Commonly Asked Questions and Answers about the Deferred Compensation Plan

A: The purpose of the Deferred Compensation Plan is to help you establish an investment savings program that grows over time and from which you can withdraw money that will supplement your retirement. The contributions you make to the plan and their interest are exempt from income taxes until you begin to withdraw the money.

A: Any VTA employee (excluding Contractors, Extra-Help and Student Interns) is qualified to enroll in this plan.

A: The Deferred Compensation Plan is an excellent way to grow your money and supplement your retirement income. It provides a variety of tax advantages such as deferred federal and state income taxes on the entire amount that you invest and on the interest you accrue. The deferred compensation investment is automatically withdrawn from your paycheck before the federal and state income taxes are paid, thus lowering your taxable income as well. However, the amount you defer does not reduce the earnings upon which your pension is calculated.

A: When you receive distributions from the plan, you report the income tax on your return. Your distributions will be taxed as ordinary income in the year you receive them. (The distribution income is typically received when you are in a lower tax bracket). In the event of a hardship distribution, you will be subject to taxes.

A: You can enroll in the plan any time during the year.   Your enrollment will take effect the first of the month following receipt of the forms by the VTA Human Resources Department, unless you list a later date.   You can obtain the enrollment forms from the Human Resources Department or from any division.   You may call VTA’s Deferred Compensation Analyst at (408) 321-5570 for more information.

A: Employees with $35,000 or more in deferred compensation have the option of investing in a self-directed brokerage account with access to over 5,000 mutual funds.

A: You invest in the plan by authorizing an amount of money that will be automatically deducted from your paycheck before any federal and state income taxes are withheld. On the day you receive your paycheck, your investment money is wired to an investment provider and invested in the specific investment vehicles that you have chosen, such as a stock mutual fund.

A:    Yes. You just need to complete an Enrollment/Change Form to increase or decrease your deduction from your paycheck.   Your change will take effect the first of the month following receipt of the form by the VTA Human Resources Department, unless you list a later date.  The Enrollment/Change Form can be obtained from the VTA Human Resources Department, or from your division.

A:   You can enroll with as little as $10 (or 1% of your compensation, whichever is greater) every paycheck, or as much as 100% of your biweekly gross income, up to the annual maximum contribution limit.  

A:    The new ‘Age 50 Catch-up’ provision permits participants who are age 50 or older to contribute an additional amount each year.   The ‘Age 50 Catch-Up’ limit may change each year. 

A: Yes, but you may enroll in it no earlier than the year you will turn 52, for up to the last three calendar years prior to the year you plan to retire.   The amount you can contribute under this provision is double the regular deferral maximum, and changes each year.

A: Yes. You may borrow up to 50% of your balance (minimum $1,000 and maximum $50,000) for purchasing a principal residence, paying for college tuition and fees, or to pay for unreimbursed medical expenses.

A:    In the event of an unforeseeable, unbudgetable hardship situation, you may be eligible to receive an emergency withdrawal from the Deferred Compensation Plan.   You will be required to establish that you have exhausted your financial resources and cannot obtain a loan or other resources to cover the expense.  You will be taxed on the distribution as ordinary income.  Further, you will not be allowed to make contributions to the plan for one year after an emergency distribution.   Remember that the Deferred Compensation Plan is not an ordinary savings account, but a retirement account.  Accordingly, you must be certain you have sufficient money saved for a “rainy day” before you begin to participate in the Deferred Compensation Plan.

A: You may roll over your Deferred Compensation Plan funds into a Traditional IRA if you leave VTA, if you wish to do so.   You also may keep the balance in the VTA plan if you so choose, providing you have $1,000 or over in your account.

A: Yes, you may transfer 401(k) funds to the VTA 457 Deferred Compensation Plan. Please see VTA's Deferred Compensation Analyst or the Deferred Compensation Plan Representative for specific information.

A: The balance of your account will be distributed to your beneficiary. There are detailed rules regarding when and how those distributions can be taken. Your beneficiary can obtain detailed information from the plan administrator regarding the distribution process.

A:    If you are enrolled in the Deferred Compensation Plan and are married during any of that time, then legally separated or divorced, your former spouse may have community property rights to a portion of your Deferred Compensation funds.   If so, it is important that you provide documentation, such as a copy of one of the following, to the VTA Human Resources Department – Deferred Compensation:

 - A copy of your and your ex-spouse's Domestic Relations Order (DRO), which states whether your ex-spouse has an interest in your Deferred Compensation funds.

- A waiver, which indicates that your ex-spouse is waiving his/her community property interest in your Deferred Compensation Plan funds.

If you find yourself in this position, you may ask the Deferred Compensation provider to provide you with sample language to use in a DRO.

A: You may choose to receive distributions as soon as you retire or officially separate from service with VTA. Information regarding distributions is available in the VTA Employee Services Department.

A: If you are no longer employed by VTA, you must begin to receive distributions no later than April 1st of the calendar year after you turn age 70½. If you are still working at age 70½, you must commence distributions no later than April 1st of the year after you separate from employment.