Macy s, Inc. Deferred Compensation Plan. Your Nonqualified Deferred Compensation Plan

Transcription

1 Macy s, Inc. Deferred Compensation Plan Your Nonqualified Deferred Compensation Plan

2 Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner& Smith Incorporated (MLPF&S) and other subsidiaries of Bank of America Corporation (BAC). MLPF&S is a registered broker-dealer, member SIPC and a wholly owned subsidiary of BAC. Investment products: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value 2013 Bank of America Corporation. All rights reserved. AR9XEYUB /2013 2

3 Agenda Potential benefits of a Non-Qualified Deferred Compensation ( NQDC ) plan How NQDC plans work Highlights of your NQDC plan Enrolling in your NQDC plan Accessing your NQDC plan account and getting assistance 3

4 Benefits of a NQDC Plan

5 The Retirement Savings Gap 120% % of Income Replaced at Retirement 100% Income Replacement Goal 80% RETIREMENT SAVINGS GAP 60% 40% 401(k) 20% Social Security 0% 75K 150K 200K 250K 300K The above hypothetical illustration is based on an individual turning age 45 in 2012 and retiring at age 62. Social Security benefits commence at age 62. (Note: Because the individual is receiving Social Security benefits early, the benefits are reduced a fraction of a percent for eachmonth before that individual s full retirement age, which in this illustration would have been 67.) Assumes 401(k) balance is $65,000 at age 45, individual is contributing the maximum pre-tax amount allowable and receiving an employer match of 3%. Also assumes individual is making catch-up contributions, starting at age 50 (maximum amount allowable). Assumes salary increase of 3% per year and that 401(k) balance earns an average annual return of 6% per year. Applicable limits indexed for an inflation rate of 3% per year. Hypothetical results are for illustrative purposes only. For the 401(k) results, they are not meant to represent the past or future performance of any specific investment vehicle as investment return and principal value will fluctuate and when redeemed the investments maybeworth more or less than their original cost. If you take a withdrawal from the 401(k) account prior to age 59½, you may also be subject to an additional 10% federal tax. 5

6 Benefits of a NQDC Plan Supplement your assets earmarked for retirement to maintain standard of living and provide financial flexibility Complements 401(k) plan provisions No IRS contribution limits (unlike a 401(k) plan) Allows additional opportunity for matching contributions Federal, state and local income taxes (subject to FICA) are deferred 6

7 Comparing NQDC and after-tax contributions $1,000,000 $800,000 $600,000 $400,000 $200,000 $633,632 $497,581 Growth of After-Tax Contributions Over 20 Years $633,632 $633,632 Growth of NQDC Deferrals Over 20 Years NQDC deferrals and any earnings have an opportunity to grow tax-deferred until withdrawal. This illustration does not include a potential Macy s match. This hypothetical illustration assumes contributions at the beginning of the year, a 6% annual effective rate of return, and taxes at 35%. For the nonqualified deferred compensation example, contributions are made before taxes ($25,000 per year) and taxes on both contributions and earnings are deducted at the end of the accumulation period. To reflect a fair comparison, the after-tax account assumes contributions are made after taxes are paid (i.e., $25,000 minus $8750 for taxes = $16,250 contributed each year) and taxes are deducted on an ongoing basis from investment earnings. Changes in tax rates and tax treatment of investment earnings (e.g., lower minimum tax rates on capital gains and dividends) may impact thecomparative results. Please consider your personal investment horizon and income tax brackets, both current and anticipated, when making an investment decision as these may further impact the results of the comparison. Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost. 7

8 How a NQDC Plan Works

9 How NQDC plans work Generally, an unsecured promise by an employer - To pay participant at a future date - For services performed currently Offer to select group of management or highly-compensated employees - To defer current income (and taxes on that income) - To target distributions Nonqualified plan not subject to same regulations governing qualified plans (e.g. 401(k) plans) 9

10 How NQDC plans work - investments When you participate you may choose to contribute to one or more benchmark investment options. They are called benchmark because they are meant to simulate the 5 publically reported mutual funds available in the Plan. Participants do not own underlying investments and are not actually invested in the funds they select. You are deemed to be invested in the funds. Deemed investments used to calculate account value including earnings/losses in value 10

11 401(k) plans vs. NQDC plans Qualified Plan (401(k)) Nonqualified Plan 1. For all eligible employees For select employees 2. Pre-tax contributions limited by IRS Pre-tax deferrals not limited by IRS 3. Contribution changes permitted at any time Deferral elections are irrevocable for current year* 4. Income tax and potential 10% additional federal tax if distributed prior to age 59½ Income taxes apply, but pre-age 59½ additional federal tax not applicable 5. Variety of investment options Variety of benchmark ( deemed ) investment options 6. Portable (e.g.can roll over to another tax deferred account) Not portable 7. Funds held in separate trust Unfunded, unsecured obligation of the company 8. Bankruptcy, insolvency have no impact on trust Claims for benefits in event of bankruptcy have no preference over general, unsecured creditor * Each year you will have an opportunity to change your contributions. 11

12 The Macy s Deferred Compensation Plan Highlights

13 Plan highlights contributions and vesting Your contributions Percentage of eligible compensation - Up to 50% of salary & up to 90% of any incentive payments Deferral elections irrevocable for the coming year following enrollment period (10/21-11/21) Deferrals may be made into a Retirement account or an in-service account Deferrals may be eligible for a company match Macy s contributions: Company match works in conjunction with the 401(k) Plan. It is determined using compensation (base and incentive bonus) and deferrals across both the 401(k) and Deferred Compensation Plan. The Company match formula is 100% of the first 1% of pay that is deferred, and a 50% match on the next 5. Your vesting in the NQDC Plan will be the same as in the Macy s, Inc 401(k) plan 13

14 Plan highlights distribution elections Choose distribution methods - Lump sum - Annual installments Choose distribution timing - In-service - At retirement 14

15 How to Enroll in the Macy s NQDC Plan

16 Enrollment window Plan Year 2014 Enrollment Starts 8 a.m. ET October 21, 2013 Ends 4 p.m. ET November 21, 2013 This is the only time you ll be able to enroll for the 2014 year. Also, effective 1/1/14, the deferred compensation plan will be renamed the Save Actively Plus Deferred Compensation Plan 16

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18 Start your enrollment The screen shots shown in this presentation are intended to illustrate the functionality and services available to participants on Benefits OnLine. They are not meant as exact representations of the screens available through your plan. 18

19 Selecting your deferral percentage 19

20 Select your account allocation 20

21 Distribution elections 21

22 Investment Direction 22

23 Account information and assistance Benefits OnLine : - Secure website available virtually 24/7 Retirement & Benefits Contact Center - (800) 234-MACY (6229), Option 1 - Interactive Voice Response system available virtually 24/7 - Representatives available 8 a.m. - 8 p.m. ET on all days the New York Stock Exchange is open Quarterly account statements 23

24 Connect Through Your Smartphone The mobile-optimized Benefits OnLine website at keep you connected when you re on the go. It lets you check your account balances and individual investments, see your account s performance data, and receive important alerts and messages. The site is designed to work with most smartphones. Carrier fees may apply

25 Wrap up Questions? 25

26 This is a nonqualified deferred compensation plan under the rules and regulations of the Internal Revenue Service and is exempt from most of the rules and regulations under ERISA. The Plan is unfunded and unsecured. The balance in your account represents a promise to pay non-qualified benefits at a future date. Your investment choices are deemed as investments for the purposes of calculating your account value in the Plan. However, you are not actually invested in the underlying investment vehicles. That means the Plan is backed by the general assets of the company and any funds that may be set aside to pay benefits are subject to claims by the company s creditors. Participants have no rights to any assets other than as a general unsecured creditor. Merrill Lynch does not provide tax, accounting or legal advice. Any tax statements contained herein were not intended or written to be used for the purpose of avoiding U.S., federal, state or local tax or tax penalties, and cannot be used for this purpose. Please consult your advisor as to any tax, accounting or legal statements made herein. 26

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