New York State Deferred Compensation

 

New York State Deferred Compensation is a voluntary retirement savings plan sponsored by the New York State for the State employees as well as other employees of local government jurisdictions which have opted to adopt it. Aimed to help the State and public employees in achieving the retirement savings goals, New York State Deferred Compensation Plan (NYSDCP) offers high quality & cost effective investment products as well as some other investment educational programs and allied services. New York State Deferred Compensation Plan is supervised by the New York State Deferred Compensation Board.

New York State Deferred Compensation Plan can have a major impact in your retirement. You contribute to the plan through your paycheck, which is made before taxes are withheld. As a result, there is an opportunity to save income tax. Distributions are considered as ordinary income. You need to pay taxes on those in the year you receive.

Features

Following are some of the key features of New York State Deferred Compensation Plan.

  • Contributions are automatically made through payroll deductions.
  • You have got an extensive variety of investment options to choose from. You can also diversify your investments.
  • You don’t have to pay income taxes on the contribution amount. Your income tax is calculated after deducting the contribution amount from your total earning. Hence, by contributing to New York State Deferred Compensation Plan, you can save on your income tax as well.
  • You won’t even have to pay any current income tax on the interest amount or the investment earnings that you get through the plan.
  • You will only have to pay the taxes when you get the money from your plan. This is usually the time when you retire from your work and in all probability, you will fall in a lower tax bracket.
  • Moreover, there is a provision of an income tax exemption of up to $20,000 on the received amount from your plan account, if you are a New York State resident with at least 59½ years of age.
  • Benefits are only available when you leave work from the government employer permanently.

Contribution to the Plan

You can decide how much amount you want to contribute to your plan. However, your contribution must start from 1 percent of your compensation up to 100 percent of your includible compensation after deduction. However, the contribution must not be less than $10 per pay period. For 2009, the regular deferral limit of the plan is $16,500.

You always have the option to increase, decrease or suspend your contributions. For that, you just need to dial the helpline number. You can also do it through the website.

Where to Invest?

You can invest your money in two ways, viz. managing individual funds or choosing a retirement date fund. You may choose to invest in the following:

  • T. Rowe Price Retirement Date Funds
  • Stable Income Fund
  • Bond Funds
  • Balanced Funds
  • U.S. Common Stock Funds
  • International Stock Funds