The State of Rhode Island’s Deferred Compensation Plan is established under Internal Revenue Code Section 457. Under the Plan, you postpone receiving (defer) a portion of your salary. It works like this:
- You decide, within certain legal limits, how much of your income you want to defer.
- The State of Rhode Island reduces your paycheck before income tax by that amount and forwards it to Voya Financial® on a regular basis.
- Contributions are invested in the investment options you have selected.
- The contributions and any earnings that accumulate are not taxed until they are distributed to you. This is usually at retirement when you may be in a lower tax bracket.
Any eligible employee of the State of Rhode Island can participate in the Plan. An eligible employee is defined as any individual, whether appointed, elected, or under contract, providing services for the State of Rhode Island for which compensation is paid.
Contributions under the Plan are voluntarily made by participants through a reduction in salary. To participate, you must agree to defer a minimum of $260 annually, or $10 per bi-weekly pay period.
Under the Plan, the maximum annual contribution amount is set by Internal Revenue Service (IRS) guidelines on a yearly basis. You may view the current limits here.
You may be eligible for increased contributions under one of the Plan’s catch-up provisions:
- Age 50+ Catch-up is available in each year beginning in the year you reach age 50.
- 457 Special Catch-up is available in the 3 consecutive years prior to reaching Normal Retirement Age*.
* Normal Retirement Age means 70 ½ however, you may make an election of an alternative Normal Retirement Age that may not be earlier than the earliest date you shall become eligible to retire and receive unreduced retirement benefits under your defined benefit plan with the State of Rhode Island.
Please note: A participant cannot use both the Age 50+ Catch-up Option and the 457 Special Catch-up Option during the same year. The participant must choose the most beneficial option.
Changing or Suspending Your Contributions
Visit the Retirement at Work website to begin or change your payroll contributions.
Transfers and Rollovers
The Plan accepts transfers of other eligible 457 deferred compensation plans and State of Rhode Island 457 Deferred Compensation Plan assets with other investment providers. Transferred assets can only be withdrawn upon a distributable event.
The Plan also accepts rollovers from eligible retirement plans (401 and 403(b) plans and traditional IRAs). The Plan does not accept rollovers of after-tax dollars. Rollover assets may be withdrawn without a distributable event, however they will be subject to an Internal Revenue Service (IRS) 10% penalty tax on premature distributions taken prior to age 59 ½ (unless an IRS exception applies). Please carefully consider the benefits of existing and potentially new retirement accounts and any differences in features.
Distributions are allowed from the Plan only upon:
- Severance from employment or retirement;
- Attainment of age 70 ½;
- Death; or
- An unforeseeable emergency.
The Plan also includes a provision allowing the in-service distribution of accounts that do not exceed $5,000 if you have not contributed to the Plan during the prior two years and you have not received this type of in-service distribution in the past.
Unforeseeable Emergency Withdrawals
In order to take a withdrawal while you are still employed with the State of Rhode Island, you must meet the requirements for an Unforeseeable Emergency. IRS guidelines and the Plan document provide that an unforeseeable emergency means a severe financial hardship to the participant resulting from:
- A sudden and unexpected illness or accident involving the participant or one of his or her dependents (as defined by the IRS);
- The loss of the participant’s property due to casualty; or
- Other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the participant’s control.
Withdrawals are permitted only to the extent the hardship cannot be relieved:
- Through reimbursement or compensation by insurance or otherwise;
- By liquidating your assets (to the extent this would not itself cause severe financial hardship);
- By borrowing from commercial sources (to the extent that this borrowing would not itself cause severe financial hardship); or
- By stopping deferrals under the Plan.
Only the amount necessary to satisfy the emergency need is available for withdrawal. The purchase of a home or automobile, or the need to pay a child’s college expenses are not considered unforeseeable emergencies.
Upon severance from employment, retirement, or attainment of age 72 , you have a variety of withdrawal options. As you select your payment option, you should consider the tax consequences of your election. You may want to consult a tax advisor before making your final decision; Voya Financial® does not offer legal or tax advice.
Your payout options include:
Defer all or a portion of your benefits to a later date
The latest date to which you can defer payments is the April 1st of the calendar year following the calendar year in which you attain age 72 or separate from service, whichever occurs later. If you fail to receive the Required Minimum Distribution (RMD) for any tax year, a 50% excise tax is imposed on the required amount that was not timely distributed.
Total lump sum or partial lump sum withdrawal
Take all or a portion of your account balance in cash. Amounts distributed directly to you from the Plan will only be taxable to you when actually paid, and will be reported on IRS Form 1099R.
Federal income tax withholding will apply to your payments, as described below, based on whether you are eligible to rollover the distribution.
- If you receive a distribution that is eligible to be rolled over, a mandatory 20% will be withheld for Federal tax.
- If you receive a distribution that is not eligible to be rolled over, 10% for Federal tax will be withheld; however, you may elect to have no taxes withheld.
Governmental 457(b) plan benefits are generally not subject to any applicable 10% premature distribution penalty tax if you receive that distribution prior to reaching age 59½. However, any withdrawal from the Plan that is attributable to an amount you rolled over from either another type of employer plan or an IRA would be subject to any applicable 10% premature penalty tax, provided you receive that distribution before age 59½ (unless an IRS exception applies).
Systematic Withdrawal Option (SWO)
This option provides you with a regular stream of income payments, which can be made monthly, quarterly, semiannually or annually. It allows you to continue to invest your money during the distribution period in any or all of the investment options offered under the Plan. You have the flexibility to transfer your account balance among the Plan's various investment options. There are two different ways you can structure your SWO payments:
- Specified Payment – Under this option, you select a specific dollar payment. The amount of the payment chosen must be at least $250. Your payment will remain constant, unless you need to take additional distributions in order to meet the federal Required Minimum Distributions imposed at the time you turn 72.
- Specified Period – You may elect to receive payments for a designated time period. The specified period must be at least three years and the first distribution must be at least $250. The maximum specified period is limited to your life expectancy, or joint life expectancy of you and your designated primary beneficiary that is your spouse. For example, if you elect to receive your payments monthly for three years, your initial payment will be equal to 1/36 of your account balance; the second payment will be 1/35 of your account balance; the third 1/34, and so on.
Estate Conservation Option (ECO)
Unlike a SWO, payments under the ECO are based on recalculating your life expectancy each year. Because this recalculation method typically produces a longer life expectancy after the first year, the ECO provides lower payments each year. That, in turn, leaves more of your assets to continue accumulating tax deferred within your account, preserving more of your assets for your beneficiary(ies).
- ECO is designed to make annual payments to you in accordance with the Required Minimum Distributions of Federal tax laws. You may select the month in which these payments are distributed to you from your account. You are eligible to begin receiving ECO payments in December of the calendar year in which you reach 70½ or retire, whichever is later.
- Your annual benefit payment is determined by dividing the value of your account as of December 31 of the previous year by a life expectancy factor. You may elect either a single or joint life expectancy factor for your ECO payments. In order to elect a joint life expectancy factor, your spouse must be your sole primary beneficiary and at least 11 years younger than you.
Transfer or rollover into another eligible plan
The Plan permits the transfer of your account to another 457 deferred compensation plan that accepts such transfers. You can also rollover your benefits into another eligible retirement plan or IRA. (An eligible retirement plan is a 401 qualified plan, a 403(b) tax deferred annuity program, or another governmental 457(b) deferred compensation plan).
Amounts rolled from a governmental 457(b) plan to another plan type are subject to any applicable 10% premature penalty tax if distributed prior to age 59½ (unless an IRS exception applies).
All distributions are eligible for rollover except for:
- An unforeseeable emergency withdrawal;
- IRS Required Minimum Distributions payable on or after you reach age 72; and
- Periodic payments made over your life or a specified period of 10 years or more.
Upon your death, benefits would be payable to the beneficiary(ies) that you designated under the Plan. If you do not name a beneficiary (or if your beneficiary predeceases your benefits will be paid in accordance with the Plan.
If you would like to designate your beneficiary(ies) or make a change to your current designation, please fill out the Beneficiary Designation Form and send it to:
Voya Retirement Insurance and Annuity Company
PO Box 990063
Hartford, CT 06199-0063
Fax: (800) 643-8143
An administrative fee is deducted from your account at an annual rate of 0.15%. There are no other fees under the Plan such as deferred sales charges or maintenance fees. Investment management fees may apply; please refer to the Investment Options fact sheets.
You should consider the investment objectives, risks, and charges and expenses of the variable product and its underlying fund options, carefully before investing. The fund prospectuses and information booklet containing this and other information can be obtained by contacting your local representative. Please read the information carefully before investing.
Group annuities are intended as long-term investments designed for retirement purposes. Money taken from the annuity will be taxed as ordinary income in the year the money is distributed. Account values fluctuate with market conditions, and when surrendered the principal may be worth more or less than its original amount invested. An annuity does not provide any additional tax deferral benefit, as tax deferral is provided by the plan. Annuities may be subject to additional fees and expenses to which other tax-qualified funding vehicles may not be subject. However, an annuity does provide other features and benefits, such as lifetime income payments and death benefits, which may be valuable to you.
Insurance products, annuities and retirement plan funding issued by (third party administrative services may also be provided by) Voya Retirement Insurance and Annuity Company, One Orange Way, Windsor, CT 06095-4774. Securities are distributed by Voya Financial Partners LLC (member SIPC). All companies are members of the Voya® family of companies. Securities may also be distributed through other broker-dealers with which Voya has selling agreements. Insurance obligations are the responsibility of each individual company. Products and services may not be available in all states.