Q&A for 403(b)
Q-1: How will the RCA retirement program work beginning with 2005 retirement plan contributions?
A-1: In the past, the RCA retirement program consisted of two different retirement plans: the RCA Retirement Plan and the RCA 403(b) Retirement Plan. Up until December 31, 2004, all employer and church contributions were made to the RCA Retirement Plan, which is a nonqualified deferred compensation plan. No employee contributions could be made to this plan. Instead, employees who wanted to make pre-tax deferrals to a retirement plan could make voluntary salary reduction contributions to the RCA 403(b) Retirement Plan, which is a special kind of retirement program that meets the requirements of section 403(b) of the Internal Revenue Code.
However, contributions (both employer/church and employee) made since January 1, 2005 have been credited to the RCA 403(b) Retirement Plan, which has been renamed the RCA 403(b) Retirement Program. The nonqualified RCA Retirement Plan was "frozen" effective December 31, 2004. (See Q&A-3 below for details.)
Additional details about the RCA 403(b) Retirement Program will be communicated to you throughout the year.
Q-2: Why is this change being made to the RCA retirement program?
A-2: In October 2004, Congress passed a new law that significantly changed the rules that apply to nonqualified deferred compensation plans like the RCA Retirement Plan. Because of those changes, and in order to provide enhanced benefit security, the RCA Board of Benefits Services decided to create a unified program so that all future contributions, both employer and employee, would be made into a 403(b) retirement program. As discussed in more detail in Q&A-6 below, a 403(b) retirement program provides a number of advantages not available under a nonqualified plan. For example, a 403(b) retirement program offers more freedom to change the form of and timing for benefit payments. In addition, once you are entitled to a distribution from the 403(b) plan, you can roll that distribution over into another retirement plan or to an IRA, without having to pay taxes at the time of the distribution. A nonqualified plan is not permitted to make tax-free rollovers.
Q-3: What has happened to the RCA Retirement Plan?
A-3: The nonqualified RCA Retirement Plan has been frozen, effective December 31, 2004. That means that no contributions have been made to that plan since that date. All contributions that were made to the RCA Retirement Plan before 2005 will continue to be held in that plan and remain invested in the investment funds which you have selected for that plan (unless you change those designations in accordance with the terms of that plan). You will receive distributions from the RCA Retirement Plan in accordance with its terms.
You need to understand that you will receive distributions from 403(b) Retirement Program in accordance with its terms of that plan – only on those dates or upon the occurrence of those events specified in the RCA 403(b) Retirement Program.
Q-4: Do I lose or gain any money as a result of this transition?
A-4: No, not at all. The transition does not affect the funds held in your accounts in either the nonqualified plan or the RCA 403(b) Retirement Program. All employer/church contributions made on your behalf since January 1, 2005 have been allocated to your account in the RCA 403(b) Retirement Program. Similarly, the transfer of funds from the nonqualified plan to the RCA 403(b) Retirement Program will not affect the total amount held in your accounts in the two plans. No money will be gained or lost as a result of this transition.
Q-5: How are my funds invested in the new RCA 403(b) Retirement Program?
A-5: All employer/church contributions are invested in accordance with the investment directions which you made under the nonqualified plan. All salary reduction contributions you made to the RCA 403(b) Retirement Plan, if any, will continue to be held in that plan, under its new name, the RCA 403(b) Retirement Program. These employee contributions will continue to be invested in accordance with investment directions that you made in the past under the RCA 403(b) Retirement Plan. Thus, it is important to note that your investment allocations may be different for the RCA Retirement Plan than your RCA 403(b) Retirement Program, unless you made the same investment selections for each type of contribution.
You can, of course, change your investment selections for any or all of the contributions that are now held in the RCA 403(b) Retirement Program or for future contributions to that plan as well as the RCA Retirement Plan. To do so, contact Fidelity at (800) 343-0860, Monday through Friday, between 8:00 a.m. and midnight Eastern Standard Time; or visit www.mysavingsatwork.com.
It is important that you check your RCA Retirement Plan and your RCA 403(b) Retirement Program accounts to be sure that these funds are correctly allocated to investment options.
Q-6: What are the advantages of the RCA 403(b) Retirement Program?
A-6: There are many advantages to the RCA 403(b) Retirement Program over the nonqualified RCA Retirement Plan, including the following:
- Rollovers. When you are eligible to receive a distribution from the RCA 403(b) Retirement Program, you can roll the distribution over directly to another retirement plan (including a 403(b) plan or a 401(k) plan) or to an IRA. This rollover provision allows you to keep your retirement money invested in a manner that best meets your needs. In addition, you can delay paying taxes on any amount you roll over until such time as you actually receive a distribution of the money.
- Investment Fund Selections. You can choose among a greater number of investment funds for employer/church contributions. The RCA Retirement Plan allows you to choose among only 15 investment options. In contrast, the RCA 403(b) Retirement Program offers 24 investment options from which to choose. These investment options include all the same funds available under the nonqualified plan, such as the Freedom Funds and the Socially Responsible funds, as well as additional international, emerging, and small cap funds. Additionally, you may select different investment options for each type of account you have (for employer/church contributions, employee salary deferred contributions, and rollovers). This greater selection should help you better meet your retirement planning needs.
- For information on available investment funds, please visit www.mysavingsatwork.com. You can also speak with a Fidelity Retirement Services Specialist at (800) 343-0860, Monday through Friday, between 8:00 a.m. and midnight Eastern Standard Time.
- Loans. You will be able to take a loan from your account in the RCA 403(b) Retirement Program. Plan loans are available at market interest rates. When you pay the loan back, you are paying both principal and interest back into your account. Loans are not available (or allowed) under a nonqualified deferred compensation plan like the RCA Retirement Plan.
- Individual Ownership. All contributions made to the 403(b) program belong to you, the participant. As such, the money is further protected from the reach of creditors.
Q-7:What are the disadvantages of the RCA 403(b) Retirement Program?
A-7: There are not many. A 403(b) plan is subject to contribution limitations--the RCA Retirement Plan is not. Currently, there are two separate restrictions on the amount of money that can be contributed to any 403(b) plan.
The first contribution limit generally limits the amount of salary reduction contributions you can make to $15,000 in 2006. However, if you are age 50 or older, you can contribute up to $20,000 in 2006. And if you have 15 or more years of continuous service with the church, you can contribute as much as $23,000 in 2006. The second contribution limit applies to the total amount that can be contributed by you and your employer/church combined. Under this limit, the total amount of contributions that can be made to a 403(b) plan on your behalf in 2006 is the lesser of 100% of your taxable compensation or $44,000. (Note: For purposes of this limit, taxable compensation does not include any amount that clergy may claim as housing allowance; that is to say that a pastor with high housing expenses would want to claim a smaller amount as housing allowance if s/he wanted to maximize his/her tax-sheltered contributions to the RCA 403(b) Retirement Program.)
Q-8: How will I be able to tell how much money I have in the RCA retirement programs?
A-8: You will receive a statement each quarter from Fidelity. This statement will identify how much money you have in your accounts in both the RCA Retirement Plan and the RCA 403(b) Retirement Program. That means that if your employer or church contributed to the RCA Retirement Plan on your behalf prior to 2005, these contributions, and any earnings thereon, will be separately reflected on your statement, along with a description of the investment funds in which these contributions are invested. In addition, the statement will show each type of contribution made to the RCA 403(b) Retirement Program (e.g., Employer Contributions, Salary Deferral Contributions, and Rollover Contributions) and the investment funds in which each type of contribution is invested.
Q-9: Where can I get more information about the RCA 403(b) Retirement Program?
A-9: You may manage your account online at www.mysavingsatwork.com.
You can reach a Fidelity Retirement Services Specialist at (800) 343-0860, Monday through Friday, between 8:00 a.m. and midnight Eastern Standard Time.
You may contact Retirement Services, Office of Benefits Services of the Reformed Church in America, at (866) 221-5480. The plan document can be found in our website.
The foregoing is provided for general information purposes only. Neither the Board of Benefits Services of the Reformed Church in America, the General Synod Council of the Reformed Church in America, nor any other assembly or corporation of the Reformed Church in America is providing legal, tax, accounting, or similar advice. Each situation is unique. Laws and customs may vary from one jurisdiction to another. They also can change with the passage of time. For all these reasons, consult with a competent attorney or other professional who is licensed in your jurisdiction before you take specific action with respect to your retirement plan(s).