TITLE: Deferred Compensation Program
The State of Iowa is authorized by the Department's Board of Directors to administer the Deferred Compensation Program for employees of the Fifth Judicial District Department of Correctional Services. To receive information about the Deferred Compensation Program or to get documents needed to enroll, contact the Iowa Department of Personnel website at http://www.state.ia.us/government/idop/BenDefComp.
Agreement: The deferred compensation agreement signed by the employer and the participating employee.
Companies: AIG (VALIC), ING, The Hartford, and Nationwide Retirement Solutions, each company issues a policy under the deferred compensation plan authorized under Iowa Code section 509A.12.
Employee: A non-temporary employee of the District.
Employer: The Fifth Judicial District Department of Correctional Services.
Normal Retirement Age: 70 ½ years of age.
Participating Employee: Employee participating in the plan.
Plan: The Deferred Compensation Plan authorized in Iowa Code section 509A.12.
Plan Administrator: The State of Iowa.
Plan Year: Calendar Year.
Policy: Any retirement annuity, insurance policy or variable annuity, or combination thereof provided for in the agreement.
- Initial Eligibility: Any non-temporary employee who regularly works twenty (20) or more hours per week or who has a fixed annual salary is eligible to defer compensation under the agreement. Final determination on eligibility shall be made by the plan administrator.
- Eligibility after Termination of the Program: Any participating employee who terminates the deferral of compensation may re-enter the plan at any point throughout the year with deductions to start with a paycheck received during the first month following the open enrollment.
- Enrollment and Termination
- Open Enrollment: Open enrollment shall be held all year for employees who wish to participate in the plan. The Company application form shall be received by the Company during the enrollment period. The premiums shall be deducted from the pay checks received by the participating employees beginning with the first pay period following the effective date of the Deferred Compensation Agreement. The policies shall become effective upon receipt of the first payment to the Company.
- Termination of Participation in the Plan: A participating employee may terminate participation in the plan by giving written notice to the plan administrator on the designated form. Except in the case of death of the participating employee the termination shall not become effective until a full month's premium has been deducted from the employee's compensation. Termination of plan participation does not provide for the disposition of funds unless done in accordance with Disposition of Funds (Procedure #6, below).
- Availability of Forms: It is the responsibility of each employee interested in participating in the program to obtain the necessary forms from the Iowa Department of Personnel's website at http://www.state.ia.us.government/idop/. Forms may also be obtained from the Personnel Technician.
- Tax Status
- FICA and IPERS: The amount of compensation deferred under the agreement shall be included in the gross wages subject to FICA and IPERS until the maximum taxable wages established by law have been reached.
- Federal and State Income Taxes: The amount of earned compensation deferred under the agreement is exempt from federal and state income taxes as provided in section 457 Internal Revenue Code of 1954 as amended.
- Deductions from Earnings
- When Deducted: Each participating employee shall have the monthly amount equally divided between the first and second paychecks received by the participating employee during the month. The monthly deferral must be divided into two (2) equal payments. Deferrals cannot be deducted from the third paycheck of a month.
- Change in Amounts: A participating employee may increase or decrease the amount of deduction any time during the year. The change request shall be submitted on the proper form and received by the Company by the end of the open enrollment month.
- Amount to be Deferred: The amount of compensation that may be deferred is the lesser of 100% of compensation or $15,000 for 2005 and $16,000 for 2006). A non-temporary part-time employee's monthly base salary shall be determined by using the employee's full-time equivalency.
A participating employee may elect to catch-up during the employee's last three (3) tax years before reaching normal retirement age. This three (3) year catch-up equals the total of the regular limit plus the amount of missed contributions up to $24,000 for 2003 ($26,000 for 2004; $28,000 for 2005; and $30,000 for 2006). During this catch-up period, the participating employee shall have participated for twelve (12) months during the employee's previous tax year.
If the participating employee does not utilize this catch-up provision during the first of the three (3) catch-up years, the "lost" catch-up amount cannot be added to either the second or third year of this catch-up period. If the participating employee does not utilize this catch-up provision during the first two (2) years of the catch-up period, this "lost" catch-up amount cannot be added to the third year of the catch-up period.
- Minimum Amount of Deferral: The minimum amount of deferred compensation to be deducted from the earnings of a participating employee during any month is $25.
- Match: For every $2.00 contributed by the employee, the State of Iowa will match $1.00. The maximum State contribution is $50.00 per month or $600.00 per year.
- Insurance Company -
- Time of Payment: Payments shall be transmitted by the plan administrator to the insurance company after each pay period.
- Annual Status Report: An annual status report stating the values of each participating employee's policy shall be provided by the Company to both the participating employee and the State of Iowa as of June 30 each year. This shall be continued even after a participating employee terminates or cancels participation in the program. These annual reports are required as long as a value exists in the contract or any activity occurs during the year.
- Method of Payment: The Company shall be paid with one check, one remittance encompassing all participants.
- Solicitation: There shall be no solicitation of employees by the insurance company at the employee's work place during the employee's regular working hours unless authorized by the Director.
- Dividends: The only dividend options available on cash value policies are those where the dividend remains with the company to increase the values of the policy.
- Removal from Participation: Failure to comply with the provisions of these rules will result in removal as a participating company.
- Disposition of Funds
- Death of an Employee: When a participating employee dies, the following information shall be required from the next of kin by the plan administrator: participating employee's name, social security number, and a copy of the death certificate. Upon receipt of the above information, the plan administrator shall initiate procedures so that the proceeds of the policy may be distributed as provided in the agreement, unless an election has been made by the beneficiary to irrevocably defer benefits to no later than the deceased employee's normal retirement date.
- Death of Former Employee: When a former participating employee dies, the following information shall be required from the next of kin by the plan administrator: former employee's name, social security number, and a copy of the death certificate. Upon receipt of the above information, the plan administrator shall initiate procedures so that the proceeds of the policy may be distributed as provided in the agreement, unless an election is made by the beneficiary to irrevocably defer benefits in accordance with the former employee's election.
- Termination of Employment: An employee who has terminated employment with the Department (including retirement) may defer or withdraw funds under any option available in the agreement and policy. The employee shall, within 30 calendar days after termination, make an irrevocable decision on a form provided by the plan administrator.
If funds are not withdrawn, payment shall commence by the time the former employee reaches normal retirement age. The former employee shall indicate on a form provided by the plan administrator when and under what option funds are to be paid. If election is not made within the time required, the funds shall be withdrawn by the plan administrator and paid to the former employee. The decision of the former employee is irrevocable when filed with the plan administrator.
If an employee elects to start receiving benefits at the normal retirement age, the amount withdrawn each year shall equal or exceed 67 percent of the expected return multiple as defined by the actuarial table provided by the Internal Revenue Service for one life, and be a settlement option that will begin to reduce the principal.
If an employee works beyond normal retirement age, the employee shall notify the plan administrator of the selected retirement option within 30 days after termination of employment on forms provided by the Department.
- Financial Hardship: A participating employee may request that the review committee allow the withdrawal of funds from the policy based on financial hardship. The review committee shall decide if the employee's request meets the definition of a financial hardship as provided for the United States Department of the Treasury - Internal Revenue Service Regulation 457-2.
- Transfer to a New Employer: The transfer of ownership of a policy in this program for a terminating employee is allowed.
- Method of Payment: Payments will not be ordered by the Department until at least 31 days have elapsed after termination. For convenience in making payments under the agreement, the employer requires the insurance company, as agent for the Department, to make payments directly to the former employee or to the employee's beneficiary, in satisfaction of employer's continuing obligation. This shall not, however, give the employee or beneficiary any right to demand payment from the insurance company.
- Federal and State Withholding Taxes: It shall be the responsibility of the insurance company, when making payment directly to former employees, to withhold the required federal and state income taxes, to remit them to the proper government agency on a timely basis and to file all necessary reports as required by federal and state regulations, including W-2's, with copies to the plan administrator.
- Location of Policies: The insurance company shall send the original policy to the plan administrator. Failure to do so may result in cancellation of further participation. All original policies shall be kept by the plan administrator at the Department. Participating employees may review their own policy during normal work hours but may under no circumstances remove the policy from the Department. The company shall furnish each participating employee with a copy of the policy for informational purposes only, and shall clearly mark that it is not an original policy. The employer shall hold the original policy until the proceeds are disbursed under the terms of the agreement.
- Change in Beneficiary: A participating employee may change the beneficiary shown on the deferred compensation agreement by providing the Company with written notice on a change of beneficiary form prescribed by the plan administrator. The beneficiary on the policy is set by the participating employee.
- All enrollments and changes will be made using the 457/401 (a) New Account and Change Form.
- Application: An application for a new participating employee will be supplied by the insurance company. The completed form shall be approved by the plan administrator prior to completion of any other forms described in these procedures. The completed form shall show that the owner and beneficiary of the policy is the State of Iowa and that the relationship of the Department of the participating employee is an employer relationship. The Accounting Technician will submit the 457/401(a) New Account and Change Form to the State of Iowa, Deferred Compensation Division to enroll a new member