Kentucky Public Employees’ Deferred Compensation Authority (KDC) is authorized under the Kentucky Revised Statutes (18A.230 – 18A.275) to provide administration of tax-deferred supplemental retirement plans for all state, public school and university employees, and employees of local political subdivisions that have elected to participate. It is an agency attached to the Personnel Cabinet of the Commonwealth of Kentucky for administrative purposes only.
KDC and Nationwide® Retirement Solutions (NRS) have worked with public sector employees for nearly 40 years, so we know the kinds of questions you may have about your plan. We will give you the tools and information to help you feel confident about investing for retirement. Keep in mind investing involves market risk, including possible loss of principal and, furthermore, there is no guarantee investment objectives will be achieved.
KDC offers two retirement plans for employees like you to save from each paycheck and invest toward retirement. These plans can help bridge the gap between what you have in your pension and Social Security (if applicable), and how much you will need in retirement. The available deferred compensation plans include:
- 457(b) Plan– tax-deferred
- 401(k) Plan – tax-deferred, which includes three after-tax options
What Does Tax-Deferred Mean?
Basically, you do not pay Federal or State income taxes on your plan contributions or earnings until you take payments from your account. This may lower your taxable income.
What Does After-Tax Mean?
Unlike tax-deferred contributions, after-tax contributions are fully taxed (Federal and State) before they are invested in your plan. Then the contributions you later withdraw are not subject to any further taxation. However, earnings on your after-tax contributions may be subject to taxation depending upon whether certain conditions are satisfied at the time of withdrawal.
Can I Combine Retirement Accounts?
Local Plan Service Representatives will work with you to determine if your other retirement assets can be combined, or consolidated, with your KDC account. This may make managing your supplemental retirement investments more effective and also reduce your administrative costs.
Qualified retirement plans, deferred compensation plans and individual retirement accounts are all different, including fees and when you can access funds. Assets transferred or rolled over to KDC from your other retirement account(s) may be subject to surrender charges, other fees and/or a 10% tax penalty if withdrawn before age 59½. However there is no 10% tax penalty on the 457(b) plan. Neither KDC, Nationwide, nor any of its representatives provide legal or tax advice. Please contact your legal or tax advisor for such advice.
How Much Can I Contribute?
A minimum monthly payroll contribution of $30 per Plan is required. If you contribute to the 457(b) Plan, this minimum applies to your pre-tax 457(b) contributions. If you contribute to the 401(k) Plan, a separate $30 contribution amount is required; however, this minimum applies to the combined total of your 401(k) Plan pre-tax and after-tax (Roth) contributions. Therefore, if you contribute to both the 457(b) and 401(k) Plans, a separate $30 minimum applies to each Plan. If you choose to make after-tax contributions to the Deemed Traditional IRA or Deemed Roth IRA, a separate $30 minimum applies to both the Deemed Traditional and Deemed Roth IRA options.
Check out the current IRS-plan contribution limits.
Get The Help You Need
The sooner you enroll, the more you may be able to save. Learn more from the Plan Highlights (PDF) or our detailed Program Summary (PDF). Take a look at the Enrollment Checklist to see what you will need to have handy and enroll today!
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There are three steps to participating in KDC:
Enroll in your plan – It is easy to participate in KDC. Only a single form is required to participate and contributions are automatically deducted from each paycheck and deposited to your account, so you do not have to remember to write a check.
Use the Paycheck Impact Calculator to see how saving pre-tax will affect your paycheck.
Invest your money – You will choose funds from the list of available well-known and high-quality investment options. Then schedule account reviews with your local Plan Service Representative when you want to increase your contributions, and monitor your account(s). Keep in mind, any investment involves risk and there is no guarantee any fund will achieve its investment objectives. Kentucky Deferred Comp (KDC) is required by Kentucky law to pay all costs associated with the plans. The Board of Trustees (the Board) collects these costs by charging participants based on their account balance. KDC provides a comprehensive costs overview (PDF) and the following highlights:
Any plan costs associated with your account are taken directly from your account balance. Learn about these costs.
Receive income – Many public employees retire earlier than those in the private sector. If you plan to retire earlier, you will want to invest enough to live in retirement on your terms. Before you begin taking payments, review our Retirement Checklist to make sure you are ready to transition from saving to spending.
When you are ready to receive income, these tips will help you do so wisely. Depending on the plan type you are invested in, there may also be a 10% penalty on distributions prior to age 59½.
Receive additional info on how to consolidate retirement accounts you may have to make managing money more effectively and also reduce your administrative costs.
Get the help you need
The sooner you enroll, the more you may be able to save. Take a look at the Enrollment Checklist to see what you will need to have handy and enroll today!
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KDC helps put you in control of when, where and how much you invest. And that is just the beginning – here are three more reasons why it is smart to participate in the KDC Program:
1. You can start anytime
Your KDC plan(s) will work for you whether you are just starting to invest or approaching retirement – saving money through a supplemental retirement account can offer several benefits.
See how your investment can potentially grow due to the power of time and compounding.
Use the Future Value Calculator to see how delaying enrollment could impact your savings long-term.
2. Every little bit helps
Even investing a small amount of money can really add up over time. By increasing contributions on a regular basis the overall impact to your paycheck is lessened. Consider putting any salary increases into the plan – it is an easy way to regularly increase your contributions.
Take a look below at how investments could potentially grow over time.
|Current Age||Amount Deferred||Annual Investment||Total Contribution||Account Value at Age 65|
Chart assumptions: Semi-monthly deferrals, 25% tax rate for paycheck impact, 6% annual rate of return. This hypothetical illustration is not intended to predict or project investment results. It does not assume taxes, fees or account withdrawals during accumulation; if it did, results would be lower. This chart is not intended to project the performance of your KDC account. Investments involve market risk, including the possible loss of principal. Actual investment results will vary depending on your investment and market experience. Income stream durations and amounts are not guaranteed.
3. You will receive outstanding customer service
Our local Plan Service Representatives are ready and willing to answer your questions. We have been helping public sector employees save for retirement for almost 40 years and our local Plan Service Representatives have helped educate thousands of employees about investing through their retirement plans. Feel free to call today – we do not charge a fee to work with a Plan Representative.
Read more about why KDC is right for you.
Get the help you need
The sooner you enroll, the more you can possibly save. Take a look at the Enrollment Checklist for tips on the information you will need to have handy and enroll today.
As a participant in KDC, you will have access to a wide range of well-known and high-quality investment options. Your investment options were selected by the KDC Board of Trustees in concert with its investment consultant Mercer Investment Consulting, and can help meet your supplemental retirement planning needs.
Understand Your Options
If you need a better understanding of the Spectrum of Investment Options (PDF) when choosing which funds are right for you, we are here to help. KDC offers different tiers of investment options designed for different types of investors.
Tier 1: Target Date Funds and Balanced Fund
Our Target Date funds are designed for participants who want to invest in mutual funds, but are not comfortable making asset allocation decisions or want decisions to be made for them by professionals on an ongoing basis. Target Date funds are allocated based on the participant‘s anticipated retirement date or the date they intend to withdraw funds. The investments become more conservative as the target date approaches.
The Balanced Fund invests approximately 60 percent in stocks and approximately 40 percent in bonds.
Target Maturity Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, in addition to the expenses of the Target Maturity Funds, an investor is indirectly paying a proportionate share of the applicable fees and expenses of the underlying funds.
Target Maturity Funds are designed for people who plan to withdrawal funds during or near a specific year. Like other funds, target date funds are subject to market risk and loss. Loss of principal can occur at any time, including before, at or after the target date. There is no guarantee that target date funds will provide enough income for retirement.
Like other funds, target date funds are subject to market risk and loss. Loss of principal can occur at any time, including before, at or after the target date. There is no guarantee that target date funds will provide enough income for retirement. Target Destination funds are designed for people who plan to withdraw retirement funds during or near a specific year after retirement. These funds use a strategy that reallocates equity exposure to a higher percentage of fixed investments over time. As a result, the funds become more conservative over time as you approach retirement.
Tier 2: Passively Managed Index Funds
Tier 2 funds are designed for participants who want to replicate the performance of a specific market index and not as an active manager attempting to outperform the index. This Tier includes an array of passively managed index funds managed by Vanguard.
Tier 3: Actively Managed Funds
Tier 3 Funds are designed for participants who want to take a more active role in the creation and rebalancing of their portfolio. Tier 3 includes over a dozen actively managed funds from different firms offering various asset classes.
Tier 4: Specialty Funds
Fixed Contract Fund 3 is designed for participants seeking stable returns with current income. It is a stable value fund intended to preserve capital and provide current income.
Fidelity Contrafund is designed for participants who seek an actively managed All Cap equity strategy. It is an All Cap fund that fluctuates between growth and value styles across all market capitalizations, based on the fund manager’s perception of market conditions.
Some funds available through KDC are subject to trading restrictions and charge redemption fees to help prevent excessive short-term or disruptive trading. Be sure you understand how these fees are applied before investing in these funds.
Get The Help You Need
Talk to a local Plan Service Representative about your investment options, review our Spectrum of Investment Options (PDF), or just learn more about how to choose funds. Information provided by Plan Service Representatives is for educational purposes and is not investment or tax advice.
Please consider the fund’s investment objectives, risks, and charges and expenses carefully before investing. The prospectus contains this and other important information about the investment company. Prospectuses and fund factsheets are available by calling 502-573- 7925 or 800-542-2667. Some mutual funds may impose a short term trade fee. Some funds may be subject to a trade restriction policy. Please read the prospectus carefully before investing.
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It only takes a few minutes to sign up. Here are some things you will need:
- Your employer agency’s name
- Your Social Security number
- Contribution amount
- Investment selections
- Read about your investment options
Get the help you need
We will even walk you through the enrollment process. If you need more help, call one of our local Plan Service Representatives.