Wisconsin Deferred Compensation Program
Information for Retirees
Wisconsin Deferred Compensation
Program Web site
Frequently
Asked Questions
Fact Sheet (ET-8904)
WDC Forms, Brochures and Publications
Wisconsin Deferred Compensation Program (Online Videos)
The Wisconsin Deferred Compensation Program (WDC) is a supplemental
retirement savings program that is available to all active state
of Wisconsin 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, as a
retiree you have many choices as to how you can receive your money.
Only you can make this very personal decision, which is best made
after careful consideration of several factors including your age,
financial needs and other sources of income.
Distributions 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.
REQUIRED MINIMUM DISTRIBUTION (RMD) RULES
Please be aware that under the IRC required minimum distribution
rules, you must begin a distribution from your WDC account no later
than April 1 of the calendar year after the year you attain age
70 ½. The WDC will contact you prior to when you turn age
70 ½ to remind you of the RMD rules.
The WDC offers an automated minimum distribution option that helps
you automatically meet RMD rules. If you would like your minimum
distribution amount calculated automatically and distributed to
you each year, obtain an Automated Minimum Distribution Request
Form by contacting the WDC office at (877) 457-9327, option 2. Complete
the form and mail it to the address listed on the form. You will
automatically receive periodic payments. The payments are calculated
by dividing your prior year’s December 31 account balance
by the life expectancy table figures contained in the applicable
U.S. Treasury Department regulations, using your age in the year
of distribution. You only complete this form one time.
WDC Distribution Options:
Periodic and Lump-Sum Payment Options
Periodic Payment of an “Amount Certain”
A periodic payment of this type means that you designate the dollar
amount you wish to receive on a regular basis (monthly, quarterly,
semi-annually or annually). Payments continue until your account
balance is zero. The number of payments you receive will vary depending
on the rate of return of your investments. After you reach your
required minimum distribution beginning date, you must ensure that
the periodic payment amount you receive will deplete your account
over a period not to exceed your life expectancy.
Periodic Payment of a “Period Certain”
When you select a periodic payment option, defined by a certain
time period, you will receive payments on a regular basis depending
upon the frequency you choose (monthly, quarterly, semi-annually
or annually). Payment amounts depend on the length of time you choose
to receive payments, the frequency you choose and the rate of return
of your investment options. Your payment amount is calculated by
dividing your current account balance by the number of remaining
payments. Your payment is recalculated at distribution; your payment
will not be the same amount each time. The payment amount will depend
on the account value, which may fluctuate depending upon the performance
of the investments that you have chosen. With this payment method,
your balance will be zero by the end of the term you select. The
payment term you select should not exceed your life expectancy as
determined by the IRS.
Partial Lump-Sum Distribution
You may elect to take a portion of your balance as a partial lump-sum
distribution. This option is fully taxable to you in the year the
funds are distributed. Federal income tax is generally withheld
at a rate of 20% of the gross amount. State income tax will be withheld
as applicable.
Full Lump-Sum Distribution
If you select a full lump-sum distribution, the full value of your
account will be distributed. Unless you elect a direct rollover
of all or a portion of the distribution, the distribution will be
paid to you. Any funds not directly rolled over, consisting of before-tax
contributions and earnings, will be fully taxable to you in the
year the funds are distributed. Federal income tax is generally
withheld at a rate of 20% of the gross amount. State income tax
will be withheld as applicable.
When you elect your distribution method, you can specify a combination
of payment options for portions of your account balance.
Partial Lump-Sum and Periodic Payment
You can withdraw less than 100% of your balance as a partial lump
sum payment after severance of employment and then also elect a
periodic payment for the remaining balance. The periodic payment
option allows you to keep your remaining balance in the investment
options available through the WDC.
Periodic Payment and Future Partial Lump-Sum Distributions
If you initially elect to receive periodic payments and in the future
wish to receive a partial lump-sum payment, you can still receive
a partial lump-sum payment from your remaining balance. The partial
payment will not affect your periodic payment schedule, but it will
affect the time remaining for your periodic payments if you choose
an amount certain. It will also affect the payment amount if you
elected a period certain payout option. You may elect partial lump-sum
payments at different times, or a series of partial lump-sum payments,
depending on your needs.
Beginning a WDC Distribution
To begin a distribution from your account, complete and submit
a distribution request form, which can be obtained by calling the
WDC at 1-877-457-9327. This toll-free line is open 7:00 a.m. to
7:00 p.m., Monday through Friday.
Tax Implications of a WDC Distribution
Distributions are considered regular taxable income by the Internal
Revenue Code. If the distribution you elect is an eligible rollover
distribution and you do not elect to roll it over to another eligible
retirement plan, regulations require that federal income tax be
withheld at a rate of 20% of the gross taxable amount you request.
Your state of permanent residence may or may not require mandatory
tax withholding (Wisconsin does not). The WDC will withhold state
income taxes according to the state of your primary residence. You
may elect to have more state or federal income tax withheld. Depending
upon your personal circumstances, you may or may not owe additional
income tax on your distribution(s) when you file your tax returns.
For periodic payments scheduled to last 10 years or more, your
payments are not considered to be eligible rollover distributions.
Therefore, participants electing a periodic payment scheduled to
last 10 years or more can submit an IRS Form W-4P, Withholding Certificate
for Pension or Annuity Payments, to elect withholding that is appropriate
for your tax situation. If a W-4P is not submitted with your request,
the WDC will default your federal income tax withholding to a status
of “married with three allowances.” You may obtain a
W-4P by calling the IRS toll-free at (800) IRSFORM, by visiting
www.irs.gov, or by contacting the
WDC at (877) 457-9327, option 2.
Tax Forms
The WDC is responsible for issuing your 1099-R. You will be mailed
a Form 1099-R postmarked by January 31 of the year following any
year in which you receive a distribution. If you do not receive
a Form 1099-R by February 15 after a year in which you received
a distribution, please call the WDC at (877) 457-9327, option 0,
to request a duplicate.
Delaying a WDC Distribution
If you decide to delay taking distributions from your WDC account:
- You can 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 receive quarterly statements, newsletters and other
information.
- Your account balance will experience investment gains (and/or
losses) on a tax-deferred basis.
- You may select from the distribution options available through
the WDC at that time.
- You will be assessed plan administrative fees.
- You must notify the WDC of any address or name changes.
However, remember that you must start taking distributions by April
1 of the year following the year in which you reach age 70 ½.
More Information
For more information about the WDC and account distribution options,
visit the WDC Web site, send
an e-mail to wdcprogram@gwl.com,
or call the WDC office at toll-free 1-877-457-9327 (hearing impaired:
1-800-766-4952).
The WDC office is located
at 5325 Wall Street, Suite 2755, Madison, WI 53718.
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