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The South Carolina Deferred Compensation Program (Program) is a powerful tool to help you reach your retirement dreams. As a supplement to other retirement benefits or savings that you may have, this voluntary Program allows you to save and invest extra money for retirement through before-tax and after-tax contributions in a 401(k) and/or 457¹ plan!

FOR MORE INFORMATION, VIEW THE PROGRAM HIGHLIGHTS.

What are the contribution limits for the 457 plan?1

In 2017, the maximum contribution amount to a 457 plan is 100 percent of your includible2 compensation or $18,000, whichever is less.


Participants in the 457 plan have two different opportunities to catch up and contribute more if they meet certain requirements. Standard Catch-Up allows participants in the three calendar years prior to normal retirement age to contribute more to the 457 plan (up to twice the annual contribution limit – $36,000 in 2017). The additional amount that you may be able to contribute under the Standard Catch-Up option will depend upon the amounts that you were able to contribute in previous years but did not. You cannot use the Standard Catch-Up option in the calendar year you reach your normal retirement age as provided under the 457 plan.


Also, participants turning age 50 or older in 2017 may contribute an additional $6,000. You may not use the Standard Catch-Up provision and the Age 50+ Catch-Up provision in the same year.


What are the contribution limits for the 401(k) plan?

In 2017, the maximum contribution amount to a 401(k) plan is 100 percent of your includible2 compensation or $18,000, whichever is less. Participants turning age 50 or older in 2017 may contribute an additional $6,000 as a catch-up contribution.


What are the contribution limits if I participate in the 401(k) plan and the 457 plan?

If you participate in both the 457 and 401(k) plans, you can contribute up to $18,000 in each plan, for a possible total of $36,000, plus catch-up.


What are the contribution limits if I participate in the 401(k) plan and the State Optional Retirement Program (State ORP), a 401(a) plan?

In 2017, if you participate in both the State ORP (a 401(a) plan) and the 401(k) plan, the total contributions made to both plans, when added together, cannot exceed 100 percent of compensation or $54,000 (plus catch-up), whichever is less.


How does my participation in the Program affect my taxes?

For before-tax 401(k) contributions:
Because your contributions are taken out of your paycheck before taxes are calculated, you pay less in current income tax. You do not report any current earnings or losses on your accounts on your current income tax return, either. Your accounts are tax-deferred until you withdraw money, usually at retirement. Distributions are taxable as ordinary income during the years in which they are distributed or made available to you or to your beneficiary.

Qualifying distributions from your 401(k) pre-tax account may be subject to a 10 percent federal early withdrawal tax penalty if the distribution is taken before age 59½. The 10 percent federal early withdrawal tax penalty does not apply if you are taking a qualifying distribution and one or more of the following applies:

• You directly roll the distribution to another tax-deferred account.

• You separate from service in the year in which you reach age 55 or after.

• You separate from service and elect payments to be made throughout your life expectancy (and your co-payee's).

• You die.

• You become disabled.

For after-tax Roth 401(k) contributions:
Contributions are taken out of your paycheck after the money is taxed. You do not report any current earnings or losses on your accounts on your current income tax return, either. Earnings from your Roth account may be withdrawn tax and penalty-free if your Roth contribution account has been established for at least five tax years and one of the following applies: you are at least age 59½, you die, or you become disabled. Any other distribution of earnings from your Roth account is subject to ordinary taxes and a 10 percent federal early withdrawal tax penalty unless the distribution is directly rolled over to another Roth account.

For before-tax 457 plan contributions:
Because your contributions are taken out of your paycheck before taxes are calculated, you pay less in current income tax. You do not report any current earnings or losses on your accounts on your current income tax return, either. Your accounts are tax-deferred until you withdraw money, usually at retirement.

For after-tax Roth 457 contributions:
Roth contributions to the 457 plan are made with after-tax dollars, which means you've already been taxed on the money before it enters your account. If you withdraw your Roth 457 contributions and earnings after you've held the account for at least five years and you've reached age 59½ plus separated from service, or severed employment due to disability or death (upon which your beneficiaries will take a withdrawal), the distribution is income-tax and penalty-free because the contributions were made with after-tax dollars.


1 All references to the 457 plan are to a governmental 457(b) plan.

2 Includible compensation includes salary and wages, overtime, bonuses, and accrued sick, vacation or other leave paid within 2.5 months following termination.

 

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