What is Deferred Compensation?
Deferred Compensation is a savings and investment plan for your retirement. Through the State Treasurer's Office, two supplemental retirement savings programs are made available to certain employee groups. The board of the Vermont State Retirement System established and administers a 457 plan and oversees the investment options that the plan offers. You are eligible for the 457 plan if you are a State employee or legislator; a state teacher; or a municipal employee in a participating municipality. A 403(b) plan is also available to employees of Vermont's public school districts. The 403(b) plan is administered by the Vermont State Teachers' Retirement Board and was first offered in January 2009 in response to updates in the Internal Revenue Code.
The advantages of Deferred Compensation plans are:
- All contributions are tax-free;
- All earnings from investments in the plan are tax-deferred until you withdraw the money at retirement;
- It is easy to contribute via payroll deduction;
- Financial security. Remember, a secure retirement depends upon three income sources: your pension or Defined Contribution retirement account, Social Security, and your personal savings. Deferred Compensation is a great way to create a personal savings account for your retirement.
Employees eligible for both the 457 plan and the 403(b) plan may opt to invest in both supplemental retirement savings plans. Each plan offers different investment options. Also, while there are penalties for withdrawing funds before age 59.5 years from the 403(b) plan, there are no penalties for early withdrawal from the 457 plan.
Participation in the Deferred Compensation plans is voluntary. You determine how much you wish to contribute and that amount is deducted from your paycheck and transferred to your Deferred Compensation plan. The Deferred Compensation plans are available as described above to all state employees and to employees of other public agencies such as municipalities, school districts, boards, and commissions if the public agency has elected to offer it. It is the decision of individual school districts regarding whether or not to adopt the VSTRS 403(b) plan and make it available to employees.
Empower Retirement (formerly known as Great West Retirement Services) is the firm retained to administer the Deferred Compensation plans. Empower Retirement has a web site for these plans. You can use this web site to check on your account information, review and change your investment options and learn about investing. If you have a Deferred Compensation account (457 or 403b), sign on with your Social Security number and PIN. If you do not have an account, click on "Guests" to visit the site.You can call Empower Retirement at 1-800-457-1028 or 802-229-2391. The Vermont Department of Human Resources also provides information on the 457 plan, including the enrollment form for state employees only. This form must be completed and sent to the DHR-Employee Benefits Unit to begin automatic payroll deductions into your plan account or change the amount of your bi-weekly deduction.
To Login to your 457 Account Click Here
Investing for the Long Term
The value of your investments in the deferred compensation program will fluctuate over time. An Empower presentation titled, "Making Sense of Market Volatility: Retirement Planning Strategies for the Everyday Investor" explores investment decisions and market changes . More