Cleveland Clinic Akron General Retirement Program

Transcription

1 Cleveland Clinic Akron General Retirement Program A good thing is getting better. New Fee Structure for All Cleveland Clinic/Akron General Plans New Option to Save Above the IRS Limits in your Matched Savings Plan

2 What s Inside What s Changing How Much You Can Save Refresher: How Roth Works At Cleveland Clinic Akron General, we re focused on the future of healthcare putting the patient in the center of everything we do. New! Roth In-Plan Conversions Steps to Consider Where to Go for Help So it should come as no surprise that we re focused on your future, too. We continuously review your retirement plans and options. We re updating your Matched Savings Plan with a few changes that can help you save more for retirement and keep more of your savings for yourself. It s all part of the My Pay + Benefits package we offer as our reward for all you do NETBENEFITS.COM/CCAG

3 What s Changing Restructured Account Fee for All Retirement Programs Currently, you pay a quarterly plan administrative fee of $8.50. The current fee covers all CCAG Retirement Plans you have at Fidelity. Effective January 1, 2019, you ll pay a $5 fee for administrative expenses for each Cleveland Clinic and/or Akron General Retirement Program account you have at Fidelity. Here s how it will work: All Caregivers who participate in the Plans have the same flat fee deducted from their accounts. If you have more than one Cleveland Clinic and/or Cleveland Clinic Akron General Retirement Program account (including the Cleveland Clinic Akron General USW Investment Pension Plan), the fee will be deducted from each account. The administrative fee is shown on your statement as a separate line item labeled Recordkeeping Fee and also appears under Transaction History in Fidelity NetBenefits. You ll be able to see the new fee beginning with your April 1, 2019 to June 30, 2019, account statement. New Deferral and Roth In-Plan Conversion in the Matched Savings Plan Pretax and Roth contributions have been available in your Matched Savings Plan for some time. Beginning in early 2019, you ll be able to use after-tax contributions to save more than the IRS limit, and have a chance to convert those dollars to Roth. We ll alert you when these features are available. Beginning in early 2019, you ll have new ways to save for retirement: Current: Pretax contributions Current: Roth contributions New! After-tax contributions New! Roth In-plan Conversions Contribute pretax salary reduction dollars now; pay taxes when you withdraw your money in retirement. Contribute after-tax Roth salary reduction dollars now; potential for tax-free withdrawals in retirement. 2 Save more than the IRS limit by contributing additional after-tax payroll deduction dollars. 1 Opportunity to build potentially more tax-free retirement income 2 by converting after-tax contributions and pretax Matched Savings money to Roth. 1 Pretax and Roth contributions are limited to $19,000 in 2019 (or $25,000 if you re 50 or older). 2 Roth distributions are federally tax-free when withdrawn after the aging requirement has been satisfied and one of the following conditions is met: age 59½; disability; or death. NETBENEFITS.COM/CCAG

4 How Much You Can Save How much can I contribute to the Matched Savings Plan? One of the most important things to understand is how much the IRS will let you contribute to the Matched Savings Plan. There are two limits you can take advantage of: 1. Salary Reduction Contributions limit: In 2019, you can contribute up to the IRS Effective Deferral Limit of $19,000 ($25,000 if you re 50 or older) in any combination of pretax salary reduction and Roth salary reduction contributions. 2. Annual additions limit: You and Cleveland Clinic Akron General together can contribute up to $56,000 in 2019 ($62,000 if you re 50 or older) that includes all of your salary reduction contributions (your pretax and Roth), your matching contributions from Cleveland Clinic, and any additional voluntary after-tax contributions you make. This means you can save more: In 2019, you may be able to add up to $37,000 more to your Matched Savings Plan account, between your after-tax contributions and the Cleveland Clinic Akron General match. And Roth In-plan Conversions allow you to take advantage of extra tax benefits. NEW OPPORTUNITY TO SAVE MORE Pretax contributions Roth contributions Matching contributions After-tax contributions that can also be converted to Roth $19,000 ($25,000 if 50+) $37,000 + = $56,000 ($62,000 if 50+) 2019 PRETAX/ROTH CONTRIBUTIONS LIMIT POTENTIAL SAVINGS OPPORTUNITY TOTAL 2019 LIMIT FOR CONTRIBUTIONS FROM YOU AND CLEVELAND CLINIC AKRON GENERAL NETBENEFITS.COM/CCAG

5 What s the difference between the contribution types? You can contribute salary reduction contributions (pretax and/or Roth). Plus you can now make extra voluntary after-tax contributions to the Matched Savings Plan. Note that if you choose a combination of pretax, Roth, and after-tax contributions, the total of your contributions is limited to 70% of your eligible pay. These deductions will all be taken from your paycheck at the same time. PRETAX CONTRIBUTIONS ROTH CONTRIBUTIONS AFTER-TAX CONTRIBUTIONS Is it eligible for the match? Yes Yes No Will I pay taxes on my contributions when I make them? No, so it costs you less to save Yes, so your take-home pay will be lower than if you made an equivalent pretax contribution Yes, so your take-home pay will be lower than if you made an equivalent pretax contribution Do I pay taxes on contributions when I withdraw them? Yes No taxes on Roth contributions, but you will pay taxes on any matching contributions No Do I pay taxes on investment earnings when I withdraw them? Yes No taxes on Roth earnings for a qualified withdrawal;* but you will pay taxes on the earnings on any matching contributions Yes What are the Plan s contribution limits? 1% to 70% of eligible pay, up to the IRS limits 1% to 70% of eligible pay, up to the IRS limits 1% to 70% of eligible pay, up to the IRS limits What are the IRS contribution limits? $19,000 in 2019 ($25,000 if 50 or older) in any combination of pretax and Roth dollars $19,000 in 2019 ($25,000 if 50 or older) in any combination of pretax and Roth dollars $37,000 in 2019 between your after-tax contributions and the match combined * In general, Roth distributions are federally tax-free when withdrawn after the aging requirement has been satisfied and one of the following conditions is met: age 59½; disability; or death. NETBENEFITS.COM/CCAG

6 Refresher: How Roth Works When can I withdraw my Roth dollars tax-free? In exchange for tax benefits, the IRS limits tax-free Roth withdrawals by requiring a five-year aging period. In general, Roth withdrawals are federally tax-free if taken after 59½, or due to disability or death and after the five-year holding period is met. The five-year clock generally starts from the first Roth contribution or from the first Roth In-plan Conversion. Before you convert or withdraw your money, talk to your financial or tax advisor or call Fidelity at for one-on-one help. What s the difference between Roth in the Matched Savings Plan and a Roth IRA? Roth in the Matched Savings Plan is similar to a Roth IRA, but there are a few key differences. NO INCOME LIMIT There s no income limit to make Roth contributions to the Matched Savings Plan. But your ability to contribute to a Roth IRA phases out as your income rises.* High earners can convert to a Roth IRA from a traditional IRA, but they can t make direct Roth IRA contributions. HIGHER CONTRIBUTION LIMIT You can contribute up to $19,000 in pretax and Roth contributions combined ($25,000 if you re 50 or older) to the Matched Savings Plan in Your contributions to Roth and pretax IRAs are limited to $6,000 ($7,000 if you re 50 or older), depending on your income. REQUIRED MINIMUM DISTRIBUTIONS The Matched Savings Plan requires you to begin taking minimum distributions at age 70½ if you are not actively employed. But Roth IRAs don t have this requirement for their original owners. If you think you won t need the Roth money in your Matched Savings Plan account, consider rolling it over to a Roth IRA to help keep your money working. * In 2019, your ability to contribute to a Roth IRA begins to phase out when your modified adjusted gross income reaches $122,000 if you are a single filer and $193,000 if you are married filing jointly NETBENEFITS.COM/CCAG

7 Who might benefit from Roth dollars? While Roth dollars are designed for anyone who likes the idea of potentially tax-free retirement income, in general, the younger you are when you start making Roth contributions, the more you may benefit. Here are four additional scenarios: 1 Think your annual pay or income tax rate will be higher in the future? If you expect your pay to rise over time or if you simply think your tax rate will be higher in the future consider making Roth contributions or a Roth In-plan Conversion and pay taxes upfront at your current rates. 3 Not eligible to contribute to a Roth IRA? While income limits may prevent you from contributing to a Roth IRA, the Matched Savings Plan doesn t carry these limits. So if you re not eligible to contribute to a Roth IRA but would like potentially tax-free income in retirement, consider Roth contributions. 2 4 Want tax flexibility in retirement? Once you retire, your expenses may vary more year-to-year than they do today. Roth dollars can help you cover your expenses without increasing your taxable income for the year. Interested in leaving tax-free money to your heirs? If you re planning to leave your retirement savings to your beneficiaries, Roth dollars are potentially free of federal income taxes. The pros and cons are subtle and complex, however, so consult an attorney or estate planning expert before attempting to use your Cleveland Clinic Akron General Retirement Program as part of your estate plan. NETBENEFITS.COM/CCAG

8 New! Roth In-Plan Conversions How does a Roth In-plan Conversion work? A Roth In-plan Conversion allows you to convert after-tax contributions to Roth. It also allows you to elect to convert any of your pretax dollars to Roth. This may include your pretax salary reduction money, your matching contributions (if vested), and any rollovers or transfer money you may already have in the Matched Savings Plan. This gives you the chance to build tax-free retirement income, and it can help you manage your tax liability. You can convert after-tax contributions, pretax contributions, and pretax balances that have been rolled over to your Matched Savings Plan account from a previous employer s plan. Once contributions are converted, you withdraw those converted dollars when you are eligible to do so under the terms of the Matched Savings Plan. In general, that will be after you have met both the Roth five-year aging requirement and one of the following conditions: reaching age 59½; severance from employment; death; or disability. If your withdrawal doesn t meet these requirements, it will be taxed. (Note, however, that after-tax and rollover money converted to Roth can be withdrawn at any time.) There s no limit to how much you can convert. However, if you are converting money that has not been taxed before, you must pay income taxes on your earnings and on any pretax contributions you convert to Roth. Thus, you could have a hefty tax bill at the end of the year, so talk to your financial or tax advisor first and make sure you have other funds available to pay your taxes. How are taxes handled for a Roth conversion? If you convert after-tax money, you will owe taxes on any investment earnings generated before your conversion date. Income taxes are not withheld at the time of conversion. If you convert pretax money, you will owe taxes on your contributions and any earnings generated before the conversion. Income taxes are not withheld at the time of conversion. At tax time you will receive a Form 1099-R showing the value of any Roth conversions you made during the previous year. You must report these amounts when you file your taxes, and pay any required tax on the investment earnings. For more information, talk to your financial or tax advisor or call Fidelity at for one-on-one help. What should I consider before I request a Roth In-plan Conversion? There are several things to consider before you decide to convert: Conversions are irreversible. Each time you make a conversion, you pay taxes based on the total of your earnings and on any pretax contributions you convert. Be sure you have enough money outside your Retirement Program accounts to pay the taxes on your conversion. If you decide to convert, consider periodically converting new contributions, since they will have less time to generate earnings NETBENEFITS.COM/CCAG

9 How do I make a Roth In-plan Conversion? To convert money in your Matched Savings Plan account to Roth, call to speak with a Retirement Planner when this feature is available (scheduled for early 2019). Can a Roth In-plan Conversion really make a difference? Let s look at an example. Sue, 35, contributes $10,000 after taxes every year until she reaches 65. Assuming a hypothetical annual return of 6%, by age 65 her after-tax account balance is impressive. But remember, while after-tax contributions come out of her account tax-free, the earnings on those contributions are taxable. Sue After-tax balance at 65: $790,000 Sue converts her after-tax dollars to Roth: She won t pay taxes on the earnings when she withdraws them in retirement, as long as her withdrawals meet the requirements.* With Roth conversions, her after-tax contributions and earnings come out tax-free. Sue doesn t convert her after-tax dollars: Her after-tax dollars come out of her account tax-free, but she will have to pay taxes on the earnings. Without Roth conversions, Sue s earnings are headed for a haircut. THE DIFFERENCE COULD BE SUBSTANTIAL WITH ROTH IN-PLAN CONVERSIONS $300,000 + $490,000 WITHOUT ROTH IN-PLAN CONVERSIONS $300,000 + $352,500 $137,500 TAX-FREE CONTRIBUTIONS TAX-FREE EARNINGS* TAX-FREE CONTRIBUTIONS EARNINGS AFTER TAXES TAX SAVINGS ON EARNINGS * Taxes on earnings are due at conversion This hypothetical example is calculated using a 28% federal income tax bracket and annual contributions of $10,000 made each year until age 65 with tax-deferred compounding at a hypothetical 6% annual rate of return. No loans or withdrawals are taken before 65. This example is for illustrative purposes only, is not intended to provide tax advice, and does not represent the performance of any security. Consider your anticipated investment horizon when making an investment decision, as the illustration may not reflect this. This example is not guaranteed. Investments that have the potential for a 6% rate of return also come with the risk of loss. Earnings on after-tax contributions are subject to taxes when withdrawn or converted and may be subject to a 10% penalty. NETBENEFITS.COM/CCAG

10 Steps to Consider GET THE FULL MATCH Contribute enough of your pay to the Matched Savings Plan to receive the Cleveland Clinic Akron General match. Go to netbenefits.com/ccag or call WANT TO SAVE MORE? Consider contributing up to $19,000 ($25,000 if you re 50 or older) in pretax salary reduction and/or Roth salary reduction contributions. Go to netbenefits.com/ccag or call STILL WANT TO SAVE MORE? Consider making after-tax contributions. You and Cleveland Clinic together can contribute a total of $37,000 more in after-tax contributions and the match. Go to netbenefits.com/ccag or call when this feature is available (scheduled for early 2019). WANT TO BUILD POTENTIALLY MORE TAX-FREE INCOME? Consider a Roth In-plan Conversion. Call when this feature is available (scheduled for early 2019) NETBENEFITS.COM/CCAG

11 Where to Go for Help Use the following resources to learn more and take action. Meet one-on-one with a Fidelity Retirement Planner. Call to better understand the after-tax savings opportunity and Roth In-plan Conversion feature. Alternatively, schedule a meeting at getguidance.fidelity.com/ccag, or find a local Investor Center at Fidelity.com/branchlocator. Use Fidelity s Roth 401(k) Modeler. You can compare Roth and pretax contributions at 401k.com. Just select Library, then Tools & Calculators. Attend a presentation in January Cleveland Clinic Akron General will hold on-site and online workshops beginning in January. Watch for details on upcoming workshop times and locations. NETBENEFITS.COM/CCAG

12 Investing involves risk, including risk of loss. Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI, FMR LLC. All rights reserved