Plan Overviews

457 Deferred Compensation Plan Overview
401(a) Defined Contribution Plan Overview

457 Deferred Compensation Plan Overview

The 457 Plan is established under Internal Revenue Code Section 457. Under the 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.

The City reduces your paycheck before income tax by that amount and forwards 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.

Eligibility

The 457 plan is a voluntary plan available to all employees of the City receiving earnings for personal services except for:

1. individuals compensated on a contracted basis;

2. members of boards, commissions, or committees and officers or employees receiving no salary; and

3. independent contractors.

There are no age or length of service requirements.

Contributions

Contributions under the Plan are made by participants through a reduction in salary.

Under the Plan, the maximum annual contribution amount is identified below (or 100% of includible compensation, if less):

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)

You may be eligible for increased contributions:

During the three years prior to attaining Normal Retirement Age under a special catch-up provision.

On and after you attain age 50 under the 50+ Catch-Up provision.

(For additional information on the 457 catch-up provision or the increased contribution limits for participants 50 years of age or older, please refer to the brochure “457(b)-How Much Can I Contribute?” located in the library section of this web site.)

Timing of Distributions

Distributions are allowed only upon separation from service, attainment of age 70½, death, or the occurrence of an unforeseeable emergency, which are considered to be triggering events.

The IRS requires that distributions under a 457 plan begin no later than the April 1st of the calendar year following the calendar year in which you attain age 70½ or separate from service, whichever occurs later. If you fail to receive the minimum required distribution for any tax year, a 50% excise tax is imposed on the required amount that was not timely distributed. These rules are referred to as IRS required minimum distribution requirements (RMD).

Loans

Loans are available from both the 457(b) Deferred Compensation Plan and the 401(a) Defined Contribution Plan. General purpose and residential loans are offered. For additional information please contact 800-584-6001.

Payment Options

When you are entitled to a distribution of benefits under the Plan, you have the choice from a variety of payment options.

Death Benefits

Upon your death, benefits would be payable to the beneficiary(ies) that you designated under the Plan. If you have not designated a beneficiary, payment of death benefits will be made to your estate.

Your beneficiary will be entitled to select from a variety of payment options, which are generally the same options that would have been available to you (and are described in the “Payment Options” section of this web site). Your beneficiary must notify ING of your death and make a payment election in accordance with the Plan.

Taxation

All of the payments you receive from the Plan are subject to federal and state income taxes.

Federal income tax withholding will apply to your payments, as described below, based on whether you were eligible to rollover the distribution.

If you receive a distribution that was eligible to be rolled over, a mandatory 20% will be withheld for federal tax purposes at the time of payment.

If you receive a distribution that was not eligible to be rolled over, 10% will be withheld for federal tax purposes at the time of payment. However, you may elect to have no withholding withheld.

Amounts distributed from a 457 plan are not subject to the IRS 10% penalty tax if distributed prior to attaining age 59½. However, if you have previously rolled over amounts from a plan other than a governmental 457 plan, such rollover amounts will be subject to this 10% penalty tax if distributed prior to attaining age 59½, unless an IRS exception applies. IRS exceptions include payments made:

to your beneficiary as a result of your death;

upon your separation from service/retirement on or after you attain age 55;

in substantially equal amounts over your life/life expectancy; or

as a result of your total and permanent disability.

Unforeseeable Emergency Withdrawals

IRS guidelines and the Plan document provide that an unforeseeable emergency means a severe financial hardship to the Participant resulting from:

1. a sudden and unexpected illness or accident involving you or one of your dependents (as defined by the IRS);

2. the loss of your property due to casualty; or

3. other similar extraordinary and unforeseeable circumstances arising as a result of events beyond your control.

The purchase of a home, an auto or the need to pay a child’s college expenses, are not considered unforeseeable emergencies. In addition, withdrawals are permitted only to the extent the hardship cannot be relieved: (1) through reimbursement or compensation by insurance or otherwise; (2) by liquidating your assets (to the extent this would not itself cause severe financial hardship); (3) by borrowing from commercial sources to the extent that this borrowing would not itself cause severe financial hardship; or (4) by stopping deferrals under the Plan. Only the amount necessary to meet the emergency need is available for withdrawal.

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401(a) Defined Contribution Plan

The City’s defined contribution plan is established under Internal Revenue Code Section 401(a). The benefit available from the plan at retirement or severance from employment will be based on the total contributions and earnings on such contributions over the time the money is invested.

Eligibility

All permanent common law employees of the City receiving earnings for services performed for the City are automatically covered by the plan except for the following:

1. individuals compensated on a contracted basis;

2. persons employed on an original probationary, or part-time, temporary or seasonal basis;

3. members of boards or commissions, officers or employees receiving no salary;

4. persons who regular City employment is less than 20 hours per week on a continuous basis (52 weeks per year);

5. participants in any City-sponsored defined benefit plan unless benefits have been frozen;

6. any otherwise eligible employee who is a participant of a collective bargaining unit that has not consented to participate; and independent contractors.

There are no age or length of service requirements.

Contributions

Under the City’s 401(a) Plan, there are both employer contributions and employee mandatory contributions:

City contributions. The City contributes an amount equal to 7.5% of each participants’ earnings

Participant mandatory contributions. Each employee is required to contribute 7.5% of earnings per payroll period. For tax purposes, these contributions are deducted from your salary on a pre-tax basis and considered to be employer contributions.

Timing of Distributions

Distributions are allowed only upon separation from service, retirement, disability or death.

The IRS requires that distributions under a 401(a) plan begin no later than the April 1st of the calendar year following the calendar year in which you attain age 70½ or separate from service, whichever occurs later. If you fail to receive the minimum required distribution for any tax year, a 50% excise tax is imposed on the required amount that was not timely distributed. These rules are referred to as IRS required minimum distribution requirements (RMD).

Loans

Payment Options

When you are entitled to a distribution of benefits under the 401(a) Plans, you have the choice from a variety of payment options.

Death Benefits

Upon your death, benefits would be payable to the beneficiary(ies) that you designated under the Plan. If you have not designated a beneficiary, payment of death benefits will be made to your surviving spouse or, if none, to your estate.

Taxation

All of the payments you receive from the 401(a) Plan are subject to federal and state income taxes.

Federal income tax withholding will apply to your payments, as described below, based on whether you were eligible to rollover the distribution.

If you receive a distribution that was eligible to be rolled over, a mandatory 20% will be withheld for federal tax purposes at the time of payment.

If you receive a distribution that was not eligible to be rolled over, 10% will be withheld for federal tax purposes at the time of payment. However, you may elect to have no withholding withheld.

Amounts distributed from a 401(a) plan are subject to the IRS 10% penalty tax if distributed prior to attaining age 59½, unless an IRS exception applies. IRS exceptions include payments made:

to your beneficiary as a result of your death;

upon your separation from service/retirement on or after you attain age 55;

in substantially equal amounts over your life/life expectancy; or as a result of your total and permanent disability.

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Mutual funds offered through a retirement plan are intended as long-term investments designed for retirement purposes. Withdrawals will be taxed as ordinary income the year the money is distributed. Early distributions taken from the 401(a) Plan prior to age 59½ may be subject to the federal 10% premature distribution penalty tax. Account values fluctuate with market conditions and when surrendered, the principle may be worth more or less than the original amount invested. You should consider the investment objectives, risks, and charges, and expenses of the mutual funds carefully before investing. The fund prospectuses contain this and other information, and can be obtained be contacting your local representative. Please read the information carefully before investing. ING does not offer legal or tax advice. Please seek the advice of your own legal or tax advisor prior to making a tax-related investment decision.

Insurance products issued by ING Life Insurance and Annuity Company. Financial planning and securities offered through ING Financial Advisers, LLC (member SIPC), One Orange Way, Windsor, CT 06095-4774, or other broker/dealers with which it has a selling agreement.