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LFCHD Employee Newsletter

Kentucky Deferred Compensation offers more than you think

Did you know that Kentucky Deferred Compensation (KDC) offers more than 401K accounts?  See below the list of accounts you can choose from and the four different ways you can invest through KDC:

Account Choices

401K – Contributions are pre-taxed payroll deductions. You can transfer funds from another qualified plan to your KDC account. The minimum deposit is $30 monthly with a maximum annual contribution of $18,000. If you are age 50 and above you can deposit a catch-up amount of $6,000 annually.  The funds are available to you upon severance from employment, retirement, or in the year age 59 ½. You can receive a loan against the funds and this account does allow for Emergency/Hardship Withdrawals.

457(b) – This account mirrors the 401K account except for two important differences. This account is available to you upon severance from employment, regardless of your age. Withdrawals are taxed as ordinary income but are not subject to the IRS 10% early withdrawal penalty.

Roth 401K – Contributions to this account are after tax deductions. The minimum and maximum contributions are the same as the traditional 401K. You can only roll over funds from another Roth 401K or Deemed Roth IRA account. Qualified distributions are not subject to federal income tax. If you withdrawal funds before owning the account for 5 years and reaching 59 ½, the investment earnings will be subject to ordinary tax and possibly a 10% early withdrawal penalty tax. This account does not allow loans against the funds or Emergency Hardship Withdrawals.

Deemed Roth IRA – After tax annual maximum contribution is $5,500 with a $1,000 catch-up allowed if you are age 50 and above. You may deposit funds into this account through payroll deductions or direct payments as long as you are actively working for a participating employer. You can directly rollover funds from another Roth IRA or Roth 41K. Contributions and earnings can be withdrawn at any time. However, earnings may be subject to federal taxes or penalties if the money has not been maintained in the account for 5 years and the owner has not reached 59 ½.

Deemed Traditional IRA – After tax, annual maximum contribution is $5,500 with a $1,000 catch-up allowed if you are age 50 and above. You may deposit funds into this account through payroll deductions or direct payments until the year you reach 70 ½, and are actively working for a participating employer. You can directly rollover funds from another Traditional IRA account or another qualified retirement plan (e.g. 401K) but not a Roth IRA. Withdrawals may be subject to regular income tax. Withdrawals taken before age 59 ½ may be subject to a 10% early withdrawal penalty.

Investment Options

Nationwide Pro Account – For a small asset management fee, you contract with Nationwide Investment Advisors to manage your KDC account in accordance with information that you provide.

Investment Advice from NIA – This free online tool allows you to use research and educational tools to help choose funds. You must initiate any actions you with to take.

Select a Managed Target Fund – You select professionally managed target retirement funds closest to your retirement age.

Do It Yourself – Selecting from a diversified set of over 30 investment options designed for long-term retirement savings.

Please contact our Kentucky Deferred Compensation Representative if you would like to sign up for an account or make changes to an existing account. Please feel free to contact him to answer any of your questions about the accounts or investment options.

jamie

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