US ARMY NONAPPROPRIATED (NAF) EMPLOYEE BENEFITS OFFICE

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1 US ARMY NONAPPROPRIATED (NAF) EMPLOYEE BENEFITS OFFICE Furlough 2013 NAF Questions and Answers PRIORITY OF PAYROLL DEDUCTIONS 1. Is there a priority order of payroll deductions for my NAF benefits? A. Yes. NAF Financial Services will deduct pay in the following order: MEDICARE/OASDI Retirement Federal Income Tax Health Insurance Flexible Spending Accounts Life Insurance State Tax Local Tax Garnishment Optional Life Insurance 401 (k) RETIREMENT 1. What happens to an employee s NAF Retirement during a furlough? A. The 2% payroll deduction will continue to be deducted from the employee s pay. However, the payroll deduction will only apply to the days the employee is in a pay status. Note: Effective 1 January 2001, participation in the NAF Retirement Plan became mandatory for new 1

2 hires, rehires and those who become eligible for benefits. Participants may opt out of the plan after they have participated for six months. However, employees who opt out after six months will only be able to receive a refund of their Retirement Plan contributions when they separate or convert to an ineligible status. However if vested an employee can leave their money on deposit until they reach retirement age. Regardless, employees who opt out the plan may not rejoin the plan for two years. If you rejoin the retirement plan and decide once again to end participation, you may not rejoin again. To cease participation, the employee must complete, sign and date DA Form 3473 at your local servicing Human Resource Office. 2. What happens to a NAF employee s CSRS/FERS retirement plan (elected following a move from civil service to NAF) while the employee is on furlough? A. Employees who made a portability of benefits election to retain enrollment in CSRS or FERS and TSP are subject to the applicable plan s rules regarding deductions during periods of non-pay status. Employees cannot contribute to their Thrift Savings Plan (TSP) account on furlough. 401 (k) 1. What happens to my 401 (k) Savings Plan during a furlough? A. If sufficient funds remain in your payroll account after other benefit deductions have been taken, the percentage you elected will continue to be deducted and placed in your 401(k) Savings Plan. However, the payroll deduction will only apply to the days the employee is in a pay status. Note: Employees cannot make up lost employer contributions for the period of time they are in a nonpay status. Employees may suspend their participation in the 401 (k) and stop making contributions at any time by filling out a DA Form Can I take out a loan against my 401 (k) Savings Plan? A. You can borrow money from your 401(k) Savings Plan account. This process only takes a telephone call to Fidelity Investments on the toll free number. You are permitted up to 2 personal loans and one residential loan at one time. The 401(k) Savings Plan was designed to help you save for retirement. However, we realize there may be times when you need to obtain some of your money before you retire. 3. Who Can Take Out a Loan? A. Any active, paid employee of the U.S. Army who is participating in the U.S. Army NAF 401(k) Savings Plan is eligible to borrow from the Plan. 4. What Are the Rules to Borrow Money? 2

3 A. o You must have at least $2, vested in your Plan account. o You can take out up to 3 loans (2 personal loans and 1 principle residence loan). o The smallest loan you may take out is $1, o The maximum you may borrow in a year is fifty percent of the vested value of your account or $50,000.00, whichever is less. o You decide how much time you ll need to repay your loan up to a maximum of five years. (If the loan is for the down-payment on your principal residence, you may take up to fifteen years to repay the loan. o The interest rate you will pay is the prime interest rate plus 1%. 5. Do I Need to Pay Back the Money I Borrow? A. Yes, the Internal Revenue Service (IRS) requires that you repay any money you borrow from your 401(k) Savings Plan Account. Loans will be repaid only by payroll deduction on the schedule that you arranged with Fidelity Investments, within the IRS guidelines. Former NAF employees, who convert to APF and elect to continue participation in the NAF 401(k) Savings Plan under the Portability of Benefits legislation, must make loan repayment by authorizing bi-weekly bank transfer of the required loan payments. Employees who have outstanding loans when they convert to GS employment should contact the 401(k) Savings Plan Program Manager in the Benefits Office to arrange for loan repayments to recommence by bank transfer. Loan repayment may not be made by payroll deduction if you are paid as an appropriated fund employee. If you terminate employment, you must pay the balance of any outstanding loan or contact Fidelity Investments to continue loan payments. Due to tax penalties for defaulting on a loan, it is important to repay any loans you take out. Additionally, repaying a loan makes sure that any money you borrow is returned to your account so that it is available to earn more money when invested and ensures that all of your savings are there when you need it at retirement. Should you default on a loan, the balance of the loan and the unpaid interest will be reported to the IRS as an early distribution and you will be liable for taxes plus a 10% penalty in the year of the default. 6. When Can I Request a Loan? A. Almost anytime of the day or night. The Fidelity Investments toll free number is open to help you with automated service virtually 24 hours a day, 7 days a week. If you prefer to speak with a retirement services representative, call Monday through Friday between 8:30 a.m. and 8:00 p.m. eastern time. You may also arrange for a loan on the Fidelity NetBenefits website. 7. Can I Still Contribute to the Plan While Paying Back a Loan? A. Yes, if you are an active employee, you may continue to contribute to the Plan while you are paying back your loan. There is no participation penalty for loan withdrawals. 8. What are hardship withdrawals? 3

4 A. Hardship withdrawals from your account are permitted under the IRS Safe Harbor Rules. The IRS recognizes the following hardships: o Certain medical expenses for you, your spouse, or your dependent. o Purchase (excluding mortgage payments) of your principal residence. o Payment of tuition for the next semester or quarter of post-secondary education for you, your spouse, or your dependents. o Payment to prevent eviction from your principal residence or foreclosure on the mortgage on your principal residence. o Death of a family member. o Natural Disaster Relief (such as Katrina). Hardship withdrawal should be a last resort in the event of a personal financial crisis. The IRS imposes penalties for hardship withdrawals. Because it is a withdrawal, rather than a loan, the amount of the hardship withdrawal will be taxed in the current year and a 10% penalty will be imposed for early withdrawal. Additionally, the IRS requires that you have exhausted all other means of withdrawal, including maximum use of the loan program. The IRS also requires that your participation in the savings plan be suspended for six months. After your six month suspension, you may resume contributions; however, the maximum you may contribute in the year following the year in which you make the withdrawal will be reduced by the amount you contributed in the year you made the withdrawal. For example, if you make a withdrawal in March 2013, you may not contribute to the savings plan until September 2013, and the maximum you are permitted to contribute in 2014 will be reduced by the amount you contributed in January, February, and March Once you make a hardship withdrawal and your contributions stop for 6 months, it is the employee s responsibility to return to their Human Resource Office to re-start contributions in the plan. If you need to apply for a hardship withdrawal, contact Fidelity Investments on their toll free telephone number. HEALTH INSURANCE 1. May a NAF employee who is furloughed continue to participate in the NAF Health Benefits Program? A. Yes. Benefits for medical and dental coverage may be continued provided the employee pays the required employee share of the premium. If the employee chooses to remain covered, the employee share of the health insurance premium will accumulate and be withheld from pay upon the employee s pay becoming sufficient to cover premiums. GROUP LIFE INSURANCE 4

5 1. May a NAF employee who is furloughed continue participation in their NAF employer s NAF Group Life Insurance plan? A. Yes. Furloughed employees may elect to continue paying life insurance premiums. If sufficient funds are not available to be deducted from your bi-weekly pay, you may elect to reimburse your employer the back premiums once the period of furlough is over. Optional Life insurance remains the responsibility of the employee. FLEXIBLE SPENDING ACCOUNTS (FSAS) 1. What happens to a NAF employee s FSA during a furlough? A. The employee s FSA coverage continues, and allotments made by the employee continue if the employee s salary in each pay period is sufficient to cover the deduction(s). If the employee s salary is insufficient to cover his or her allotment(s), then incurred eligible health care expenses will not be reimbursed until the allotments are successfully restarted (in which case the remaining allotments would be recalculated over the remaining pay periods to match the employee s annual election amount). Incurred eligible dependent care expenses may be reimbursed up to whatever balance is in the employee s dependent care account, as long as the expenses incurred allow the employee (or employee s spouse if married) to work, look for work or attend school full-time. Once dependent care allotments are successfully restarted, remaining allotments would be recalculated over the remaining pay periods to match the employee s annual election amount. LONG TERM CARE (LTC) INSURANCE 1. What happens to a NAF employee s LTC insurance coverage during a furlough? A. Furloughed employees may elect to continue paying long term care insurance premiums. Absence of premium payments from NAF payroll will result in automatic direct billing of premiums by CNA so that your coverage will not lapse. Participants are encouraged to notify CNA directly of any change in their employment status. Your coverage will end only if you fail to make the required premium payments. ANNUAL AND SICK LEAVE 1. Does a NAF employee continue to accrue annual and sick leave while out on furlough? A. No. NAF employees do not accrue annual or sick leave while in a non-pay status. NAF EMPLOYEE BENEFITS OFFICE 5

6 Toll Free Fax Number POINTS OF CONTACT Benefits Program Manager Retirement Program Manager k, LTC, FSA Program Manager Medical Program Manager Portability Inquiries Life Insurance Program Manager Fidelity Investments Toll Free CONUS Fidelity OCONUS AT&T Direct Access Aetna for DoD NAF Health Benefit Plan Long Term Care (CNA Insurance Co.) GROUP ACCOUNTS USARMY JB San Antonio IMCOM HQ Mailbox NAF Benefits Office-401K-LTC-FSAs Team USARMY JB San Antonio IMCOM HQ Mailbox NAF Benefits Office-Life Insurance Tm (Note: Tm is correct for this group vice Team) USARMY JB San Antonio IMCOM HQ Mailbox NAF Benefits Office-Portability Team USARMY JB San Antonio IMCOM HQ Mailbox NAF Benefits Office-Retirement Team USARMY JB San Antonio IMCOM HQ Mailbox NAF Benefits Office Medical Team Note: Please ensure to encrypt any s containing Personal Identifiable Information (PII)/sensitive information. 6