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Update: Revised Ruling Allows Forfeiture Balances to be Used for Safe Harbor Contributions
February 14, 2017

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FAQ

As a participant in your company's retirement plan, you have an important opportunity to save for your future. Whether you are very experienced in investing or brand new to the choices offered you, we're here to help.  The following questions and answers may help you understand a little more about how retirement plans like yours work. If you would like more information, don't hesitate to contact us. We're here for you.

1. Website - What is available on the plan’s website?

Your plan’s website provides detailed information about your account and allows you to make changes. You can get information about your balance, investment options, see past transactions, and see copies of your participant statements. You can also make changes to your account, including transferring money between investments and choosing how future contributions are invested.

2. Website – How do I access my plan’s website?

Most retirement platforms provide you a website where you can manage your retirement account.  If your account is on the JULY Retirement Platform go to:

If your retirement plan is on a non-JULY platform such as John Hancock, The Hartford, American Funds, or another provider, contact your Human Resources Department for information on accessing your account.

3. Technical Support – How do I get technical support?

Contact our toll-free participant help line from 8:15 a.m. to 5:15 p.m. Central Time at (888) 333-5859 and choose Option 1. Our team is standing by to help you.  You may also email us at distributions@julyservices.com.

4. Benefits of Plan - How does a 401(k) plan work and why I should participate?

A 401(k) is a plan that allows you to defer some of your pre-tax income towards retirement savings. If your company has adopted a 401(k) plan, you may participate when you meet the plan’s eligibility requirements. These requirements vary, but generally do not exceed one year if you are a full-time employee. Many employers match amounts that employees contribute to the plan resulting in “free money”. The amounts you contribute are generally not subject to federal income taxes until you withdraw the funds at retirement. For more on this topic, please visit the FAQ section.

5. Benefits of Plan –How do I save taxes by participating?

When you participate in your company’s 401(k) plan, you save taxes in two ways. First, each dollar you contribute into the pre-tax portion of your company’s plan goes into the plan free of any federal income tax. Depending on your tax rate you could save between 10% and 35% of every dollar you contribute. Example of Annual Tax Savings Annual Salary = $30,000 Annual 401(k) Contribution = 6% or $1,800 Federal Tax Rate = 15% Annual Tax Savings = $270 ($1,800 X 15% tax rate) In addition to the tax savings on your contributions, the earnings that you make on amounts you contribute grow tax-deferred. In fact, as long as you leave your balances in your plan, you will not pay taxes on the amount in your account until you withdraw the funds at retirement.

6. Enrollment - How do I enroll in my company’s plan?

If your company sponsors a 401(k) plan, you can enroll in the plan by completing an Enrollment Form and giving it to your human resources or benefits department. This form will ask you some important questions, including: how much you wish to contribute into the plan each pay period, which investments you wish to have your contributions invested in, and who your beneficiaries will be in the event of your death. Before you can participate, you must meet your plan’s eligibility requirements. To determine these requirements, talk to your human resources department or obtain a copy of the plans “Summary Plan Description” which describes the plan in more detail.

7. Enrollment – Am I eligible to participant in my company’s plan?

Companies that sponsor 401(k) Plans have some choices on when employees become eligible to participate. The specific eligibility requirements of your plan will be described in the “Summary Plan Description” that you can obtain from your human resources department. In most cases, however, employees will become eligible no later than one year of full-time employment and can then enter the plan on the next plan entry date (often January and July).

8. Enrollment – What is a ROTH contribution and is it right for me?

Some 401(k) Plans provide employees an option of making ROTH contributions. ROTH contributions differ from traditional 401(k) contributions in that amounts are contributed to the plan after you pay taxes. Despite paying taxes up-front, you may still come out ahead. Withdrawals from your ROTH account are not subject to federal income tax as long as you do not withdraw the funds for at least five years and before you attain age 59 ½. Withdrawals from pre-tax plans are subject to federal income tax. Deciding which option is right for you will depend on your personal tax rate now compared to what it will be when you retire or withdraw the funds. We recommend that you discuss your options with your financial advisor before making the choice of pre-tax versus ROTH.

9. How much to save - How do I determine how much to save for retirement?

This is a very important question and one you should answer through careful planning. There are a number of key factors to consider in determining how much to save now to meet your retirement goals and needs during your retirement years. The links below provide tools to help you create your own retirement plan, but In addition to these tools, we recommend discussing your retirement needs with a financial advisor. Retirement Planning Worksheet – Download and completed our Retirement Planning Worksheet. It will help you answer questions that are critical to projecting how much you need to save, including your retirement goals and income needs. Retirement Planning Calculator – After completing the Retirement Planning Worksheet spend time with our Retirement Planning Calculator to get a better idea of what you need to save to meet your goals.

10. How much to save - How do I change the amount I am saving in my plan?

To change the amount you are saving in your plan, you generally need to obtain a Salary Deferral Election Form from your human resources department. Your human resources department will then provide your election to your payroll team to adjust the amount withheld from your paycheck. Some plans limit the frequency that changes can be made so you may need to review your plan’s Summary Plan Description for details.  In some cases you may be able to make this change on your plan’s website.

11. How much to save - What is the most I can contribute to my account each year?

There are annual limits set by the Internal Revenue Service on the amount you can contribute to your 401(k) plans. These limits are adjusted annually for inflation. For the latest limits, visits the plan limits page on our website.

12. Investment Options – How do I get information about the investment options in my plan?

You can obtain information about the investments offered in your plan by logging into your plan’s website. If your 401(k) plan website is with JULY, you can access your account at https://401k.julyservices.com. After logging in, choose My Account / Investment Choices from the main menu. Each investment option is listed along with a link to perform research on each option.

13. Investment Options – How do I determine which investments are right for me?

Your 401(k) plan likely provides you a lineup of pre-determined investment choices, and the best way for you to determine which investments are right for you is to consult with your plan’s Investment Advisor. The term used for choosing how to invest your contributions is “Asset Allocation” and the goal is to choose the right mix of investments to maximize returns and minimize risks. Some of the investment options available in your plan likely have a higher risk of loss, but these are the investments that also have the potential of achieving higher long-term returns. Other investment options have less risk of loss, but have a lower potential for higher long-term returns. Below are some helpful tools in planning the asset allocation that is right for you. • Risk Tolerance Worksheet – Complete our Risk Tolerance Worksheet to help you determine your personal risk profile. Knowing your own risk profile is one factor in choosing how to invest your contributions. • Guide to Asset Allocation – The U.S. Securities and Exchange Commission has published a Beginner’s Guide to Asset Allocation, Diversification, and Rebalancing that may help you choose. • Asset Allocation Calculator – Complete our Asset Allocation Calculator to help you choose the right Asset Allocation for you.

14. Distribution – I am no longer employed with the company, how do I request a distribution from my account?

Most plans allow employees to withdraw their entire vested balance in a lump sum or rollover their balance to an IRA or another qualified plan.  If your plan permits this option and if you have terminated employment with your company, you can obtain a Termination Distribution Packet by contacting the JULY Distributions Department using one of the following methods:

15. Withdrawal – Can I take a withdrawal from my account if I am still employed with the company?

This type of withdrawal is referred to as an In-Service withdrawal. The rules for in-service withdrawals are quite restrictive and not every plan provides for them. To be certain about the options in your plan, you should review your plan’s Summary Plan Description. Most often, however, plans allow participants to withdraw funds upon reaching age 59 ½ and the plans Normal Retirement Age. Some plans allow participants to take in-service withdrawals for certain financial hardships (see the question in this FAQ about Hardship Distributions).

16. Withdrawal – Am I eligible for a Hardship Distribution?

Certain plans may provide for distributions when a participant has an immediate and heavy financial hardship. If Hardship Distributions are permitted, they are generally allowed for the following types of financial hardships and cannot exceed the amount needed to satisfy the financial need.

  • To pay medical expenses of the participant, spouse, or dependents
  • To purchase a principal residence for the participant
  • To pay tuition, room and board, and other educational-related expenses for post-secondary education for the participant, spouse, or dependents
  • To prevent eviction or foreclosure from the participant’s principal residence
  • Payments of burial or funeral expenses for a deceased parent, spouse, child, or other dependent
  • Expenses for repair of damage to a principal residence that would qualify as a casualty under the Internal Revenue Code

There are often certain other conditions that apply to be eligible for a Hardship Distribution.  For the exact rules that apply to your plan you should consult your plan’s Summary Plan Description.

17. Withdrawal – What are the tax penalties if I withdraw my balance before age 59 ½?

Participants that have not reached age 59 ½ that withdraw funds from their qualified retirement account, including 401(k) Plans and Profit Sharing Plans, are subject to federal withholding of 20% Mandatory and a 10% early withdrawal penalty if the funds are taken as a lump sum and are not rolled over to an IRA or another employer plan.  Exception for age 55: If the participant separates from service after reaching age 55, payments received from the plan are not subject to the 10% early withdrawal penalty.

18. Withdrawal – What taxes will be withheld if I withdraw funds from my account?

If the withdrawal is eligible for rollover then 20% federal withholding is mandatory.  An exception to the rule exists for distribution amounts less than $200 and 20% withholding does not apply.

19. Loan - How do I request a loan from my account?

Many plans may permit employees to borrow from their account using their vested interest as security for the loan.  Employees that take advantage of the loan feature must follow strict rules to maintain plan compliance and prevent the loan from becoming a taxable event. To see if your plan allows for loans you should review your plan's Summary Plan Description, and contact your human resources department to obtain instructions for obtaining a loan request form.

20. Loan - If I take a loan from my account, how does it work?

If your plan permit's you to take a loan from your account, the JULY Participant Support Team can assist you in determining the maximum loan you can take.  There may be plan-imposed limits on the total amount of the loan.  These limits will either be described in the plan's Summary Plan Description or the Loan Policy.  You can obtain a copy of these from your employer.   The interest rate for the loan will also be stated in the Loan Policy.

In no event can you take a loan that exceeds 50% of your vested account balance up to $50,000.  Loans that are not for the purchase of a principal residence must be repaid within 5 years.  Loans for the purchase of a principal residence can be repaid over a 30 year period. 

Upon determining the maximum amount you can withdraw, the JULY team will prepare the required loan documents which include Irrevocable Pledge and Assignment, Loan Application, Promissory Note, Federal Truth and Lending Disclosures and an Amortization Schedule. You are required to sign the documents agreeing to the terms of the loan and loan repayments must begin through automatic payroll deduction.

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