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Eligibility into the plan is as follows:
- All unrepresented employees hired on or after July 1, 2013, with estimated annual full-time salary rate of $75,000 or more are eligible to join the Voluntary Defined Contribution Program (“VDC Plan”).
- Persons employed on a permanent full-time basis who want to join the VDC Plan within 30 days of their date of appointment.
- Once your VDC Plan election is made, it cannot be changed during any period of public New York City or New York State employment, and is retroactive to the date of appointment.
- Employees receiving pension benefits from a public retirement system in New York State are not eligible to join or continue active participation in the VDC Plan.
The potential advantages of starting early
The New York State Voluntary Defined Contribution Program (“VDC Plan”) is a defined contribution retirement program. Benefits are determined by the amount contributed each year and the performance of the investments. The contribution rates to the VDC are as follows.
An employee contribution will be required for the duration of employment based upon estimated gross annual wages in a given calendar year, as follows:
|Wages of $45,000 or less||3%|
|Wages of $45,000.01 to $55,000||3.5%|
|Wages of $55,000.01 to $75,000||4.5%|
|Wages of $75,000.01 to $100,000||5.75%|
|Wages of more than $100,000||6%|
VDC employee contributions are made through payroll deduction on a pretax basis. Contributions are not subject to federal income tax until withdrawn but are subject to state and local income taxes in the year in which they are made. All earnings on contributions are tax deferred until they are withdrawn.
All contributions are made based upon IRS compensation and contribution limits, which are determined annually.
An employer contribution of 8% of salary will be made for the duration of employment.
Rollover eligibility to the VDC Plan from another qualified retirement plan or traditional IRA
The VDC Plan does not accept rollovers from other retirement plan(s), traditional IRAs or Roth IRAs.
Rollover eligibility from the VDC Plan to an alternative retirement plan
A rollover is a tax-free transfer of assets from a retirement plan to either a traditional IRA or another employer’s retirement plan. You are not eligible to roll money out of the VDC Plan until after separation from service. Careful consideration of outside investment fees and the tax consequences of both transfers and ultimate distributions should be discussed with your tax advisor prior to completing any rollovers from the VDC Plan.
A direct rollover will transfer funds from the VDC Plan directly to an IRA trustee or to the trustee of the retirement plan of the new employer (if the plan permits this type of rollover). You do not take receipt of the funds and are not subject to any required income tax withholding.
An indirect rollover is a payment made to you, not directly to the recipient of the plan or IRA. A 20% statutory tax withholding is required. In order to qualify as a rollover, the funds must be deposited into another qualified retirement plan or to a traditional IRA account within 60 days of receipt. Failure to deposit the investment into an IRA or qualified plan will result in a taxable distribution. Early distribution penalties may also apply.
You cannot roll over to a Roth IRA. However, you may be able to convert the assets to a Roth IRA from a traditional IRA based on IRA guidelines. Contact the investment provider for more information.
Upon completion of 366 days of service (waived for employees who enter service with employer-funded retirement contracts from any of the VDC Plan investment providers) the participant has full and immediate vesting in all retirement and death benefits provided by the retirement annuities purchased through the employee and the employer contributions.
Contributions will begin upon plan entry, but are held by the employer until completion of the vesting period. Once vested, the employer will make a single lump sum contribution of applicable employer and employee contributions plus interest to the investment provider(s) selected by the participant. A participant who does not complete the vesting period is entitled to a refund of his or her own contributions plus interest.
There is a 366-day vesting period except for:
- The employees who come to eligible employment with vested employer funded retirement contracts from any of the VDC Plan investment providers; vesting is immediate.
- The employees who are active members of any public retirement system within NYS with at least 366 days of service credit; vesting is immediate. If less than 366 days in the system, service credit may be applied against the VDC Plan vesting period.
- The employees who have 366 days of service with any public employer within New York State.
Note: The VDC Plan vesting period is on a calendar basis.
Accessing your money before retirement
In accordance with IRS guidelines, for specific reasons and financial circumstances, an eligible employee may request a hardship withdrawal from certain pre-1990 contributions for the purpose of satisfying an immediate and heavy financial need, which cannot be met from other sources. The distribution must be necessary for one or more of the following reasons:
- Payment of medical expenses described in the Internal Revenue Code, Section 213(d), incurred by the employee, his or her spouse or other dependent(s), or payment necessary for these persons to obtain medical care;
- Prevention of eviction from or foreclosure of his or her primary residence.
The ORP/VDC Plan member will provide any documentation requested by the investment provider deemed necessary to review and process such withdrawal. Hardship withdrawals cannot exceed the amount of the financial need.
Employees may borrow up to 50% of the accumulated value of their contracts, subject to Internal Revenue Service regulations and rules promulgated by the investment providers. Current IRS regulations set a maximum aggregate loan balance of $50,000. Employees who wish to request a loan should contact the applicable investment provider(s).