Frequently Asked Questions

Based on our broad experience with tax-deferred investing, we have tried to anticipate and answer the most "frequently asked questions" you might have about your retirement plan.

If you have any other questions, or would like to see other topics addressed here, please e-mail us at info@benefitworks.com. We always appreciate your comments and suggestions.

General Questions

Account Balances

Our Website and Your Security

Loans

Loan Modeling

Withdrawals and Distributions

Contribution Changes

GENERAL QUESTIONS

What are 401(k) plans?
401(k) plans are retirement investment vehicles that allow employees to save for their own retirement. This type of plan permits employees to set aside tax-deferred earnings and lets that money accumulate in various investments, without having to pay taxes until savings are withdrawn. We believe that 401(k) plans are the most important national retirement effort since Social Security was introduced in the 1930s.

Back to Top

How does a 401(k) plan work?
A 401(k) plan is established by your employer (the plan sponsor) and is open to all eligible employees. As a plan participant, you decide how much money you want deducted from your paycheck and invested at the end of each pay period (up to the maximum dollar amount set by the IRS each year). You pay no taxes on these plan "contributions" when they are deducted. You can change the amount of your pre-tax contribution at any time. You also determine how your contributions are invested; most plans offer a diversified selection of mutual funds. When you retire, the distributions from your account are taxable income in the year they are received. 401(k) plans are intended to be retirement plans. For that reason, distributions taken before you turn 59 ½ are generally assessed a tax penalty (unless distributions are taken as planned, periodic payments over the term of your life expectancy.)

Back to Top

What is a Roth 401(k)?
A Roth 401(k) works like a regular 401(k) plan, but with a few significant differences. With a Roth 401(k), your account is funded with after-tax contributions, not pre-tax contributions (as with a regular 401(k)). However, once you turn 59 , all distributions from a Roth 401(k) (including investment gains) are tax-free.

Back to Top

What is an Employer Match?
In most 401(k) plans, employers make contributions to your 401(k) account. This contribution often takes the form of an employer match on your contribution. Usually the employer matches a certain percentage of your contribution, up to a set limit. For instance, an employer might elect to put in 25 cents for every $1.00 you contribute on the first 4% of your contribution. As an example, if your annual salary is $25,000 and you contribute $1,000 each year to your 401(k), your employer might add $250 to your account. This employer match, which is, in effect, "free money," provides a significant addition to your contribution.

Back to Top

What is the difference between saving money in my company's "qualified" retirement plan and depositing money into a "non-qualified" savings plan?
The biggest difference is your plan's tax deferral. An ordinary savings account or mutual fund does not allow you to save on a tax-deferred basis (pre-tax contributions and tax-deferred growth on those contributions). In an ordinary account, the money you save has already been taxed and you continue to pay tax on any earnings in that account. However, the money you contribute to your company-sponsored retirement plan is with pre-tax dollars. Further, the money grows tax-deferred until you withdraw it – usually in retirement, when you may be in a lower tax bracket.

Back to Top

ACCOUNT BALANCES

What is 'vesting'?
Vesting refers to ownership of your account. Your own payroll contributions, any rollover contributions you add from a previous account and any earnings on those monies, are always 100% vested. That means they always belong to you. However, any matching contributions made by your employer, and earnings on those contributions, are not immediately yours to keep. Those monies vest to your account on a schedule determined by your years of service with your employer.

Back to Top

How do I become fully vested in my account?
Vesting in your employer's contribution is plan specific – it can vary from company to company – and is determined by your company's plan document. Please refer to your Summary Plan Description for your plan's vesting schedule.

Back to Top

What's the difference between my total balance and my vested balance?
Your total balance represents the current value of your account, including portions of your Employer Match that might not yet belong to you. Your vested balance represents the portion of your total balance to which you are entitled if you terminate employment. For example, let's say your total balance of $10,000 is made up of $8,000 you contributed yourself (including earnings growth) and $2,000 of employer contributions (including earnings growth). You have worked for your employer for three years and the company's Summary Plan Description says that three years of service is worth a 50% vesting in employer contributions. If you were to leave the company tomorrow, your vested balance, the money in your account that belongs to you, would be $9,000 ($8,000 plus 50% of $2,000).

Back to Top

How often is my account value updated?
Your account value is updated daily by 9 a.m. EST, with the ending fund value from the previous day.

Back to Top

OUR WEBSITE AND YOUR SECURITY

What steps are being taken to ensure the privacy of my account?
BenefitWorks has instituted significant safeguards to protect the privacy and security of your account information, and prevent unauthorized access to your funds. Our system includes the following state-of-the-art security features:

  1. You need your Social Security number and your personal identification number (PIN) to access your account.
  2. You have the ability to change your PIN on screen as necessary. Changes are effective immediately.
  3. If there are three successive invalid login attempts to your account, our system automatically stops on-line access. (If this occurs to you accidentally, call BenefitWorks at (717) 273-8441 or (800) 931-3144 to re-establish your PIN.)
  4. Your private identifiers (such as Social Security number and PIN) are never displayed on screen.
  5. Any attempt to go to a page that you have bookmarked within Account Services requires that you login to authenticate yourself.
  6. Any transactions involving account changes are followed by a confirmation notice that is mailed to you.
  7. Address changes are not permitted on-line.

Our website makes use of a Secure Sockets Layer (SSL) 128-bit encrypted Secure Server ID, provided by Verisign.

Verisign is the industry-standard leader in encryption and security; 128-bit encryption is the highest level of encryption that is commercially available today.

All transactions within the Quantech system make use of SSL so that any data you exchange within your account is encrypted. In essence, any information that is exchanged between your computer and our server is "scrambled," so that it cannot be decoded if intercepted by a third party. You know that you are using a secure connection when you see the "closed padlock" icon at the bottom of your browser window.

Back to Top

What steps should I take to ensure the security of my account information?
You share the responsibility for maintaining the security of personal account information when using on-line services. After accessing the Participant's Account on this web site, you should always log out to leave your account and close your browser. Also, you should keep your Social Security number and PIN in a private place and never share them with anyone.

Back to Top

What if I forget my password/PIN?
Contact BenefitWorks at (717) 273-8441 or (800) 931-3144 to have your PIN reset to a default number. You may then go to the PIN Changes screen to modify your PIN.

Back to Top

LOANS

What are my Plan's loan provisions?
Loan provisions are optional and plan-specific. Your employer's Summary Plan Description will explain whether your company's plan offers a loan provision. If your plan does permit a loan, the maximum loan you can take is the lesser of 50% of the vested balance or $50,000. The minimum loan amount is $1000. To initiate a loan, call (717) 273-8441 or (800) 931-3144 to request the appropriate paperwork.

Back to Top

How does a 401(k) loan work?
When you borrow money from your account you obligate yourself to repay the loan at a fixed interest rate, which is usually the prime lending rate, over a designated period. This period cannot exceed five years, except for the purchase of your home.

Back to Top

What are the differences between a loan and a withdrawal?
When you take a loan, you borrow from your account and your account is credited with the interest and principal repayment. When you take a withdrawal prior to retirement, the transaction is considered a taxable distribution; you have to pay taxes and, probably, a penalty on the distribution.

Back to Top

Are there any taxes or penalties associated with a loan?
No, you won't be subject to withholding taxes or penalties as long as you repay your loan on time.

Back to Top

How does taking a loan affect the value of my account?
The money you withdraw is removed from your account and your balance is reduced by the amount of your loan. As you repay the loan, your account balance is increased. But you should understand that, although your account is credited with interest and principal payments, you do lose the growth potential of the money that's not in your account for a time.

Back to Top

Are the interest payments on loans tax deductible?
No.

Back to Top

What happens to my loan if I leave my employer?
If you have an outstanding balance on your loan, you may be able to make arrangements to repay when you terminate employment. Otherwise, your loan would be considered in default and the outstanding balance would be treated as a taxable distribution.

Back to Top

Can I use my 401(k) account balance as collateral for a loan?
No. Lenders might inquire about the value of your 401(k) account to broaden their understanding of your overall financial status, but they will not use 401(k) assets as collateral for a personal loan.

Back to Top

LOAN MODELING

Can I calculate potential loan payments?
Yes, the process is called loan modeling. To model loan scenarios interactively, go to the Participant Accounts page on this website and select "Model Loan." Enter the amount you would like to borrow and the number of months over which you choose to repay the loan; the payment amount will be calculated for you, assuming a designated interest rate. You may model as many loans as you wish.

Back to Top

WITHDRAWALS AND DISTRIBUTIONS

What taxes are involved with a withdrawal?
You must pay income tax on any money that you withdraw (as opposed to borrow as a loan) from your account – whether it's an early withdrawal or a normal distribution in retirement. Because qualified retirement plans are designed to help you save for retirement, if you take an early withdrawal, the government requires that you also pay an early-withdrawal penalty for most distributions occurring before age 59 ½.

Back to Top

When do I have to start taking money from my 401(k) plan?
Generally, you must begin taking distributions no later than April 1st of the year following the year in which you turn age 70 ½, or following the year in which you retire, whichever is later.

Back to Top

What happens to my account if I become disabled?
Generally, the only change in your account is your level of vesting. If your disability meets the criteria specified in the Internal Revenue Code, most plans provide that you become 100% vested in any money your employer may have contributed to your account.

Back to Top

What happens to my account if I die?
If you die, your entire account is payable to your spouse or other named beneficiary. Your spouse can roll the account balance over into a rollover IRA.

Back to Top

Can my 401(k) account be attached to pay child support or alimony?
Possibly. You may be required by law to pay court-ordered child support or alimony payments as specified in a Qualified Domestic Relations Order (QDRO). A portion of your plan assets may be required to satisfy that obligation. You should discuss this with your legal advisor.

Back to Top

CONTRIBUTION CHANGES

Can I change my contribution amount?
Yes, you may change your contribution rate of your payroll deductions at any time.

Back to Top

Can I contribute lump sums of money, such as an inheritance or money from my bank account, into this plan?
No. The Internal Revenue Service requires that all employee contributions be made through payroll reductions. However, you can roll over money from a previous employer's qualified plan and/or conduit IRA, if applicable.

Back to Top