The BENCOR National Plan

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The BENCOR National Plan

• Special Pay Plan

Pennsylvania Association of School Business
Officials
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BENCOR, Inc.

• A benefits service company specializing in the
  design, marketing and administration of
  retirement plans

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The BENCOR National Plan

• Defined contribution plans authorized under
  Section 401(a) of the Internal Revenue Code
• Implemented by many major school systems,
  colleges, municipalities and counties
• May be adapted to suit 403(b) and 457(b) plan
  types

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The BENCOR National Plan (cont.)

• Covers two distinct employee groups
• Part-time, seasonal and temporary employees who
  are covered by the FICA Alternative Plan
• Eligible employees who are entitled to payment
  of sick, annual-leave and vacation pay, as well
  as other retirement incentives, are covered by
  the Special Pay Plan

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The BENCOR National Plan (cont.)

• Participation by affected employee groups is
  mandatory
• No 10 IRS penalty on withdrawals at separation
  of service if employee separates at age 55 or
  older

10 federal tax penalty for early withdrawals
does not apply to 457 (b) plans.
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The BENCOR National Plan

• Special Pay Plan

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Special Pay Plan

• The BENCOR defined contribution retirement plan
  for special forms of compensation including
• Accumulated sick pay
• Accumulated annual-leave and/or vacation pay
• Retirement incentive and/or bonus pay

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Special Pay Plan (cont.)

• Benefits
• Employees and employer save Social
  Security/Medicare taxes on eligible payroll, up
  to 7.65, if
• That compensation is subject to FICA
• Employers would otherwise choose to pay the
  amount in cash rather than as a contribution to
  the plan
• Income taxes are deferred on eligible
  contributions until withdrawal
• With the 403(b) Special Pay Plan, contributions
  may be made for up to five years following the
  employees separation from service

Federal restrictions and tax penalties may
apply to early withdrawals.
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Special Pay Plan (cont.)

• How much can be contributed to a 401(a) or
  403(b) plan?
• Maximum contribution in 2002 is 50 of gross
  compensation, up to a maximum contribution of
  40,000 (indexed for 2002)
• Gross compensation equals plan year compensation
  plus special pay

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Special Pay Plan (cont.)

• How much can be contributed to a 401(a) or
  403(b) plan?
• Maximum plan contribution limit is calculated
  each year, and the 40,000 amount is indexed
  for inflation in 5,000 increments

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Special Pay Plan (cont.)

• How much can be contributed to a 457(b) plan?
• Maximum contribution in 2002 is 50 of gross
  compensation, up to a maximum contribution of
  11,000 (for 2002)

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Special Pay Plan (cont.)

• Effect on contributions to other plans
• Contribution maximum has to be coordinated with
  other like plan types of the employer
• Coordination is not required when plan type is
  different
• For example, in many cases employees
  participating in a 401(a) Special Pay Plan will
  still be eligible for the maximum elective
  deferral (11,000 in 2002) to the employers
  403(b) or 457(b) program

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Special Pay Plan (cont.)

• Conditions of the plan
• Employees with accumulated sick, annual-leave
  and vacation pay, as well as other forms of
  special pay are required to participate in this
  plan
• For the plan to be tax-advantaged, IRS requires
  mandatory, non-elective employer contributions

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Special Pay Plan (cont.)

• Conditions of the plan (cont.)
• Minimum 50,000 in annual aggregate plan
  contributions required

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Special Pay Plan (cont.)

• Distribution
• Employees may request immediate distributions
  when they leave employment, or they may leave
  their money invested in the plan

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Special Pay Plan (cont.)

• Summary
• Employees defer individual income taxes on plan
  contributions until withdrawal
• Employees and employers permanently save up to
  7.65 of Social Security/Medicare tax on any
  special forms of compensation that are eligible
  for contribution to the plan

Federal restrictions and tax penalties may
apply to early withdrawals.
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Special Pay Plan (cont.)

• Investment account
• VALICs PotentiaSM Fixed and Variable Annuity
  provides participants with a flexible, low-cost
  retirement plan
• Employees may manage their own investment plan
  and portfolio