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Plan Overview

Metro Nashville’s Deferred Compensation Plan is established under Internal Revenue Code Section 457. With a deferred compensation plan, you postpone receiving (defer) a portion of your salary. It works like this:

  • You decide, within certain legal limits, how much of your income you want to defer.
  • Metro will reduce your paycheck before income tax by that amount and forward it to ING on a regular basis.
  • Contributions are invested in the investment options you have selected.
  • The contributions and any earnings that accumulate are not taxed until you receive them. This is usually at retirement when you may be in a lower tax bracket.

    • The following are the highlights of MetroMax.

  • Eligibility
  • Contributions
  • Distributions

    • Eligibility

    Any employee, officer, or elected or appointed official of Metro with at least twenty hours of work per week, with the exception of contract workers for the Metropolitan Board of Education, the Transit Authority, Nashville Electric Service, and the Metropolitan Development and Housing Authority is eligible to participate in MetroMax. A minimum annual contribution of $240 is required under the plan.

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    Contributions

    Contributions under the plan are voluntarily made by participants through a reduction in salary. Under the plan, annual contributions are limited to 100% of includible compensation*, or the amount shown below.

    Year

    Annual Maximum

    2009

    		 $16,500 regular limit

    $22,000 Over 50 catch-up limit ($5,500 over the regular limit $33,000 NRA catch-up limit (Double the regular limit)

    *Refers to compensation received for services performed for Metro Nashville & Davidson County that is includible in gross income for that year.

    Includible compensation excludes:

  • 414(h) pick-up contributions

    • Includible compensation includes:

  • deferrals to a 457(b), 403(b), 401(k) or SEP plan
  • pre-tax contributions to a section 125 cafeteria plan
  • pre-tax contributions with respect to Section 132(f)(4) – Qualified Transportation Fringe Benefits

    • A higher limit may be available during the three consecutive years prior to attaining Normal Retirement Age (NRA) under the 457(b) Special Catch-up Option. A higher limit may be available to participants of 50 years of age or greater using the Age 50+ Catch-up Option. A participant cannot use both the 457(b) Special Catch-up Provision and the Age 50+ Catch-up Provision during the same year. The Participant must choose the option most beneficial to him or her. For additional information on the catch-up provisions, please Click Here.

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    Distributions

    When can I receive a distribution under the Plan?

    Distributions are allowed only upon:

  • separation from service (or retirement)
  • attainment of age 70½,
  • death, or
  • an unforeseeable emergency.

    • What is an Unforeseeable Emergency Withdrawal?

    IRS guidelines and the Metro plan document provide that an unforeseeable emergency means a severe financial hardship to the participant resulting from:

  • a sudden and unexpected illness or accident involving the participant or one of his or her dependents (as defined by the IRS);
  • the loss of the participant’s property due to casualty;
  • other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the participant’s control.

    • Withdrawals are permitted only to the extent the hardship cannot be relieved:

  • through reimbursement or compensation by insurance or otherwise;
  • by liquidating your assets (to the extent this would not itself cause severe financial hardship);
  • by borrowing from commercial sources to the extent that this borrowing would not itself cause severe financial hardship; or
  • by stopping deferrals under the plan.

    • Only the amount necessary to satisfy the emergency need can be distributed. The purchase of a home or an auto or the need to pay a child’s college expenses, are not considered unforeseeable emergencies.

    At retirement or separation from service, what type of a benefit election can I make?

    You may elect to either:

  • defer the payment of your benefits to a date no later than the April 1 following the calendar year in which you attain age 70½.
  • receive your benefits immediately, under one of the distribution options available under the plan. Payments made over a period of more than one year must be made in substantially non-increasing amounts.

    • What are the options for payment of my benefits under the Plan?

    MetroMax provides you with a wide variety of payout options. They include:

  • Systematic withdrawal of your account over a specified period or of a specified amount
  • Deferral of all or a portion of your benefits to a later date
  • Lump sum, or partial lump sum distribution in combination with other options
  • Distribution over your lifetime and the lifetime of your designated beneficiary
  • Distribution over a set period not extending beyond your life expectancy
  • Distribution over a set period or time not extending beyond the joint and last survivor life expectancy of both you and your designated beneficiary
  • Distribution over your lifetime.

    • The plan permits the transfer of your 457 benefits to another 457 deferred compensation plan that accepts such transfers. You are also permitted to rollover your benefits into another eligible retirement plan or a traditional IRA (an eligible retirement plan is a 401 qualified plan, a 403(b) tax deferred annuity program, or another governmental 457(b) deferred compensation plan).

    When am I required to begin receiving distributions?

    The IRS requires that distributions under a 457 plan begin no later than the April 1 of the calendar year following the calendar year in which you attain age 70½ or separate from service, whichever occurs later.

    How will my deferred compensation benefits be taxed?

    Amounts distributed directly to you from the plan will only be taxable to you when actually paid, will be reported on IRS Form 1099R, and will be subject to 20% federal tax withholding (to the extent that the distribution is rollover eligible). Governmental 457 plan benefits are not subject to the IRS 10% premature penalty tax, even if distributed prior to your attaining age 59 1/2. Rollover amounts from a non 457(b) plan may be subject to a 10% premature penalty tax.

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