July 2014 DC Update
Where do you stand?
College and University Participation
This month's video update is brought to you from Lincoln University in Jefferson City, one of Missouri's ten public universities offering the deferred compensation plan benefit to both its faculty and staff. To date, almost 500 university employees participate in the deferred compensation plan, with more enrolling each month.
Incentive Funding Withheld from FY15 State Budget
Funding for the reinstatement of the employer incentive (match) program associated with the State of Missouri Deferred Compensation Plan has been withheld from the state budget at this time. This means that the funding for the deferred compensation incentive program will not be available in the Fiscal Year 2015 budget that began on July 1, 2014. Generally speaking, withheld or "restricted" funds may be restored to the state's budget later in the fiscal year as deemed appropriate. Visit governor.mo.gov for more on this budget action, and stay tuned to the Plan's website and social media channels (Facebook, Twitter, LinkedIn and YouTube) for more information as it becomes available.
Adding It Up: Where do you stand?
In this month's Adding It Up feature, we'll take a closer look at participant behavior to see how Missouri savers are utilizing the deferred compensation plan. While everyone's situation is different, understanding how your peers use the Plan might just inspire important adjustments to your own savings strategy. All statistics are as of May 2014.
The average employee contribution amount to the deferred compensation plan is about $124.00 per month. For an average state of Missouri employee who works 23 years for the state, a $124 monthly contribution could produce $73,930 in retirement savings1. Next steps: View the December 2013 DC Update to see how changes to your contribution amount could impact your retirement savings balance in a big way.
Speaking of account balances, the average for 457 accounts in the deferred compensation plan sits at a little more than $23,500. As a refresher, the 457 account source includes the money you have contributed and any investment earnings those dollars may have incurred. Your 457 account does not include employer contributions or rollovers from other savings accounts, which are reflected in the 401 account source. While $23,500 may seem like a large sum, remember that deferred compensation plan savings supplement your pension and social security in retirement. For instance, an account balance of $23,500 at retirement could produce approximately $140 of monthly, supplemental income over 20 years of retirement2. Next steps: View the March 2014 DC Update for tips on managing your account balance in retirement.
In terms of how employees contribute to the Plan, more than 17% of all participants are utilizing percentage-based contributions. That is, they are contributing a percentage of their pay versus a flat dollar amount. Percentage-based contributions are a unique automatic feature that enables your contributions to increase alongside your salary. Even better, the Plan gives you maximum flexibility by allowing you to defer in one-tenth of one percent (0.1%) increments, with a minimum starting contribution of 1%. Next steps: View the June 2014 DC Update to see how percentage-based contributions could improve your savings outcome.
This is but a brief snapshot of how participants are using the deferred compensation plan benefit. It's important to reiterate that everyone's situation is different when it comes to retirement savings strategies and goals, but on your long journey toward retirement security, it never hurts to understand where you stand.
1Assumes a $124 monthly contribution and a 6% annual rate of return over 23 years.
2Assumes a 4% annual rate of return in retirement, 0% inflation and an account balance of $0 after 20 years.
Now That’s a Great Question
At the deferred compensation plan, we receive a lot of questions. We often highlight the most popular ones in a segment we call "Now That's a Great Question". This month's question is:
"When can I access my savings in the Plan?"
Generally speaking, you can access deferred compensation plan savings once you separate from service by either retiring or leaving state employment. While it's important to remember that deferred compensation plan savings are designed for retirement, the Plan is unique because distributions from your 457 savings source are not subject to the 10% early withdrawal penalty typically imposed on retirement savings accessed prior to age 59 ½. Please note: all withdrawals of pre-tax savings are subject to a 20% federal tax withholding. For more information on accessing your money, view the Distribution Options When Separating from Service page on the Plan website, or view the Distribution Options Guide (PDF). It's also recommended that you read over and understand the Special Tax Notice Regarding Plan Payments (PDF) before withdrawing any money from your account.
For more answers to popular questions, be sure to visit the FAQ section of the Plan website. If you can't find what you're looking for there, give one of our friendly participant service representatives a call at 800-392-0925.
Auto Enrollment Report
This DC Update contains cumulative auto enrollment data by department as of June 1 of 2014.
Please note: Detailed data for agencies with 10 or fewer hires is omitted in this report.
| Department |
Total AE
|
Opt out
|
Net AE
|
Automatic Enrollment Success Rate
|
| State Auditor |
14
|
0
|
14
|
100.0%
|
| Office of Administration |
155
|
10
|
145
|
93.5%
|
| Dept of Corrections |
1817
|
154
|
1663
|
91.5%
|
| Dept of Social Services |
1341
|
137
|
1204
|
89.8%
|
| Dept of Revenue |
212
|
22
|
190
|
89.6%
|
| Dept of Elem & Sec Ed |
202
|
21
|
181
|
89.6%
|
| Dept of Agriculture |
34
|
4
|
30
|
88.2%
|
| Dept of Health & Senior Services |
231
|
28
|
203
|
87.9%
|
| Dept of Transportation |
440
|
60
|
380
|
86.4%
|
| Dept of Conservation |
63
|
9
|
54
|
85.7%
|
| Public Safety |
766
|
113
|
653
|
85.2%
|
| Dept of Ins, Fin Inst, Prof Reg |
54
|
8
|
46
|
85.2%
|
| Dept of Labor & Industrial Relations |
54
|
8
|
46
|
85.2%
|
| Judiciary |
476
|
71
|
405
|
85.1%
|
| Dept of Natural Resources |
128
|
20
|
108
|
84.4%
|
| Dept of Mental Health |
1501
|
244
|
1257
|
83.7%
|
| Secretary of State |
36
|
6
|
30
|
83.3%
|
| State Public Defender |
118
|
23
|
95
|
80.5%
|
| Attorney General |
74
|
16
|
58
|
78.4%
|
| Dept of Econ Development |
60
|
15
|
45
|
75.0%
|
| Legislature |
111
|
30
|
81
|
73.0%
|
| Dept of Higher Education |
-
|
-
|
-
|
-
|
| Governor's Office |
-
|
-
|
-
|
-
|
| Highway & Highway Patrol |
-
|
-
|
-
|
-
|
| Housing Development Commission |
-
|
-
|
-
|
-
|
| Lt. Governor |
-
|
-
|
-
|
-
|
| MOSERS |
-
|
-
|
-
|
-
|
| Missouri Consolidated Healthcare |
-
|
-
|
-
|
-
|
| State Treasurer |
-
|
-
|
-
|
-
|
| Totals |
7922
|
1006
|
6916
|
87.3%
|
Stay Connected with the Plan on Facebook, Twitter, LinkedIn and YouTube
Thanks for reading the July 2014 edition of the DC Update. Remember to connect with the Plan on Facebook, Twitter, LinkedIn or YouTube. Our social media channels are one of the best ways to receive timely plan news and helpful savings tips.