The Alachua County Library District offers tax deferred savings plans, called 457 plans which an employee may save salary generated income through payroll deduction. ICMA and Nationwide Retirement Solutions are the two companies that offer these benefits for employees. The Library District also offers a Roth IRA through payroll deduction through ICMA.
Deferred Compensation Plans (457)
Employees may enroll in these plans any time during the year. The 457 plans allow an employee to defer up to a dollar limit in effect for that year (see table below).
||Normal Contribution Limit
||Over 50 catch up|
The money invested, as well as the earnings are able to grow on a tax-deferred basis. The employee pays the taxes when he or she withdraws the money at the time of retirement or when separating from service. There is no penalty for withdrawal at any age.
A strictly defined Internal Revenue Code provision in the deferred compensation plan allows withdrawals in the event of an unforeseen emergency. Deferred compensation is for retirement purposes. Its tax-deferred privileges are granted because funds are not readily available to the participant. An unforeseeable emergency is defined as a severe financial hardship created by; a sudden and unexpected illness or accident to the participant or his or her dependent, loss of property due to casualty, or other similar, equally severe and unforeseeable circumstances beyond the participant's control.
Payroll Deduction Roth IRA
A Roth IRA allows an employee to invest up to $ 5,500 on an after-tax basis, with an additional $1,000 allowed if over age 50. *Investments grow tax free, provided contributions are not withdrawn until they have been in the account for 5 years and the employee is 59 1/2 yrs or older. Since contributions are made with after-tax dollars they are accessible at any time.
The Payroll Roth IRA offers the following benefits:
- Dollar cost averaging through regular contributions
- Interest and earnings on contributions are always tax-deferred
- Earnings are tax-free at the time of withdrawal*
- Contributions are allowed after age 70