Deferred Compensation Program
Wisconsin Deferred Compensation
Program Web site
The Wisconsin Deferred Compensation Program (WDC) is a supplemental
retirement savings program that is available to all active State
and university employees. Active local government and school district
employees may also be eligible if their employer has elected to
offer this optional benefit program.
The WDC is an Internal Revenue Code (IRC) Section 457 deferred
compensation plan. The WDC allows participants to invest a portion
of their pre-tax earnings in a variety of investment options. Participants’
deferrals reduce their taxable income, which lowers their current
State and federal income taxes. Also, any interest or gains received
grow on a pre-tax basis.
If you participated in the WDC prior to your retirement, you have
the option to take a distribution from your WDC account. Benefit
payments from your WDC account are considered taxable income for
both federal and State (if applicable) purposes in the calendar
year in which you receive them. Under the IRC required minimum distribution
rules, you must begin a distribution from your WDC account no later
than April 1st of the calendar year after the year you attain age
70 ½.
WDC Distribution Options:
1. Lump Sum Withdrawal
A lump sum withdrawal distributes either the entire or partial balance
of your WDC account to you. This payment is eligible to be rolled
into a traditional individual retirement account (IRA) or other
eligible employer plan. A mandatory 20% federal income tax withholding
will apply to this distribution unless you elect a direct transfer
to a traditional IRA or qualified eligible employer plan account
(e.g., 401(k), 403(b)).
2. Periodic Payments
Your account balance will be distributed to you in periodic installments
and you continue to manage your WDC investments. This provides you
an opportunity to experience investment gains (or losses) on a tax-deferred
basis.
There are three different periodic payment options:
- Fixed dollar payment, where you choose the
dollar amount you wish to receive;
- Fixed period payment, where you choose the
period of time over which your payments will be calculated; or
- Expected lifetime/joint lifetime recalculation payment,
where your payments will be calculated for you based on life expectancy
tables.
When you choose one of these options, you will be subject to federal
(and State, if applicable) income tax only on the amounts you receive
each calendar year.
Periodic Payment Features
You may elect to have your payment amount taken from one specific
investment option (priority distribution option). Payments will
be made from this investment option as long as there is a sufficient
balance to cover the full payment amount. If your balance does not
cover your payment, your priority distribution will be cancelled
and future payments will be taken on a pro rata basis from each
investment option.
- You select your payment frequency – monthly, quarterly,
semi-annually or annually.
- You continue to manage your account and its investments.
- Your account balance will continue to be subject to potential
investment gains and losses.
- Your account will continue to be assessed plan fees.
- You will continue to receive quarterly statements, newsletters
and other information.
- You can make periodic changes to the payment type, amount or
frequency.
- You may elect additional partial lump sum payments at anytime.
Beginning a WDC Distribution
When you decide you want to begin a distribution from your account,
you must complete a benefit election form. The benefit election
form can be obtained by calling the Plan Administrator’s office
or you can download the form from the WDC Web site at www.wdc457.org
The completed benefit election form, along with the necessary tax
withholding certificates, must be submitted to the WDC 30 days before
you want your distribution to begin.
Delaying a WDC Distribution
If you decide to delay your WDC distribution:
- You can continue to manage your WDC account and its investments
with the same flexibility that was available to you while you
were deferring into your account.
- You will continue to receive quarterly statements, newsletters
and other information.
- Your account balance will continue to experience investment
gains (and/or losses) on a tax-deferred basis.
- You will continue to be assessed plan fees.
- You must notify the Plan Administrator of any address or name
changes.
Remember: Under the IRC required minimum distribution rules, you
must begin a distribution from your WDC account no later than April
1st of the calendar year after the year you attain age 70 ½.
For example, if your date of birth is August 1, 1940, you will attain
the age of 70 in 2010. However, you will attain the age of 70 and
a half on February 1, 2011. Therefore, your distribution MUST begin
NO LATER than April 1, 2012.
For more information about the WDC and its distribution options,
please access the Wisconsin Deferred Compensation Program Web
site or call the Plan Administrator's office at toll-free 1-877-457-9327
or for the hearing impaired, 1-800-766-4952. The Plan Administrator's
office is located at 5325 Wall
Street, Suite 2755, Madison, WI 53718. Local e-mail address: wdcprogram@gwl.com
For additional general information
on the WDC, see Frequently Asked
Questions or the WDC Fact
Sheet.
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