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1 Investing in Your Future with the New York State Deferred Compensation Plan Answers to commonly asked questions

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3 Table of Contents All about your Deferred Compensation Plan...4 Contributions, investment options, special circumstances...7 Receiving your benefits and Plan loan provisions...11 Enrolling in the Plan...14 Plan services...15 As an employee of New York State or a New York public jurisdiction or local employer, you may be eligible to participate in the New York State Deferred Compensation Plan ( Deferred Compensation Plan or DCP ). The Deferred Compensation Plan permits you to save for retirement without having your savings subject to current federal and New York State income tax. Advantages of the Plan include: Contributions are automatically deducted from your salary each pay period. A wide variety of Plan investment options are available for you to choose from. You don t pay any current federal or New York State income tax on the amounts contributed or the investment earnings credited to your Plan Account. Taxes apply when your Plan Account is paid to you, usually at retirement, and you choose the method and commencement date for your payments. New York State residents who are at least 59 1/2 are entitled to a New York State income tax exemption of up to $20,000 on payments received from the Plan. This booklet is designed to answer questions you might have concerning the New York State Deferred Compensation Plan and provide you with the necessary forms to enroll in the Plan. Please read all information carefully before you decide to participate. If you have any questions, call: The toll-free HELPLINE at

4 All about your Deferred Compensation Plan n All about your Deferred Compensation Plan What is the Deferred Compensation Plan? The New York State Deferred Compensation Plan is a voluntary deferred compensation program, created by federal and state law, that permits government employees to defer up to 100% of compensation after any required salary deductions (such as retirement system contributions, social security and Medicare taxes, health plan premiums, union dues, etc.), but not more than $13,000 in This contribution limit will increase by $1,000 in each of the following two years up to $15,000 in After that, the contribution limit is indexed for inflation. The amount invested is not subject to current federal or State income taxes and any earnings accumulate tax-deferred until the amounts are distributed, generally during retirement. What does deferred compensation mean to me? It means that you can contribute a portion of your salary through payroll deduction before federal or New York State income tax is calculated. That gives you less taxable income and, therefore, lower current income tax and more dollars for you. At the same time, you are building retirement savings for your future. Here is a comparison of how Before-Tax Contributions works: After-Tax Savings Deferred Compensation Before-Tax Deferrals Gross Bi-weekly Salary $ 1,500 $ 1,500 DCP Contribution $ 0 $ 45 Taxable Income $ 1,500 $ 1,455 Social Security $ 115 $ 115 Federal Income Tax $ 198 $ 187 N. Y. State Income Tax $ 66 $ 63 Regular Savings $ 31 $ 0 Take-Home Pay $ 1,090 $ 1,090 This illustration assumes 2004 FICA, federal, and New York State income tax withholding for a single person who claims one withholding allowance. Suppose you earn $1,500 per pay period. And, let us assume you would like to contribute 3% per pay period ($45) to the DCP. Instead of withholding taxes based on $1,500, your employer would calculate your income tax withholding based on $1,455 because your $45 contribution to the Deferred Compensation Plan is not subject to current federal or New York State income tax withholding. Thus, at the end of the year, your IRS Form W-2 will reflect $37,830 of taxable wages, rather than $39, Investing in Your Future with the New York State Deferred Compensation Plan

5 Invest Additional Amounts Using Deferred Compensation Gross Take- Bi-weekly DCP Taxable Tax Home Salary Contributions Income Withholding Pay $1,500 $45 $1,455 $250 $1,090 Example assumes person filing as single with one withholding allowance. Another way of looking at this is that you can take home the same $1,081 you would have by investing with after-tax dollars, and save $15 more per pay period ($45 instead of $30) by investing with pre-tax dollars through contributions to the Deferred Compensation Plan. For most people, deferred compensation can be a good way to use your income-earning years as a direct means to supplement your pension and Social Security benefits when you retire and to help build a bright financial future. Later in the booklet we ll discuss how to know if participating in the Plan might be right for you. Let s look at how much could be accumulated in your DCP account if you participated in an investment option under the DCP providing a 7% annual return. Your actual results may vary. Cash Value Accumulation Chart Bi-Weekly Contribution $75$100 $423 Annual Contribution $1,950 $2,600 $11,000 Total Value with Total Value with Total Value with Year Deferrals Earnings Deferrals Earnings Deferrals Earnings All about your Deferred Compensation Plan 5 $ 9,750 $ 11,617 $ 13,000 $ 15,489 $ 55,000 $ 65, ,500 27,911 26,000 37, , , ,250 50,763 39,000 67, , , , ,770 65, , , ,622 The example above assumes bi-weekly contributions made over 26 pay periods within a calendar year. The annual contribution is the total of bi-weekly contributions made over 26 pay periods within a calendar year. It is a hypothetical compounding example and not intended to predict or project the investment results of any specific investment. Investment return is not guaranteed and will vary depending upon your investments and market experience. Returns will vary, particularly for long-term investors. If fees and taxes were reflected, the totals shown would be lower. Investing in Your Future with the New York State Deferred Compensation Plan 5

6 All about your Deferred Compensation Plan Does this mean that taxes never have to be paid on my Plan contributions? No. Upon withdrawal, all deferred amounts (including earnings) will be subject to federal income taxes. The payment of state income taxes will depend on your state of residence when you are receiving benefits from your Plan Account. New York State residents who are at least 59 1/2 may be entitled to a state income tax exemption of up to $20,000 on benefits payments received from the Plan. Am I still eligible for a traditional Individual Retirement Account deduction? Participation in the Deferred Compensation Plan does not affect your eligibility for a traditional IRA deduction. However, if either you or your spouse is an active participant in a tax-qualified retirement plan, including the New York State Employees Retirement System, you are eligible for a full IRA deduction only if your adjusted gross income is less than an amount described in federal law. Does contributing to the Deferred Compensation Plan affect my eligibility for a Roth IRA? No, participation in the Deferred Compensation Plan does not affect your eligibility for a Roth IRA because contributions to a Roth IRA are not deductible for federal income tax purposes. Do deferrals affect my Social Security taxes or pension contributions? No, your Social Security taxes and pension contributions, if any, will be calculated on the basis of your gross wages, before any contributions you may make to the Plan. How do I know if participation in the Deferred Compensation Plan is right for me? For most people who have sufficient cash on hand to cover emergencies and would like to build savings for retirement, it usually will be advantageous to participate in the Deferred Compensation Plan. Deferred compensation may be especially beneficial to employees who are single, part of a two-income family, or approaching retirement. 6 Investing in Your Future with the New York State Deferred Compensation Plan

7 n Contributions, investment options, special circumstances How much may I contribute from my paycheck? You may contribute from 1% of your compensation (but not less than $10 per pay period) up to 100% of your includible compensation after any required salary deductions (such as retirement system contributions, social security and Medicare taxes, health plan premiums, union dues, etc.), but not more than $13,000 in This contribution limit will increase by $1,000 in each of the following two years up to $15,000 in After that, the contribution limit is indexed for inflation. May I change the amount I contribute to the Plan? Yes. You may increase, decrease or suspend your contributions by calling the HELPLINE at or through the My Account section of the Plan s Web site and selecting Deferral Change, or by completing a Deferral Change form. All changes will be implemented as quickly as administratively possible. However, because of payroll timeframes, your deferral change may not occur for up to two payrolls. What if I start contributing to the Plan in the middle of the year at a rate designed to produce maximum contribution by year-end, but which if made for a full year would result in excess contributions? Your deferral rate will not be changed until you inform the Plan. If you want your deferrals taken more evenly throughout the year, you should adjust your deferral percentage. This can be done by calling the HELPLINE ( ) or by accessing the Plan Web site at Otherwise, your deferral rate will remain the same and payroll reductions will be automatically stopped when you reach your maximum contribution level. However, it is your responsibility to monitor the total contribution. What if I have not contributed to the Plan for a while and have decided not to contribute in the future? As long as you are employed by the State or a participating employer, you may keep your contributions in the Plan and continue to build savings for retirement. However, you may withdraw up to $5,000 of your contributions if you have a Plan Account balance of less than $5,000, exclusive of any assets you may have in a rollover account, AND you have not contributed to the Plan in the last two years AND have not used this Plan provision before. Are there any times when I can contribute more under the Plan? Yes, there are three time periods when you can contribute more to the Plan than the regular contribution limits would allow. If you are age 50 or over or will become age 50 during 2004, you may contribute an additional $3,000 through the Age 50 and Over Catch-Up provision. The ability to make additional contributions through the Age 50 and Over Catch-Up is available to you every year you are at least 50 years old, except the years in which you are making Retirement Catch-Up contributions. However, if the maximum deferral permitted under the Age 50 and Over Catch-Up provision is greater than your Retirement Catch-Up amount, you may make deferrals up to the Age 50 and Over Catch-Up maximum deferral. The second time period you may make contributions in excess of the regular contributions is during your Retirement Catch-Up period. Retirement Catch-Up contributions may be made during the three consecutive calendar years prior to your Retirement Catch- Up Age. Your Retirement Catch-Up Age is an age that you choose that is no earlier than the year during which you may retire under your employer s retirement plan without a reduction in benefits. Retirement Catch-Up Age may be no later than the year in which you turn 70 1/2. If you are a police officer or a firefighter, Retirement Catch-Up Age may be no earlier than age 40. Contributions, investment options, special circumstances The amount you may contribute through the Retirement Catch-Up provision is the difference between the amounts you were eligible to contribute while an employee of the State or a participating employer and your actual contributions to the Plan. In 2004, you may contribute up to an additional $13,000 dependent upon your Retirement Catch-Up amount. Assistance may be required to Investing in Your Future with the New York State Deferred Compensation Plan 7

8 Contributions, investment options, special circumstances determine the exact amount you are permitted to contribute under this special Retirement Catch-Up rule. There is also a special provision for individuals who are called away from their regular job to perform duty in the United States military. If you return to your employer after a period of qualified military service, you will have a limited right to make up contributions to the Plan that you could have made if you had been working for your regular employer. Please call the HELPLINE at When do I pay income taxes? When you receive your benefit payments from the Plan, your benefit payments will be subject to federal income taxes as income. The payment of state income taxes will depend on your state of residence when you are receiving benefits from your Plan Account. New York State residents who are at least age 59 1/2 are eligible to a state income tax deduction of up to $20,000 on benefit payments received from the Plan. Are NYSDCP benefit payments taxable to New York State residents? The first $20,000 of pension and annuity benefits paid to New York State residents is exempt from State income tax. This exemption includes benefit payments from the Plan after January 1, 2002 and is applied to the total amount of pension and annuity benefits received by the individual. This exemption does not apply to lump sum benefit payments, only to those taken as periodic payments and does not affect the mandatory income tax withholding required of the Plan. This exemption is in addition to the exemption that applies to retirement benefits received from a New York State or local public retirement system. What is the federal income tax credit and who is eligible to receive it? Low and moderate income savers who defer part of their salary to the Plan may be eligible for an income tax credit against their federal income tax. This credit is claimed on the Participant s federal income tax return and applies to the first $2,000 that is deferred. The amount of this income tax credit is based on the following table: Credit Maximum Salary Scale for Salary Scale for Rate Credit Single Tax Filers Joint Filers 50% $1,000 $0 - $15,000 $0 - $30,000 20% $ 400 $15,001 - $16,250 $30,001 - $32,500 10% $ 200 $16,251 - $25,000 $32,501 - $50,000 What happens to the money that is withheld from my paycheck? When you become a participant in the Deferred Compensation Plan, you will select how you want your contributions to be invested. More complete information can be found in the inserts which are included with this Enrollment Kit. You should carefully read any prospectus and other relevant investment information before you select your Plan investment options. The Stable Income Fund: The Stable Income Fund offers participants the opportunity to place their contributions in a Plan investment which provides stable interest. All of the guaranteed interest contracts, managed bond portfolios, and the short-term cash portfolio held in the Stable Income Fund are awarded to highly rated companies pursuant to a competitive bidding process in accordance with the investment guidelines and the rules and regulations of the New York State Deferred Compensation Board. All amounts contributed to the Stable Income Fund are credited with a blended rate of interest, which is the combined weighted return of all guaranteed interest contracts, managed bond portfolios, and the short-term cash portfolio held by the Stable Income Fund. 8 Investing in Your Future with the New York State Deferred Compensation Plan

9 Restrictions on Exchanges From the Stable Income Fund to the Vanguard GNMA Fund or the Vanguard Prime Money Market Fund - Institutional Shares Direct exchanges are not permitted from the Stable Income Fund to the Vanguard GNMA Fund or the Vanguard Prime Money Market Fund - Institutional Shares. Exchanges out of the Stable Income Fund are permitted only to non-competing mutual funds. Upon an exchange from the Stable Income Fund to a non-competing mutual fund, the Plan prohibits exchanges to the Vanguard GNMA Fund or the Vanguard Prime Money Market Fund - Institutional Shares for 90 days. Mutual Funds: The Plan provides participants with a wide variety of mutual funds to choose from. Participants may allocate their contributions among any number of these mutual funds, each professionally managed by a well-known fund management group, selected by the Board under a competitive bid with the advice of an expert investment consultant. A Guide to the Plan s Investment Options, Fees and Exchange Provisions provide information describing the investment objective and the expenses of each fund. HOW TO OBTAIN A PROSPECTUS A mutual fund prospectus may be obtained by calling the HELPLINE at or through the Plan s Web site ( Before investing, carefully consider the fund s investment objectives, risks, and charges and expenses. The underlying fund prospectus contains this and other important information. Read the prospectus carefully before investing. Additional Investment Options: In addition to offering a diversified menu of core investment options, the Plan now permits participants to invest a portion of their account in funds outside the Plan s core investment options through a Mutual Fund Window. This is not a core service and participants who utilize this service are subject to additional participation fees. Exchange Provisions and Restrictions General Provisions Relating to Exchanges of Plan Assets Within the Plan s Investment Options Exchanges of assets may be made by calling the Plan s HELPLINE ( ) or through the Plan s Web site ( All requests for exchanges between any of the Plan s investment options, including the Stable Income Fund, that are received prior to the close of the NYSE (normally 4 PM, E.T.) will be processed at that day s closing price. Exchanges received after the close of the NYSE or on a day that the NYSE is closed will be processed at the closing prices of the next business day. Restrictions on Exchanges From International Equity and Emerging Market Growth Funds Exchanges out of international stock funds are limited to one exchange per month. If an exchange out of any one of the international stock funds is made during a calendar month, no additional exchanges out of any of the international stock funds may be made until the next calendar month. The international stock funds are the American Century International Growth Fund, the Fidelity Diversified International Fund, the Putnam International Growth Fund (This fund is closed to new investments effective January 5, Exchanges may be made out of this fund at anytime subject to the exchange limitations applicable to international stock funds.), and the T. Rowe Price International Fund. A separate restriction of one outgoing exchange per month applies to the MSIF Emerging Markets Portfolio. Individual Fund Restrictions In addition to the exchange restrictions previously described, each mutual fund may impose exchange limitations. These restrictions are generally included in the prospectus of each mutual fund. Exchanges in excess of the exchange limitations imposed by a mutual fund may result in restrictions being placed on the account of the participant or the rejection of an exchange request. The prospectus of the mutual fund may be obtained from the Plan s Web site or the HELPLINE ( ). Contributions, investment options, special circumstances Interim Excessive Trading Policy In addition to the previously described exchange restrictions, the Plan has developed an Interim Excessive Trading Policy to prevent potential detrimental impacts of excessive trading that include the rejection of an exchange request, a potential negative impact on investment performance, or the closure of a mutual fund to all participants by an investment manager. The entire text of the Policy may be viewed on and printed from the Plan s Web site ( or requesting a copy from the HELPLINE ( ). Investing in Your Future with the New York State Deferred Compensation Plan 9

10 Contributions, investment options, special circumstances The Interim Excessive Trading Policy provides that upon notification by an investment manager that it suspects excessive trading, the Plan will identify Plan participants who are exceeding the exchange guidelines and issue an initial warning letter. The Policy was established by the Plan to assure that long-term Plan investors are not adversely affected by potential excessive exchanges in that mutual fund. If, after receiving the warning letter, the exchange activity of the Plan participant does not adhere to the mutual fund s prospectus guidelines, the participant may be subject to restrictions that may include a prohibition of making subsequent investments in the affected fund(s) or the loss of electronic transaction privileges. Excessive trading limits do not apply to systematic investments such as payroll deferrals. The Plan reserves the right to adjust or add to the above restrictions at any time. Plan Allocation Changes Changes in the investment allocation of future contributions may be made by calling the Plan s HELPLINE ( ) or through the Plan s Web site ( All allocation changes will become effective on the first available pay period following the receipt of the request. May I split my contributions among the different investment options? Yes. You may allocate your contributions in whole percentages among the various Plan investment options. How do I exchange or reallocate amounts from one investment option to another? You may exchange existing balances from one Plan investment option to another, depending on restrictions imposed by the Plan. All exchange requests received prior to the close of the NYSE (normally 4 PM Eastern Time) will be processed at that day s closing price. Exchanges may be initiated by calling the HELPLINE at and accessing the VRU or by speaking to a HELPLINE Representative, or through the My Account section of the Web site at What if I take a job with another employer? If you leave state employment or your position with a participating employer, there are a number of options available to you. First, you are eligible to receive a payment of your Plan Account through any of the payment options that are explained in the Benefit Distribution Request Form. You may also maintain your account with the Plan which will allow you to enjoy all the benefits of Plan participation (numerous investment options, tax deferred growth of assets) while keeping fees at a minimum. Continuing your participation in the Plan provides you with access to your assets at any time you need additional cash. If your new employer sponsors a Section 457(b) eligible deferred compensation plan, you may also transfer all or a portion of your Plan Account balance directly to that plan, as long as the plan will accept the transfer. In the case of a transfer, the amount transferred will not be treated as current taxable income. If your new employer sponsors a 401(k) or 403(b) plan, you may roll over all or a portion of your Plan Account balance to the plan sponsored by your new employer as long as the plan will accept the transfer. Please note, the tax consequences, distribution options, investment options, and participation costs in a 403(b) or 401(k) Plan may differ from the New York State Deferred Compensation Plan. You are encouraged to examine the requirements and limitations of any plan to which you may contemplate rolling over your Plan Account balance. Finally, you may transfer your Plan Account balance to an Individual Retirement Account. Again, you are encouraged to examine the tax consequences, distribution options, investment options, and participation costs associated with this option prior to transferring your Plan Account balance. What happens to my Plan Account if I am married and at some point get divorced? If under a court s decision or an agreement, your former spouse has an interest in some or all of your Plan Account, a Qualified Domestic Relations Order (QDRO) will need to be filed with the Plan. The QDRO will allow a segregated account to be set up for your former spouse. He or she may elect a lump sum distribution of these funds as soon as practicable after the account is established, or defer distribution until the participant separates from service or becomes age 50, whichever is earlier. 10 Investing in Your Future with the New York State Deferred Compensation Plan

11 n Receiving your benefits and Plan loan provisions When may benefit payments be made from the Plan? You are eligible to receive the investments in your Plan account under the following six circumstances. 1. Separation from service, including regular retirement. 2. Attainment of age 70 1/2, even if you continue to work. 3. Severe financial hardship. 4. Small Inactive Account provision. If your Plan Account balance is no more than $5,000, excluding any assets that you may have in a rollover account, AND you have not contributed to the Plan in the last two years AND you have not received a distribution under this provision before, then a Small Inactive Account withdrawal is allowed but limited to $5,000 and may be used only once. 5. Death. 6. A Plan loan. How may I receive my benefits? To initiate a benefit payout for any of the reasons above, call the HELPLINE at , so that a Representative can assist you. What are my benefit distribution options? Withdrawals for a severe financial hardship, from a Small Inactive Account, or as a Plan loan are paid in a single lump sum payment. You may receive benefits under the other eligible circumstances in numerous ways. You may take a one-time full withdrawal of your Plan Account, establish a regular periodic payment of benefits to be paid monthly, quarterly, semi-annually or annually, take a partial withdrawal of your Plan Account followed by monthly, quarterly, semi-annual or annual payments, or defer receiving your benefits to a later date. As long as there is a balance in your Account, you may change your benefit payment option. You also have the ability to take up to 12 partial lump sum payments each year of at least $500 each payment throughout your payment period when you need additional funds. If you elect periodic payments, the amount remaining in your Plan Account will remain invested in the option or options you select. You continue to have the same rights to exchange assets (transfer) among Plan investment options. The amount of each installment payment will take into account the investment performance of the option or options in which your Plan Account was invested and, therefore, may change with each payment. You may elect to receive your installment payments in the form of a check or an automatic electronic transfer to your bank account. Receiving your benefits and Plan loan provisions When must I choose my distribution option? When you permanently leave work with New York State or a participating employer, you have the ability to choose when and how to receive your benefit payment. You may decide either to begin to receive benefit payments immediately or at some later date. You are not required to make a decision when you leave employment, however, and may defer receiving benefit payments until you are age 70 1/2. If you choose to defer payments, you will continue to accumulate tax-deferred earnings until benefits are paid to you. The earliest possible date that benefit payments may begin is 45 days after you leave employment. Investing in Your Future with the New York State Deferred Compensation Plan 11

12 Receiving your benefits and Plan loan provisions Is there a time when I must withdraw money from my Deferred Compensation Plan? If you have separated from service with New York State or a participating employer, you must begin receiving payments no later than April 1 following the close of the calendar year in which you attain age 70 1/2. Of course, you may begin receiving payments sooner, if you wish, as long as you have permanently terminated employment. What happens if I am still employed at age 70 1/2? If you remain employed with New York State or a participating employer when you are age 70 1/2, you may elect to receive your Plan benefits while you are employed or continue to defer benefit payments until you retire. If you decide to receive your Plan benefits, you may elect any of the distribution options previously discussed. What happens if I die after I begin receiving benefit payments? If your account has not been fully paid to you prior to your death, the amount remaining will be paid to your named beneficiary. If you did not name a beneficiary, the amount remaining will be paid to your spouse, if you have a spouse, or to your estate. The date when a beneficiary must begin to receive benefit payments and the maximum period over which benefit payments may be made depends on: the age of the Plan Participant when he or she died. whether the Plan Participant was receiving benefits from the Plan. whether you are the Participant s spouse, another individual, or the representative of a non-individual (charity, trust, institution). In all instances, the earliest you may begin to receive benefit payments is 45 days after the date of death. Please read the instructions in the Death Benefit Distribution Claim application carefully so that you are aware of the maximum benefits that you are entitled to receive and the manner in which you may receive them. Beneficiaries should contact the HELPLINE at for help in determining the benefit options available to them. Do deferred compensation benefits reduce Social Security benefits? No. Your Social Security benefits will not be reduced because of your participation in or your benefits from the Deferred Compensation Plan. What is separation from service? Separation from service occurs because of your voluntary or involuntary termination from employment, retirement, or death. A leave of absence or suspension from employment is not a separation from service. What is a severe financial hardship? Federal regulations define a severe financial hardship as a financial emergency resulting from either illness, accident, or property loss to you or your dependents resulting from circumstances beyond your control. Payments can only be made to the extent that your hardship expenses are not covered by insurance or money available from other sources. The process prescribed by law to qualify for an Emergency Withdrawal request is as follows: Step One: You must complete the Emergency Withdrawal form which is available on the Plan s Web site or may be requested through the HELPLINE at It is recommended that you speak to a HELPLINE Representative who can assist you to determine whether your situation is likely to qualify for an Emergency Withdrawal. Step Two: You must prove that you have used other available savings and liquid assets and any insurance to satisfy the emergency. Step Three: You must submit proof that you have incurred this financial loss. Step Four: The Plan s Administrative Service Agency will determine whether each hardship request complies with the emergency withdrawal guidelines. 12 Investing in Your Future with the New York State Deferred Compensation Plan

13 Step Five: Your request may be approved for the amount necessary to satisfy the financial emergency. Since upon distribution you must pay the applicable income taxes, the amount withdrawn to cover the emergency will be a sum that, when reduced by an estimate of such taxes, will leave you with the dollars needed to pay for the emergency. Usually, a decision on the approval/denial of your Emergency Withdrawal request will be made within one week of your submission of all the required paperwork, although the Plan allows for up to 60 days. If approved, the amount requested is normally sent to you within two business days, but the Plan allows for up to 30 days for a distribution. Step Six: Denials by the Administrative Service Agency may be appealed to the Review Committee. If your request for an emergency withdrawal is denied, your letter of denial will contain information about how to request an appeal and the time limits for doing so. Can I withdraw my Plan Account if I stop contributing? You may be able to take advantage of a one-time provision to withdraw your Plan Account balance if you meet the following requirements: You are still working for your employer. You have a Plan Account balance of less than $5,000 excluding any assets you may have in a rollover account; AND You have not contributed at any time in the last two years; AND You have not used this provision before. Can I take a loan against my Plan Account Balance? Yes. The Plan permits loans to participants who are currently employed by the State or a participating employer or who are on an approved leave of absence. The loan cannot exceed the lesser of 50% of your Plan Account balance or $50,000. Loans for general purposes must be repaid, with interest, within five years. The repayment schedule may be extended up to 15 years if the loan is for the purchase of a primary residence. The interest rate is the prime rate, as published in the Wall Street Journal, plus 1%. Loan repayments are automatically deducted from your checking or savings account and deposited in your Plan Account according to your most recent investment allocation. You should carefully examine your financial options and/or consult with a financial planner or tax advisor before taking a loan against your Plan Account. Please contact the HELPLINE for additional information about other specific information about the loan program, including the loan origination fee, and insufficient fund and default fees. Loans that are not repaid in accordance with the repayment schedule will be deemed to be a Plan distribution and will be subject to federal and state income taxes. Can I roll assets from another retirement plan to the Deferred Compensation Plan? Yes, you can. Assets that you have in another qualified retirement plan, such as a 401(k) or 403(b) plan, an Individual Retirement Account, or another deferred compensation plan may be rolled over to the New York State Deferred Compensation Plan. The direct rollover of assets from another qualified retirement plan to the Plan is not an action that will result in the imposition of federal or state income taxes at the time of the transfer. Assets will be subject to federal and state income taxes upon distribution. Assets rolled to the Plan from another qualified retirement plan will be invested in the Plan s investment options that you designate. Receiving your benefits and Plan loan provisions Are assets that are rolled into the Plan available to me prior to separation from service with my public employer? Yes. Assets rolled into the Plan from another qualified retirement plan, other than assets rolled in from another deferred compensation plan, are separately accounted and, therefore, may be paid to you prior to your separation from public employment. Distribution of assets rolled into the Plan continue to be subject to the distribution rules of the former plan, which could include a 10% early penalty if they are received before age 59 1/2. Investing in Your Future with the New York State Deferred Compensation Plan 13

14 Enrolling in the Plan n Enrolling in the Plan How do I enroll in the Plan? Enrolling in the Deferred Compensation Plan is one of the most important decisions you can make while working for New York State or a participating employer. You may receive all the necessary enrollment information by calling the HELPLINE at or printing an Enrollment Kit from the Plan Forms section of the Web site at Once you ve completed the forms, just mail them to: New York State Deferred Compensation Plan Administrative Service Agency, PW PO Box Columbus, OH When will my payroll deductions start? Your enrollment application will be processed by the Administrative Service Agency upon receipt. Payroll deductions will be implemented as quickly as administratively possible. Because of payroll timeframes, your deferral change may not occur for up to two payroll periods. What are the costs associated with the Plan? There is a $14 annual fee to cover general Plan administrative and record keeping expenses, which all participants pay. Seven dollars is deducted from each participant s account in March and September of each year. You pay no sales charges on the investment options. However, each of the funds offered by the Plan charges a fund operating expense that is deducted directly from the fund s daily price. These fees vary based on the fund selected. For a more complete description, please refer to the particular fund prospectus or the Guide to Plan Investment Options. How do I keep track of my Plan Account? There are three primary ways to track your account information. First, you will receive quarterly account statements, mailed to your address of record, describing how your Plan Account is performing. Second, you may call the Plan's HELPLINE to obtain Plan Account information through the automated Voice Response Unit (VRU). Frequently requested Plan Account information is available directly from the VRU 24 hours per day. All you need is your Social Security number and Personal Identification Number (PIN) to access the VRU. You can also access your account information through the Web site. Your Social Security number and birth date are all you need to set-up on-line account access. How are the Plan's administrative expenses funded? The Plan's administrative expenses are funded by three primary sources of revenue: (1) reimbursements that most of the Plan's mutual funds pay to the Plan based on the amount of participant assets that they manage; (2) the semi-annual participant fee and, (3) interest income earned on revenue received by the Plan. Mutual fund reimbursements are negotiated with individual mutual funds and currently range from.10% to.35% of assets annually. The current participant fee is $14 per year or $7 semi-annually. The mutual fund reimbursement and semi-annual participant fees are deposited in an interest bearing account. All revenues are used to pay the Plan's administrative expenses. 14 Investing in Your Future with the New York State Deferred Compensation Plan

15 Which mutual funds pay reimbursements to the Plan? The following mutual funds currently pay reimbursements to the Plan in the following amounts: Mutual Fund Alger MidCap Growth Institutional Fund.25% American Century International Growth Fund.25% Columbia Acorn USA Fund.25% Davis New York Venture Fund A.25% Dreyfus Appreciation Fund.25% Fidelity Freedom Fund % Fidelity Freedom Fund % Fidelity Freedom Fund % Fidelity Freedom Fund % Fidelity Magellan Fund.25% Fidelity OTC Portfolio.25% Fidelity Diversified International Fund.25% ICAP Equity Portfolio.25% Janus Fund.25% Morgan Stanley IF Value Portfolio.25% MSIF Emerging Markets Portfolio.25% MTB Small Cap Growth Fund.15% PAX World Balance Fund.25% The George Putnam Fund of Boston.35% Putnam International Equity Fund.35% Strong Advisor Small Cap Value Fund.35% T. Rowe Price Equity Income Fund.10% T. Rowe Price International Stock Fund.10% Reimbursement (as a percentage of assets managed)* Enrolling in the Plan *Reimbursement percentages are subject to change. These percentages are accurate as of April 1, Mutual funds offered by Harbor Capitol and the Vanguard Group do not pay mutual fund reimbursements to the Plan. Investing in Your Future with the New York State Deferred Compensation Plan 15

16 Plan services n Plan services The New York State Deferred Compensation Plan has developed a comprehensive range of services to meet your needs. Here are some of the services provided: Toll-Free HELPLINE: Personalized assistance is available when enrolling in the Plan as well as on an ongoing basis for answers to questions about your Plan Account, making changes to your Plan Account, and understanding your distribution options upon separation from service. Automated Voice Response Unit (VRU): The VRU is available 24 hours a day, 365 days a year, and allows you to obtain basic account information, make changes to your Plan Account, and much more. Quarterly Plan Account Statement: Each quarter you will receive a statement detailing your Plan Account balance and all transactions that took place during the quarter. Quarterly Plan Newsletter: Along with your quarterly Plan Account statement, you will receive a newsletter that will inform you of recent Plan changes or enhancements, provide you with articles on retirement planning, and much more. Internet Access to Your Plan Account: A special Web site, has been designed to provide you with information about the Plan and your Plan Account. You can access basic account information, information about the different investment options, and more. Statewide Account Executives: The Plan has Account Executives who serve participants throughout the state. They are available to provide seminars and answer any questions you may have about the Plan. Statewide Seminars: The Plan s Account Executives offer seminars explaining the Plan throughout the state on an ongoing basis. If you have any questions about the Deferred Compensation Plan, please call the toll-free HELPLINE at While this kit is an overview of the Plan, the official Plan Document controls in the case of conflict or ambiguity. A copy of the official Plan document may be obtained from the Administrative Service Agency of the New York State Deferred Compensation Plan. This kit contains information about your Deferred Compensation Plan and should be retained along with your quarterly Plan Account statements for future reference. This information explains the Plan and the federal and New York State laws as in effect when this material was prepared for printing. Neither the New York State Deferred Compensation Board nor the Plan s Administrative Service Agency gives any legal or tax advice. If you need tax advice, consult your lawyer or Certified Public Accountant. If you need legal advice, consult your lawyer. 16 Investing in Your Future with the New York State Deferred Compensation Plan

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20 Plan Mission Statement The New York State Deferred Compensation Plan is a voluntary retirement savings plan that provides quality investment options, investment educational programs and related services to help State and local public employees achieve their retirement savings goals. Administrative Service Agency Mailing Address: New York State Deferred Compensation Plan Administrative Service Agency, PW PO Box Columbus, OH Phone: Toll Free (800) Available 24 hours a day. Personalized assistance is available 8 a.m. to 11 p.m. Monday through Friday and 9 a.m. to 6 p.m. on Saturdays, except holidays. TTY/TDD services are available toll free (800) hours a day. Web Site: New York State Deferred Compensation Board Empire State Plaza Concourse-North, Room 124 Albany, NY (518) The NYSDCP does not discriminate on the basis of disability in the provision of service or employment. If you need this material interpreted in a different form or if you need assistance using it, contact us at (800) Securities offered through Nationwide Investment Services Corporation, Member NASD. 2004, N.Y.S. Department of Economic Development New York Photography Only The New York State Deferred Compensation Plan is a State-sponsored employee benefit for State employees and employees of participating employers. NRS