A 401(k) plan allows participants to make tax deferred contributions each pay period, which are then invested and potentially grow until retirement. The Kentucky Public Employee Deferred Compensation Authority (KDC) 401(k) Savings and Investment Plan allows State employees to get the same benefit, through a program that is specifically tailored to the needs of Kentucky public employees.
When you contribute to the KDC 401(k) plan, the money is not taxed until it is withdrawn – usually in retirement, when you may be in a lower tax bracket. To contribute even more to your retirement plan, you may contribute to an after-tax Roth 401(k) along with your 457(b) retirement plan. Contributing to a Roth 401(k) does not decrease the total amount you can contribute. Roth 401(k) investment earnings may be taken tax free in retirement as long as certain requirements are met.
Remember, investing involves market risk, including the possible loss of the money you have saved. As you get started in the plan, we will help you understand market risk and strategies that may help you deal with it.
Additional 401(k) Features
In addition to tax-deferred investing, the KDC 401(k) plan also offers these features, and more:
- Contributions to more than one plan at a time – you may contribute to a 401(k) while also contributing to a 457(b) and/or a 403(b) Plan (if you work for a State educational institution), as long as you do not exceed the current IRS contribution limits. See the plan comparison chart (PDF) for details.
- Catch-up contributions – you can take advantage of your remaining years of earning income with two special provisions designed to help participants nearing retirement invest even more. Catch-up contributions in Learning Center allow eligible participants to contribute more than the normal annual deferral limits and there are two kinds are available – Age 50+ Catch-up and Special 457 Catch-up. Both options are tax deferred until withdrawal when they are taxed as ordinary income. Only one of the catch-up options can be utilized per plan each year.
- Age 50+ Catch-up – if you will be age 50 or older by the end of the tax year, you use this option and defer up to an additional $6,000 over the normal deferral limit.
- Special 457 Catch-up – if you are within the three years prior to your designated Normal Retirement Age,* you may be eligible for catch-up contributions up to two times the maximum contribution limit to make up for under contributing in the past.
- Rollovers – you can roll money into your 401(k) plan from other qualified retirement plans. Also, upon leaving State employment, you can roll your money into another qualified retirement plan. See the plan comparison chart (PDF) for more information.
- Loans – as long as certain qualifications are met, you may be eligible for a loan. You are obligated to pay it back, with interest.
- Hardship withdrawals – you may take an in-service hardship withdrawal from your plan, as long as certain qualifications are met.
For a complete look at all of the KDC 401(k) plan features, benefits and restrictions take a look at the plan comparison chart (PDF).
Qualified retirement plans, deferred compensation plans and individual retirement accounts are all different, including fees and when you can access funds. Assets rolled over from your account(s) may be subject to surrender charges, other fees and/or a 10% tax penalty if withdrawn before age 59½. Neither Nationwide® nor any of its representatives give legal or tax advice. Please contact your legal or tax advisor for such advice.
Get The Help You Need
Talk to one of our local Plan Service Representatives if you have questions about plan options.