New Texa$aver Roth contribution options
In recent surveys, employees indicated a strong interest in adding a Roth feature to Texa$aver. As a result, effective January 2, 2012, Texa$aver offers a Roth contribution option in both the 401(k) and 457 Plans. Both Plans now give you the flexibility to designate all or a portion of your contributions as Roth contributions. Roth (after-tax) and traditional (before-tax) contributions each have their own advantages. Please review the following FAQs and carefully consider which option is best for you. For more detailed FAQs, please visit www.texasaver.com.
View the Texa$aver Roth Options Webinar or download the (presentation - pdf).
What is a Roth contribution to the Texa$aver 401(k)/457 Plans?
Roth contributions allow participants to contribute to the Texa$aver 401(k) and/or 457 Plan with after-tax dollars. No taxes are withheld from Roth contributions or their earnings when a distribution is taken as long as it is a “qualified” distribution (see “What is considered a qualified Roth distribution?”). You can designate all or a portion of your 401(k) and 457 Plan contributions as Roth contributions.
How are Roth contributions different from traditional contributions to your 401(k)/457 Plan?
Roth contributions are made with after-tax dollars. Traditional contributions are made with before-tax dollars.
How do I know which option is right for me?
The Texa$aver Roth contribution allows you to pay taxes on your contributions when they are contributed. The Texa$aver Roth contribution essentially “locks in” today’s tax rate on your contributions. If you expect to be in a higher tax bracket when you retire, then Roth contributions may make sense for you.
How much can I contribute as a Roth contribution to my 401(k)/457 Plan?
You may contribute up to $17,000 to your 401(k) and 457 Plan in 2012. That includes before-tax and Roth contributions. Employees 50 years of age or older may contribute up to $22,500.
Are there additional fees to participate in the Roth contribution option?
Yes. Because there are two money types (before-tax and Roth) held separately in your Texa$aver 401(k) and 457 Plans, you will have separate administrative fees for each money type, in addition to a flat monthly fee of $5 to participate in the Roth contribution option. See the charts below.
Administrative Fee
| Before-Tax Balance |
Monthly
Administrative
Fee |
Annualized
Administrative
Fee |
| $10.00 or less |
No Fee
|
No Fee
|
| Between $10.01 and $1,000.00 |
$1.18
|
$14.10
|
| Between $1,000.01 and $16,000.00 |
$3.99
|
$47.90
|
| Between $16,000.01 and $32,000.00 |
$6.32
|
$75.89
|
Between $32,000.01 and $48,000.00
|
$9.49
|
$113.83
|
Between $48,000.01 and $64,000.00
|
$12.65
|
$151.78
|
$64,000.01 or more
|
$15.81
|
$189.72
|
| Monthly fees are rounded to the nearest cent. |
Administrative Fee Plus Roth Fixed Fee
| Roth Balance |
Monthly Roth
Flat Fee |
Monthly
Administrative +
Roth Fee |
Annualized
Roth Fee |
Annualized
Administrative +
Roth Fee |
$10.00 or less
|
No Fee
|
No Fee
|
No Fee
|
No fee
|
Between $10.01 and $1,000.00
|
$5.00
|
$6.18
|
$60.00
|
$74.10
|
Between $1,000.01 and $16,000.00
|
$5.00
|
$8.99
|
$60.00
|
$107.90
|
Between $16,000.01 and $32,000.00
|
$5.00
|
$11.32
|
$60.00
|
$135.89
|
Between $32,000.01 and $48,000.00
|
$5.00
|
$14.49
|
$60.00
|
$173.83
|
Between $48,000.01 and $64,000.00
|
$5.00
|
$17.65
|
$60.00
|
$211.78
|
$64,000.01 or more
|
$5.00
|
$20.81
|
$60.00
|
$249.72
|
| Monthly fees are rounded to the nearest cent. |
Can I leave my money in my Texa$aver 401(k)/457 Plan as a Roth contribution at retirement?
Yes, you can leave it until you reach age 70½ when you must begin taking your Required Minimum Distribution (RMD). The government requires that you begin taking an RMD unless you are still working for a participating agency. If you do not take your RMD, there is a 50% penalty on the amount required to be withdrawn, and you are still required to take your distribution.
What is considered a qualified Roth distribution?
A qualified Roth distribution is generally one that is made after five taxable years of Roth participation and the distribution must be either:
- Made on or after the date the employee reaches age 59½,
- and with the 457 Plan, the employee must be separated from employment;
- Made after the employee’s death; or
- Attributable to the employee being disabled.
If you take a distribution before you’ve held the Roth contributions for five taxable years in your 401(k)/457 Plan, your earnings are subject to ordinary income tax, even if you reach age 59½.
Can I withdraw my Roth contributions without a distribution event?
No. It’s important to remember that you must have a qualified distribution event under the Texa$aver Program to withdraw your Roth contributions or your before-tax contributions.
Where can I get more information about Roth?
Call Texa$aver at (800) 634-5091 or email texasaver@gwrs.com.
