If withdrawn during retirement, not considered as income when calculating Social Security eligibility All employees are eligible for SIP Roth 401(k) contributions; Roth IRA eligibility is determined by wages

Types of Contributions Through Payroll

Pretax 401(k) & Catch-up Roth 401(k) & Catch-up Post-86 After-tax

$1,000 - 60 $ 940 Gross wages 6% Pretax Contribution Taxable wages Contributions withdrawn - taxable Earnings withdrawn – taxable Receives employer match (if eligible) • • • • Early Withdrawal Requirements: IRS-approved hardship 2 loans outstanding No contributions or match for 6 months 10% federal penalty before age 59-1/2 $1,000 - 60 Taxable wages 6% After-tax Contribution $1,000 - 60 Taxable wages 6% After-tax Contribution Contributions withdrawn - tax free* Earnings withdrawn - tax free* Contributions withdrawn - tax free Earnings withdrawn - taxable Receives employer match (if eligible) • Early Withdrawal Requirements: IRS-approved hardship • 2 loans outstanding • • No contributions or match for 6 months 10% federal penalty before age 59-1/2 * Must be age 59-1/2 with 5 years of Roth participation for a “qualified” distribution.

Receives employer match (if eligible) • Withdrawal Requirements: No hardship needed • • No loans required Contributions don’t stop • 10% federal penalty before age 59-1/2 (on earnings only)

Catch-up Contributions

       Available to all employees age 50 (by year end) or older. (Not available for the January 10 paycheck of the year you turn 50.) Must be contributed through payroll deductions.

A separate deduction election, up to 35%.

Eligible for employer matching contribution.

Limit for 2014: $5,500.

Can be deducted as either pretax 401(k), Roth 401(k), or any combination of both.

May be deducted after reaching the initial $17,500 limit, or simultaneously during the year.

Employer Contribution Sources

 All full-time employees are eligible for the following types of employer contributions: *

Non-matching Contribution

: 3%** of regular wages, regardless of contribution percentage.

Matching Contribution

: Calculated on regular wages, 50% of the first 6%** of payroll contribution (all types of payroll contributions).

   Employer contributions are always pretax .

Employer contributions are deposited into your account each payday, and are 100% vested after one year of full-time employment.

Employer contributions cannot be invested in the brokerage option until 100% vested.

**The level of employer contribution is evaluated by management every 6 months.

Annual Contribution Limits 2014

 $17,500 – Pretax 401(k), Roth 401(k), or any combination of both.

(If hired mid-year, limit applies to all employers combined.)  $ 5,500 – Pretax catch-up, Roth catch-up, or any combination of both. Available to employees who are at least age 50 by year end.

(

If hired mid-year, applies to all employers combined.)  The limits above DO NOT include any employer contributions.

 $52,000 – Maximum total SIP contributions (or 100% of S&L wages, whichever is less). Includes all 401(k), Roth 401(k), after-tax, employer matching and employer non-matching contributions. Excludes pretax and Roth catch-up contributions.

After-tax Contributions

          Taxable wages are not reduced by amount of contribution.

Pre-87 refers to after-tax contributions made prior to January 1, 1987.

Post-86 refers to after-tax contributions made after December 31, 1986.

May be made through payroll contributions or as a lump sum contribution (cashier’s check or money order), typically at year end.

Payroll contributions receive an employer match (if eligible), lump sum contributions do not.

Money in the after-tax sources (Pre-87 and Post-86) can be withdrawn for any reason. All earnings, including capital gains and dividends from mutual fund investments, are reinvested and not considered taxable until withdrawn at a future date.

Accumulated earnings are tax-deferred, not reported as income until withdrawn.

Consider as an option if needing withdrawals prior to retirement.

Invested in the same funds as other contributions. If you want this money invested in fund options that are more conservative than those for long-term retirement, you can change the investments through an Exchange or Rebalance of the Post-86 source only.

Withdrawals From After-tax Sources

  Withdrawals from the Pre-87 source come from employee contributions first. Those contributions are tax free at the time of withdrawal. Withdrawals from the Post-86 source must be taken proportionally between tax free employee contributions and taxable earnings. For example: $4,000 Contributions (80% of source) 1,000 Earnings (20% of source) $5,000 Total   Based on the example above, 80 cents of every dollar withdrawn would come from the after-tax contributions and 20 cents would come from the earnings.

You have the option of taking the earnings as additional income. Fidelity is required to withhold 20% for federal tax; the 10% penalty (if applicable) will be included on your federal tax return for that year.

, you can defer taxes on the taxable earnings. Fidelity would issue two distributions: one to you for the after-tax contributions, and a second check for the taxable earnings which can be payable to an IRA rollover. This would be a pretax (traditional) IRA at a bank or financial institution of your choice. The rollover check would be mailed to your home (if not a Fidelity IRA) payable to the bank/financial institution.

Withdrawal of Employer Sources

    Employees with >5 years of plan participation may withdraw from the two employer contribution sources (accounts) for any reason. Employees with <5 years of plan participation may withdraw for one of the following hardships: * Expenses arising out of a financial emergency due to accident, sickness, disability or death within your immediate family, or resulting from a natural disaster * Significant medical expenses (not reimbursed by insurance) incurred by you, your spouse, your qualified dependents, or a named SIP beneficiary.

* The purchase (excluding mortgage payments) or your principal residence.

* Payment of tuition and related educational fees for the next 12 months of post secondary education for you, your spouse, your qualified dependents, or a named SIP beneficiary.

* To prevent foreclosure of or eviction from your principal residence. * Burial or funeral expenses for your parent, spouse, children, qualified dependent or named SIP beneficiary.

* To meet expenses for the repair of your principal residence that would qualify as deductible casualty expenses.

Documentation supporting the hardship need must be provided with the withdrawal request.

If not rolled over into a IRA or another qualified employer-sponsored plan, the withdrawal will be subject to federal and state taxes (depending on the state). A 10% federal early withdrawal penalty may apply for those under age 59-1/2. At the time of distribution, 20% will be withheld for federal tax.

Hardship Withdrawals 401(k) & Roth 401(k)

      Employees age 59-1/2 or over may withdraw for any reason, no hardship needed. Employees under age 59-1/2

must withdraw all other available funds in the Plan first and have 2 loans outstanding

. Then a withdrawal may be requested for one of the following hardships: * Significant medical expenses (not reimbursed by insurance) incurred by you, your spouse, your qualified dependents, or a named SIP beneficiary.

* The purchase (excluding mortgage payments) of your principal residence.

* Payment of tuition and related educational fees for the next 12 months of post secondary education for you, your spouse, your qualified dependents, or a named SIP beneficiary.

* To prevent foreclosure of or eviction from your principal residence. * Burial or funeral expenses for your parent, spouse, children, qualified dependent or named SIP beneficiary.

* To meet expenses for the repair of your principal residence that would qualify as deductible casualty expenses.

Documentation of the need must be provided at the time of withdrawal.

Payroll contributions (and employer match) will stop for 6 months.

The withdrawal of pretax money (including any non-qualified earnings on Roth 401(k) contributions) will be subject to federal and state taxes (depending on the state). 10% will be withheld for federal tax at the time of distribution. A 10% penalty may apply to any taxable funds withdrawn if under age 59-1/2.

Hardship requirements

DO NOT

apply to the Rollover and Roth Conversion sources.

Rollovers to a Roth IRA

      Since January 2010, all participants have the option of rolling non-Roth plan assets into a Roth IRA (outside the plan).

There is no limit on the amount you can rollover into an IRA; a rollover is not considered a contribution (which is limited to a specific dollar amount, if eligible).

When selecting which of the following options is best for you, consider the amount of earnings that would be taxable income and any amount you want to remain in the Plan for a future withdrawal.

Pretax money rolled into a traditional IRA can subsequently be rolled back into the Plan.

A Roth IRA rollover distribution is requested through Kathy Davis,

NOT

Fidelity.

A rollover of after-tax money from the Plan can be done two ways: 1. Split the rollover between two types of IRAs. The after-tax contributions can be directed to a Roth IRA, with the associated taxable earnings on those contributions directed to a pretax traditional IRA. This would defer the taxes on those pretax earnings until a later date.

2. Roll over the after-tax contributions and associated taxable earnings to a Roth IRA. By paying taxes now on those pretax earnings, they will grow tax-free.

Rollovers into SIP

 All plan participants (except non-spouse beneficiaries) may rollover money into the plan from the following types of accounts: * Other qualified retirement plans * Pretax IRAs (but not from a Roth IRA)    Rollovers are maintained in separate sources, depending upon money type (see Page 3), and retain their original tax characteristics.

A rollover is not considered an employee contribution and there is no limit to the amount eligible for rollover.

Rollover checks should be payable to FIIOC and given to Kathy Davis for deposit (along with the Incoming Rollover Form, available from K. Davis).

Roth Conversions

           Became available through the Small Business Jobs Act of 2010, and expanded by the American Taxpayer Relief Act of 2012 (January 2013) Money sources may be converted to Roth without leaving the Plan or selling investments.

Converted pretax amounts are considered taxable income in the year of conversion, but the 10% penalty does not apply.

Federal tax is not withheld from any converted pretax amount..

There is no minimum or maximum amount for conversion, nor are you required to convert an entire money source. Smaller amounts may be converted each year.

The 5-year period needed for a qualified distribution starts with the year of conversion.

Conversion forms are available from Kathy Davis, and returned to her for processing.

Hardship requirements do not apply to the Roth In Plan Conversion source, but any “unqualified” earnings withdrawn will be subject to federal and state taxes (depending on the state) unless rolled over into a Roth IRA. A 10% federal early withdrawal penalty may apply for those under age 59-1/2. At the time of distribution, 20% of any taxable portion will be withheld for federal tax.

In addition to the qualified distribution rule, there is also a 5-year recapture rule. Regardless of age, a withdrawal during the first 5 years after conversion would be subject to a 10% penalty (the entire amount, not just the earnings).

Hardship requirements

apply to the new 401(k) to Roth Conversion (Page 20) and Employer Roth Conversion (Page 21) sources.

Conversion options are not available to non-spouse beneficiaries and non-spouse alternate payees (QDROs).

Roth Conversion-Eligible Sources

Effective January 1, 2013, the following money sources are eligible for Roth conversion:

        

Pretax 401(k) Employer Match Contribution Employer Non-matching Contribution Post-86 SIP After-tax Pre-87 SIP After-tax Employee Pretax Catch-up Rollover (from a pretax IRA or another qualified plan) After-tax Rollover

ROTH IN-PLAN CONVERSION

       Money sources that are eligible for non-hardship withdrawal may be converted to the Roth In-Plan Conversion source.

Pre-87 SIP after-tax contributions may be converted without converting the pretax accumulated earnings on those contributions.

Post-86 SIP after-tax contributions and accumulated earnings are converted proportionally, with the converted earnings being taxable income for that year.

If you have Pre-87 and Post-86 SIP accounts, the taxable portion of the conversion will include any earnings in the Pre-87 SIP source.

Hardship requirements do not apply to the Roth In-Plan Conversion source, but any “unqualified” earnings withdrawn will be subject to federal and state taxes (depending on the state). A 10% federal early withdrawal penalty may apply for those under age 59-1/2. At the time of distribution, 20% of any taxable portion will be withheld for federal tax.

The tax implications for withdrawals from any of the Roth Conversion sources are extremely complex. You are strongly encouraged to consult with a financial planner and/or tax advisor before requesting withdrawals from any tpye of Roth conversion.

401(k) to Roth Conversion Source

         Effective January 2013, pretax 401(k) may be converted to a new 401(k) to Roth Conversion source. Money sources may be converted to Roth without leaving the Plan or selling investments.

Converted pretax amounts are considered taxable income in the year of conversion, but the 10% penalty does not apply.

Federal tax is not withheld from any converted pretax amount.

There is no minimum or maximum amount for conversion, nor are you required to convert an entire money source. Smaller amounts may be converted each year.

The 5-year period needed for a qualified distribution starts with the year of conversion.

Conversion forms are available from Kathy Davis, and returned to her for processing.

Hardship requirements DO apply (Page 14) if not age 59 1/2, and any “unqualified” earnings withdrawn will be subject to federal and state taxes (depending on the state). A 10% federal early withdrawal penalty may apply for those under age 59-1/2. At the time of distribution, 20% of any taxable portion will be withheld for federal tax.

Employer Roth Conversion Source

         Effective January 2013, the Employer Match and Employer Non-Matching Contribution sources may be converted to a new Employer Roth Conversion source for employees who are 100% vested (at least 1 year of full-time employment). Money sources may be converted to Roth without leaving the plan or selling investments.

Converted pretax amounts are considered taxable income in the year of conversion, but the 10% penalty does not apply.

Federal tax is not withheld from any converted pretax amount.

There is no minimum or maximum amount for conversion, nor are you required to convert an entire money source. Smaller amounts may be converted each year.

The 5-year period needed for a qualified distribution starts with the year of conversion.

Conversion forms are available from Kathy Davis, and returned to her for processing.

Hardship requirements DO apply for employees with <5 years of plan participation (Page 13), and any “unqualified” earnings withdrawn will be subject to federal and state taxes (depending on the state). A 10% federal early withdrawal penalty may apply for those under age 59-1/2. At the time of distribution, 20% of any taxable portion will be withheld for federal tax.

Withdrawal of 401(k) to Roth Conversion Source

       Pretax 401(k) money that has been converted to the 401(k) to Roth Conversion source is only available to those <59-1/2 for an IRS-approved hardships (see Page 14). Employees age 59-1/2 or older may withdraw for any reason, but see qualification rules below.

Employees under age 59-1/2 must withdraw all other available funds in the Plan first and have 2 loans outstanding before requesting a hardship withdrawal.

Documentation supporting the hardship need must be provided with the withdrawal request.

The amount considered to be “qualified” if age 59-1/2 or over will be determined by the date of Roth conversion. The 5-year qualifying period starts in the year of conversion. All conversions made within the same year are calculated from January 1 of the year of conversion through the end of the next four calendar years. If not “qualified” the converted amount (already taxed) will be tax free. But any accumulated earnings will be subject to federal and state taxes (depending on the state). A 10% federal early withdrawal penalty may apply for those under age 59-1/2. At the time of distribution, 20% will be withheld for federal tax. In addition to the qualified distribution rule, there is also a 5-year recapture rule. Regardless of age, a withdrawal during the first 5 years after conversion would be subject to a 10% penalty. Note: each conversion starts a new 5-year period, effective January 1 of the year converted.

The tax implications for withdrawals from any money converted to Roth are extremely complex. You are strongly encouraged to consult with a financial planner and/or tax advisor before requesting withdrawals from any time of Roth conversion.

Withdrawal of Employer Roth Conversion Source

      Employees with <5 years of plan participation may withdraw for an IRS-approved hardships (see Page 13). Employees with >5 years of plan participation may withdraw for any reason.

Documentation supporting the hardship need must be provided with the withdrawal request.

Changing Contribution Percentage

 You can change your contribution percentage at any time, up to the maximums below: * 401(k) – up to 65% * Roth 401(k) – up to 65% * 401(k) and Roth 401(k) combined – up to a total of 65% * Pretax catch-up – up to 35% * Roth catch-up – up to 35% * Pretax and Roth catch-up combined – up to a total of 35%   * After-tax – up to 45% Note: When selecting a combination of contribution percentages, it is the employee’s responsibility to ensure enough money is available in each paycheck to cover other payroll deductions such as FICA, transit, or after-tax insurance deductions.

After you log into your account at 401k.com, go to Contribution Amount.

The deadlines are the 12 th and 27 th of each month ( business day if on a weekend or holiday.

NOT

the end of our pay periods), or the previous

S&L Contact Information

 Sargent & Lundy: Kathy Davis, Plan Administrator Phone: 312-269-2130 Fax: 312-269-1943 [email protected]

Lotus Notes SIP Discussion Group Website

www.sargentlundy.com/sip

* all SIP newsletters, since 1996 * Rates of Return, updated monthly * Deadlines of payroll changes * Plan announcements & related articles * Summary Plan Description * Plan Documents * Fidelity Excessive Trading Policy

S&L SAVINGS INVESTMENT PLAN

Transcript S&L SAVINGS INVESTMENT PLAN

SARGENT & LUNDY SAVINGS INVESTMENT PLAN CONTRIBUTION SOURCES INCLUDING ROTH 401(k) & CONVERSION

Current S&L Employees

June 2014

SIP History

Sources of Money

Roth 401(k)

Roth IRA

Benefits of Roth 401(k) & Roth IRA

Types of Contributions Through Payroll

Pretax 401(k) & Catch-up Roth 401(k) & Catch-up Post-86 After-tax

Catch-up Contributions

Employer Contribution Sources

Annual Contribution Limits 2014

(

After-tax Contributions

Withdrawals From After-tax Sources

Withdrawal of Employer Sources

Hardship Withdrawals 401(k) & Roth 401(k)

Rollovers to a Roth IRA

Rollovers into SIP

Roth Conversions

Roth Conversion-Eligible Sources

Effective January 1, 2013, the following money sources are eligible for Roth conversion:

Pretax 401(k) Employer Match Contribution Employer Non-matching Contribution Post-86 SIP After-tax Pre-87 SIP After-tax Employee Pretax Catch-up Rollover (from a pretax IRA or another qualified plan) After-tax Rollover

ROTH IN-PLAN CONVERSION

401(k) to Roth Conversion Source

Employer Roth Conversion Source

Withdrawal of 401(k) to Roth Conversion Source

Withdrawal of Employer Roth Conversion Source

Changing Contribution Percentage

S&L Contact Information

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