Tax Advantage Accounts
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Defined Benefit Plans
Information to Review
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Other Items to Consider
Balance Billing When you go to an out-of-network provider for medical and dental services, you may be responsible for the difference between the full cost (amount billed) and Reasonable and Customary charge (maximum amount paid) in addition to any coinsurance amounts.
Basic Dental ServicesRoutine dental procedures such as root canals and cavity fillings.
Cafeteria Plan An employee benefit arrangement allowed by IRS Code Section 125, under which employees are allowed to pay for certain employee benefits on a pre-tax rather than an after-tax basis.
Coinsurance A percentage of the cost of eligible medical expenses you are responsible for paying, after the deductible is met.
Copayment A fixed dollar or percentage you pay each time you receive certain medical services – (i.e. office visits, prescription drugs).
Defined Benefit Pension Plan An employer sponsored retirement plan in which the benefit is based on a "defined" formula.
Defined Benefit Plan Formulas
Ninth District: 1.50% of your total Final Average Pay, multiplied by your years of benefit service, plus 0.25% of the amount by which Final Average Pay exceeds covered compensation* multiplied by years of benefit service.
Northwest: 1.45% of your total Final Average Pay, multiplied by your years of benefit service; plus 0.35% of the amount by which Final Average Pay exceeds one half of the average of the last five years of Social Security taxable wage bases ($57,780 in 2017), multiplied by years of benefit service.
AgriBank District (Final Average Pay formula): 1.50% of your total Final Average Pay, multiplied by your years of benefit service; plus 0.25% of the amount by which Final Average Pay exceeds covered compensation* multiplied by years of benefit service. (Different percentage applies for service prior to Jan. 1, 1994 for former 4th District retirement plan participants.)
AgriBank District (Cash Balance formula): Annual pay credit added to account equal to 5 - 10%, depending on years of benefit service, of eligible compensation. Additional pay credit equal to 5% of compensation in excess of Social Security taxable wage Base, if applicable ($127,200 in 2017).
11th District: 1.95% of total Final Average Pay, multiplied by years of benefit service.
*Covered compensation is the 35-year average, ending at Social Security Full Retirement Age, of the taxable Social Security Wage bases on which employees pay FICA tax. Covered compensation tables are published annually by the Internal Revenue Service.
Defined Benefit Pension Restoration Plan A nonqualified Pension Restoration Plan (varies by District) that restores benefits payable from the qualified retirement plans listed above that are reduced by:
Internal Revenue Code ("Code") limits on compensation and/or benefits.
Exclusion of employee deferrals to the Farm Credit Foundations Non-qualified Deferred Compensation (NQDC) plan from the definition of "Compensation" in the qualified retirement plan.
For example, the code limits annual compensation used to determine benefits under the qualified retirement plans to $405,000 in 2018 ($275,000 if hired after 1995). Similar annual limits on compensation apply to prior years. Also, the code limits annual benefits payable from the qualified plans to $220,000 in 2018 for those commencing payments at or after age 62 (limit is actuarially reduced for commencements prior to age 62; actuarially increased for commencements after age 65). Therefore, the Pension Restoration Plan restores pension benefits attributable to compensation or benefits payable in excess of the Code limits.
Defined Contribution / 401(k) An employer sponsored retirement plan in which an employee and employer elect to defer some amount of money into the employee's account.
Employee Contribution Types:
Pre-Tax: Pre-tax deferrals reduce your current taxable income (except for FICA tax). Distributions and withdrawals from the 401(k) plan are subject to ordinary income tax.
Roth After-Tax: This contribution type does not reduce current taxable income. Qualified distributions of Roth 401(k) contributions and associated earnings are tax-free. Qualified distributions are those made after age 59½ and at least five years following the first year of a Roth after-tax contribution.
Traditional After-Tax: These after-tax contributions do not reduce current taxable income. Distributions of after-tax contributions are not taxable, but associated earnings are subject to ordinary income tax.
After-Tax Spillover: The after-tax spillover feature allows employees to make a one-time election to automatically switch contributions every year to traditional after-tax upon reaching the annual IRS limit on combined pre-tax and Roth after-tax contributions, $18,500; $24,500 if age 50 anytime during the calendar year. At the beginning of the next year, the after-tax spillover stops and the participant's pre-tax and/or Roth after-tax contribution rate on record at JHRPS resumes.
Employer contribution amounts vary by date of hire.
Hired on or after Jan. 1, 2007
Fixed 3% employer contribution.
Dollar-for-dollar employer match on first 6% of combined employee pre-tax, traditional after-tax, Roth after-tax contributions.
Possible total employer contribution/match = 9% of eligible compensation.
Hired before Jan. 1, 2007 and a participant in defined benefit plan
Dollar-for-dollar employer match on first 2% of combined employee pre-tax, traditional after-tax, Roth after-tax contributions plus 50 cents on the dollar match for the next 4% of employee contributions.
Possible total employer match of 4% of eligible compensation.
Hired before Jan. 1, 2007 within former Consolidated group and not a participant in defined benefit plan
Fixed 3% employer contribution.
Dollar-for-dollar employer match on first 6% of combined employee pre-tax, traditional after-tax, Roth after-tax contributions.
5% integrated employer contribution for eligible compensation in excess of the annual Social Security taxable wage base ($128,400 in 2018).
Possible total employer contribution/match equals 9%; plus 5% integrated employer contribution.
Hired before Jan. 1, 2007 within former U.S.AgBank group and transferred account balance benefit from 9th District DB plan to 401(k) plan
Up to 3.50% transition credit depending on age and service on Sept. 30, 2007.
1% integrated employer contribution for eligible compensation in excess of the annual Social Security taxable wage base ($128,400 in 2018).
Deductible The amount of money you pay each plan year before the medical and/or dental plan pay a benefit.
Elements of Compensation
Base Salary – Current annual salary excluding any variable pay.
Compensation – This definition is used to determine retirement benefits, in the 401(k) and defined benefit plan(s). It is defined as your current base salary plus current variable pay.
Total Compensation – This definition is used to determine pay based welfare benefits, such as life and disability insurance. It is defined as your current year's base pay plus the prior year's variable pay.
Total Compensation Variable Pay – Defined as incentive pay, commissions, overtime, intermittent pay, shift differential, retroactive pay adjustments, lump-sum merit pay, business or performance-based bonuses and salary continuation plans – e.g. sick pay.
Variable Pay – Includes any type of incentive or bonus tied to performance throughout the rolling 12-month calendar. This includes long-term incentive payments, annual incentive awards, commissions and special bonus plan payments.
Evidence of Insurability Any statement of proof of a person's physical condition affecting his/her acceptance for insurance.
Employer-Paid Benefits A cost incurred by your employer for your health and welfare coverage, income protection, retirement benefit, Social Security / Medicare and taxes.
Eligible Charges Charges for services covered under a benefit plan.
Flexible Spending Account (FSA) – Dependent Care Allows employees to use pre-tax dollars from their paychecks to pay for the cost of care for children or elderly dependents.
Flexible Spending Account (FSA) – Health Care Allows employees to use pre-tax dollars from their paychecks to pay for qualified health care expenses.
Flexible Spending Account (FSA) – Limited Purpose Allows employees to use pre-tax dollars from their paychecks to pay for the cost of eligible dental and vision expenses. Employees are only allowed to participate in this plan if they are enrolled in a high-deductible health plan (Consumer Choice PPO Plan).
Generic Drugs Generic drugs have the same chemical make-up of a corresponding non-preferred brand drug whose patent has expired.
Health Coverage Includes medical, dental and vision.
Health Maintenance Organization (HMO) An organization that provides pre-paid health benefits and most medical services through its network of facilities.
Health Savings Account (HSA) A Health Savings Account is the vehicle that allows employees in a high-deductible health plan (HDHP) to set aside tax-exempt contributions for current and future qualified medical expenses in an account made available through their employer or financial institution.
High-Deductible Health Plan (HDHP) An HDHP allows employees to save money on their insurance premium in exchange for a higher deductible. When employees are covered under a traditional medical plan, they pay a substantial monthly premium, whether they use the plan or not.
Income Protection Includes long-term disability insurance. Some employers also offer short-term disability and sick pay.
Major Dental Services Extensive dental procedures such as crowns, bridges and dentures.
Non-Preferred Brand Drugs A medication that has been patented for name and chemical content. Once the patent expires, generic drugs with a different name but the same chemical make-up usually become available. Non-preferred brand drugs are all other prescription drugs that are not generic or on the list of preferred drugs. The highest copay is charged for these drugs because they are either the most expensive and/or have a comparable drug that is either generic or on the preferred list.
Nonqualified Deferred Compensation (NQDC) NQDC Plans allow for additional retirement savings for select executive and highly compensated employees due to IRS limitations on employee and employer contributions to the qualified 401(k) plan.
Employee Deferrals – Allow eligible employees to make elective pre-tax deferrals. NQDC deferrals can be in addition to deferrals into the qualified Farm Credit Foundations Defined Contribution/401(k) Plan (the "Foundations 401(k) Plan").
Restore Benefits – Allow employers to restore benefits under the Foundations 401(k) Plan that are subject to the following limitations:
Code Sections – The imposition of Sections 401, 402, and 415 of the Internal Revenue Code (the "Code") as described in the next section below.
Exclusion of Contributions – The exclusion of contributions to any deferred compensation plan from the definition of "compensation" under the Farm Credit Foundations Defined Contribution 401(k) Plan.
Discretionary Contributions – Allows employers to provide discretionary contributions of deferred compensation.
Internal Revenue Code Limits – The code can significantly limit and reduce the retirement benefits under the Farm Credit Foundations Defined Contribution 401(k) Plan for highly compensated employees. 401(k) benefits affected by the following code limits are intended to be restored under the NQDC Plan:
Code § 402(g) Limit on Elective Deferrals. For 2018, the maximum amount of combined employee pre-tax and after-tax Roth 401(k) contributions to the Farm Credit Foundations Defined Contribution 401(k) Plan is limited to $18,500. An employee who is age 50 or more may contribute an additional $6,000 of "catch up" contributions (pre-tax and/or Roth after-tax), for a total of $24,500.
Code § 415 Cap on Contributions. For 2018, the maximum annual contributions that can be made to a participant's Farm Credit Foundations Defined Contribution 401(k) Plan account is capped at $55,000. An employee who is age 50 or more may contribute an extra $6,000 for "catch up" contributions (pre-tax and Roth after-tax combined). All employee and employer contributions – whether pre-tax, after-tax Roth, traditional after-tax and fixed employer/match – count against this cap, except for rollovers from other qualified plans.
Code § 401(a) (17) Limit on Annual Compensation. For 2018, compensation more than $405,000 is excluded from the calculation of employer match/contributions to the Farm Credit Foundations Defined Contribution 401(k) Plan if the employee became a participant in the Farm Credit Foundations Defined Contribution 401(k) Plan or any predecessor plan prior to 1996. Compensation more than $275,000 is excluded if the employee became a participant in the Farm Credit Foundations Defined Contribution 401(k) Plan or any predecessor plan after 1995. If a participant in the Farm Credit Foundations Defined Contribution 401(k) Plan has compensation excluded from his or her 401(k) calculations, then the employer matching contributions and/or fixed/integrated employer contributions would be limited.
Preferred Provider Organization (PPO) An organization in which networks are created with preferred providers (medical/dental professionals who have contracts with the organization to provide services at a discounted rate). Typically, benefits will be greater and costs will be lower if the participant uses an in-network provider.
Pre-Existing Condition A medical condition that could exclude employees from receiving benefits associated with that condition for a defined period of time.
Preferred Drugs These are prescription drugs that have been placed on a list of preferred drugs for a medical plan with a prescription copay. The copay for preferred drugs is less than non-preferred brand drugs but higher than a generic drug copay.
Pre-Tax /Tax Advantage Reimbursement Accounts Consists of Flexible Spending Health Care Account, Flexible Spending Dependent Care Account, Flexible Spending Limited Purpose Account and Health Savings Account. These accounts allow employees to contribute money on a pre-tax basis for a specific purpose. This helps employees lower their taxable income by using tax-free money for allowable expenses. For a list of allowable expenses, reference the IRS website at www.irs.gov, publication 502.
Preventive Dental Services Routine services such as cleanings and checkups.
Qualified Status Change An event that allows you to make coverage changes you could not otherwise make under a pre-tax plan as long as you make those changes within 31 days of the event – (marriage, divorce, etc.) Note: birth of child is 60 days of the event.
Reasonable & Customary (R&C) The average fee charged by a particular type of provider within a geographic area. Medical and dental plans use this amount to determine the maximum amount to be paid for a service.
Routine Care Includes doctor visits, exams and other services for the purpose of monitoring a diagnosed condition.
Social Security / Medicare For 2018, the estimate of the employee cost for Social Security/Medicare is calculated by multiplying your base pay up to $128,400 times 7.65% plus any eligible earnings above $128,400 times 1.45%. The estimate of the employer cost for Social Security/Medicare is calculated by multiplying an employee's base pay up to $128,400 times 7.65% plus any eligible earnings above $128,400 times 1.45%. Other company paid benefits not shown include Worker's Compensation Insurance and State and Federal Unemployment Taxes. If you would like to know more about Social Security benefits, go to www.socialsecurity.gov.
Total Rewards The total value of your benefits and pay, including total compensation and employer-paid benefits (health and welfare and retirement benefits).
Welfare Coverage Includes Life/Accidental Death & Dismemberment (AD&D) insurance.
Wellness Benefits Certain services whose priority is the prevention and early detection of conditions. It does not include care or monitoring of an existing condition.