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Participation and eligibility
You are immediately eligible to join the MTA Deferred Compensation Program and/or MTA 457 Plan as soon as you become an employee of the MTA. You may enroll in the Plan at any time.
- Contributions can be made on a pre-tax or after-tax Roth basis.
- Maximum contribution: The lesser of 100% of your salary or $19,500.1
- Age 50 Catch-up Provision: You may contribute an additional $6,500 above the maximum in 2021 if you are age 50 or older as of December 31, 2021.
- 457 Plan only (Special Catch-up Provision): You may also elect special catch-up deferrals in one or more of the three consecutive years prior to the year in which you attain normal retirement age under the Plan. You may not use this catch-up in conjunction with the Age 50 Catch-up Provision.
- You may roll over funds from another employer’s eligible retirement plan. (Rollover contributions are not subject to the maximum contribution amount specified above.)
- In-plan Roth rollovers are a feature of both the 401(k) Plan and 457 Plan for eligible, distributable amounts.
- If you are eligible for the 401(k) Plan and the 457 Plan: The contribution limit pertains to each Plan in which you are eligible to participate. That means you can contribute $19,500 to the 401(k) Plan and another $19,500 to the 457 Plan, for a total of $39,000.
1This is the federal contribution limit for 2021.
Are you trying to decide between joining the 401(k) and 457 Plans?
First of all, there’s no need to stall your decision to join. Both Plans make it easy to save for your future. Here is a quick snapshot of how the Plans are different:
- In-service withdrawals at age 59½
- 10% penalty for withdrawals before age 59½
- Catch-up contributions only for age 50+
- 2 loans allowed at one time
- No in-service withdrawals
- No 10% penalty for early withdrawals
- Special Catch-up Provision to allow greater savings
- 1 loan allowed at a time
Annual account fee
Each year, your Plan account will be assessed an account fee of 10 basis points (0.10%). So, for example, if your account has a $50,000 balance, it will be charged $50 per year in account fees ($12.50 per quarter). This fee applies only to the first $100,000 in your account.
You are always 100% vested in your own contributions without risk of forfeiture. To be “vested” means that your contributions (and any earnings) belong to you, even if your employment with the MTA should end. Please note that certain MTA employees receive employer contributions that are subject to a vesting schedule. To obtain specific vesting schedules, please contact your on-site Retirement Education Counselor.
Frequency of changes
- Contributions: You may make changes to your contribution rate at any time. You may also stop contributing to either Plan at any time.
- At any time, you may make changes in where your future contributions—or the money you've already contributed—are invested.
Access to funds while employed
You may be able to access money in your account through a loan.2
Here are some details:
- Maximum Loan Amount is limited to 50% of your vested account balance or, if lower, $50,000 minus the difference between the highest outstanding loan balance in the previous 12 months and the current outstanding loan balance. If you also have an MaBSTOA pension loan, the total loan amount between all plans (MaBSTOA, 401(k) and 457) cannot be in excess of $50,000. Please contact the MaBSTOA pension department before initiating a loan with Prudential. If your total loans are over $50,000, this could result in a taxable distribution.
- Roth contributions are included in the calculation of the amount available for a loan. However, loans can only be taken from your pre-tax contributions.
- Minimum loan: $1,000.
- Interest rate: Prime + 1% (interest is paid to your own account).
- Application fee: $75 for each loan application.
- Repayment period: Payroll deduction over a maximum of five years.
- You may have up to 20 years to repay if you are using the loan to purchase your primary residence. (A copy of the signed purchase agreement must be submitted with your loan application.)
- Number of loans permitted at one time: The 457 Plan allows one loan at a time. The 401(k) Plan allows two loans. However, you are allowed to have a maximum of two loans outstanding from both Plans combined at any point in time.
- Tax consequences: None, as long as the loan is repaid in full.
- Prepayment available: Yes.
Any outstanding loan balance not paid back at termination becomes taxable in the year of default. Under the Tax Cuts and Jobs Act, for defaults related to termination of employment after 2017, the individual has until the due date of that year’s return (including extensions) to roll over this amount to an IRA or qualified employer plan.
If you participate in both the 401(k) Plan and the 457 Plan, the amount available for a loan will be calculated within each Plan separately.
2Loan proceeds are disbursed from your account, and your account balance will be reduced at the time of loan initiation.
Hardship withdrawals from the 401(k) Plan:
You must meet one or more of the following conditions in order to qualify for a hardship withdrawal (which may be subject to Plan Administrator approval):
- major medical expenses
- purchase of a primary residence
- payment to prevent eviction from your home
- payment for higher education
- the need to pay funeral expenses of a family member
- a financial emergency or stress, the satisfaction of which is necessary for the safety, well-being, livelihood or health of yourself or your immediate family
Taxes, early withdrawal penalties and other consequences may apply. Hardship withdrawals are subject to voluntary 10% federal income tax withholding.
Unforeseeable emergency distributions from the 457 Plan:
You may take a withdrawal from the Plan, subject to Plan Administrator approval, for severe financial hardship due to:
- an illness or accident suffered by you, your spouse or your dependent
- a casualty loss of your property
- another extraordinary loss beyond your control
Ordinary income taxes will apply to any withdrawal you make.
If you should qualify for disability while you are an employee of the MTA, you have the following options for the money in your account:
- leave your funds in the Plans (subject to federal rules on Required Minimum Distributions)
- take a full or partial distribution
- take a full or partial systematic withdrawal
- roll over your vested account balance to an IRA or other eligible retirement plan
Taxes that apply to distributions
- You usually pay taxes at your current income tax rate for the year in which you receive the money.
- Withholding for federal income tax is automatically deducted from the withdrawals paid directly to you—with certain exceptions.
- The federal government requires this withholding amount to be 20% of your withdrawal amount.
- A 10% federal income tax penalty may apply for any withdrawals from the 401(k) Plan made before age 59½.
- Each withdrawal is a pro rata combination of contributions and earnings.
- No federal taxes are due upon taking a “qualified” distribution from the Plan.
- A distribution is “qualified” if:
- Your Roth money has fulfilled the five-taxable-year period of participation
- You are over age 59½, disabled or deceased at the time of withdrawal
- If your distribution is not qualified, any earnings portion is taxable. However, the contribution portion is never taxable.
- Roth contributions can be rolled into a Roth IRA; however, a Roth IRA cannot be rolled into the MTA Deferred Compensation Program.
- Amounts withdrawn, except for qualified withdrawals from a Roth 401(k), are generally taxed at ordinary income tax rates.
- Amounts withdrawn before age 59½ may be subject to a 10% federal income tax penalty, applicable taxes and plan restrictions.
- Neither Prudential Financial nor any of its affiliates provide tax or legal advice--for which you should consult your qualified professional.
In the event of your death
Your account balance will be paid to your beneficiary (or beneficiaries)—who will be responsible for all taxes.
Neither Prudential Financial nor any of its representatives are tax or legal advisors, and we encourage you to consult with your individual legal or tax advisor with any specific questions.