Citi Benefits Handbook
You may save from 1% to 50% — in whole percentages — of your eligible pay. You may save on a traditional before-tax or on a Roth after-tax basis or a combination of both. However, your combined Before-Tax and Roth After-Tax Contributions may not exceed the lower of 50% of your eligible pay or the IRS limit on Before-Tax and Roth After-Tax Contributions to a 401(k) plan. For 2017 that limit (not including Catch-up Contributions) is $18,000. Your contribution election stays in place from year to year unless you make a change, you are subject to automatic increases, or you elect to have your contributions automatically increased.
Before-Tax Contributions are deducted from your pay before federal — and, in most locations, state and local — income taxes are withheld. Since your taxable income is reduced, you should owe less income tax for the current year. Before-Tax Contributions do not reduce Social Security or Medicare taxes or Social Security benefits.
Taxes are deferred on your contributions and any investment earnings on those contributions for as long as they remain in the Plan. However, you will pay income tax on all of this money when you receive a distribution of your account balance.
Even though your taxable income is reduced when you make Before-Tax Contributions to the Plan, the level of your other pay-related benefits under the Company's plans — such as life insurance benefits under the Citi Life Insurance Plan — is not affected. The value of these benefits continues to be based on your full pay (as defined under those plans) before you contribute to the Plan.
The example below assumes you are a single tax filer taking the standard deduction and one personal exemption, earn $40,000 a year, and contribute 6% of your eligible pay to the Plan for 2017. It illustrates how Before-Tax Contributions to the Plan provide more spendable income than saving the same amount outside the Plan. Please note that the tax rules may change in subsequent years. Consequently, the before-tax savings benefit may be higher or lower in such years depending on how the rules apply to your situation.
In this example, if you were eligible, the Company Matching Contribution would add another $2,400 of savings to your Plan accounts for a total savings of $4,800.
A key advantage of the Citi Retirement Savings Plan is the ability to save on a before-tax basis. Find out what this will mean to you — and your paycheck — by using the 401(k) Calculator at https://financialengines.com/education-center/topics/calculators/. You can also determine the impact the Company matching contribution will have on your savings over time.
Roth After-Tax Contributions
Roth After-Tax Contributions differ from traditional Before-Tax Contributions in the way income tax applies when you contribute and when you take a distribution from the Plan. While your income tax is not reduced when you make Roth After-Tax Contributions, your distribution may be tax-free.
When you make Roth After-Tax Contributions, your federal — and, in most locations, state and local — income tax will be withheld from your pay; then a contribution will be taken from your after-tax pay and made to the Plan. The result is that your take-home pay will be lower than if you made traditional Before-Tax Contributions to the Plan.
However, the advantages of Roth After-Tax Contributions are realized at the time of distribution. When your Roth Contribution Account is paid to you, the dollar amount of your total Roth After-Tax Contributions made to the Plan will not be taxed. Most importantly, when the investment earnings in your Roth Contribution Account are paid to you, they will be tax-free, provided that:
- You are at least age 59-1/2, permanently disabled (as defined under IRS rules), or you have died, and
- The distributions occur no earlier than during the fifth taxable year starting after the taxable year your first Roth After-Tax Contribution was made to the Plan.
For example, if you make your first Roth After-Tax Contribution during 2016, any distribution of investment earnings from your Roth Contribution Account will be tax-free if it is paid during 2021 or later (since 2021 is your fifth taxable year starting after the year of your first Roth After-Tax Contribution (2016)) and you had attained age 59-1/2, become disabled, or died before the distribution was made. Since your Roth After-Tax Contributions were made from eligible pay on which you already paid income tax in 2016, you will not owe income tax on the contributions when they are distributed.
Key features of traditional Before-Tax and Roth After-Tax Contributions are summarized in the table below.
Who May Benefit Most from Making Roth After-Tax Contributions?
The primary advantage of Roth After-Tax Contributions is that the earnings on those amounts will be paid to you tax-free if you satisfy the timing rules on payout.
You may be better off making Roth After-Tax Contributions instead of traditional Before-Tax Contributions if:
- You expect to be in a higher income tax bracket when you retire than when you contribute.
- Based on the number of years that you anticipate that you will continue to work or will wait to take a distribution, you expect to have a considerable amount of time to accumulate earnings in the Plan that ultimately may be paid to you tax-free.
- You plan to leave your 401(k) account to your heirs, since they may receive payouts of Roth After-Tax Contributions and earnings thereon tax-free.*
* Using a 401(k) account in estate planning requires an understanding of the complex rules in the Code governing 401(k) account distributions. You should consult a knowledgeable tax adviser before making any decisions.
If you want to know whether Roth After-Tax Contributions are right for you, contact the Aon Hewitt Financial Advisors (AFA) Professional Management Program, as described under "Financial Tools to Help You Manage Your Savings" for answers to specific questions about Roth After-Tax Contributions. See "Roth In-Plan Conversions" for information on converting your current non-Roth Plan balances to Roth after-tax amounts.
Tax laws limit how much money you can contribute to the Plan each year. The limit applies, as an aggregate limit, to all contributions from your pay (both Before-Tax Contributions and Roth After-Tax Contributions) that you make to all 401(k) plans to which you contribute during a calendar year. The limit may be adjusted each year for changes in the cost of living.
The limit for 2017 is $18,000, unless you also are eligible for Catch-up Contributions, as described below. Once you reach the maximum combined Before-Tax and Roth After-Tax Contributions (and, if applicable, Catch-up Contributions) for the year, your payroll deductions will stop automatically. Payroll deductions will resume automatically in the following year as long as you continue to have a contribution election on file.
If you have contributed to another employer's plan during the current calendar year, it is your responsibility to ensure that you do not exceed the IRS's annual contribution limit once you start contributing to the Plan. If you exceed the limit, you may be liable for a penalty tax. To help ensure you do not exceed the limit, you may request a Citi Retirement Savings Plan 402(g) Refund Request Form. To request a copy of this form, contact the Plan as instructed under "How to Contact the Plan."
Participants who are age 50 or older by the end of each calendar year may make additional contributions, called Catch-up Contributions, to the Plan for that year. Catch-up Contributions are subject to a separate limit ($6,000 for 2017).
If you are eligible to make Catch-up Contributions for 2017, you may contribute as much as $24,000 to the Plan ($18,000 in regular contributions plus $6,000 in Catch-up Contributions). The Catch-up Contribution election is separate from your regular contribution election and can be for a different percentage of eligible pay. You may elect to contribute from 1% to 49% of eligible pay for Catch-up Contributions in addition to contributing up to 50% of eligible pay for regular contributions.
When you enroll to make Catch-up Contributions to the Plan, you must indicate whether your Catch-up Contributions are to be made on a traditional Before-Tax and/or Roth After-Tax Contribution basis.
Note: Your Before-Tax and/or Roth After-Tax Contributions will be deducted from your eligible pay before Catch-up Contributions are deducted. Once you reach the maximum Catch-up Contribution for the year, your payroll deductions for Catch-up Contributions will stop automatically. Payroll deductions will resume automatically the following year as long as you continue to have a Catch-up Contribution election on file.
The Company does not match your Catch-up Contributions and Catch-up Contributions are not considered in the calculation of the Plan's Company Matching Contribution. Only contributions made on a Before-Tax and/or Roth After-Tax basis up to the limit of $18,000 (for 2017) are considered in the calculation of the Company Matching Contribution.
You can call the Plan or visit the Plan's website accessible through TotalComp@Citi at www.totalcomponline.com to enroll to make Catch-up Contributions. If you make Catch-up Contributions to another employer's 401(k) plan and to the Plan in the same calendar year, you are responsible for ensuring that the total amount of Catch-up Contributions does not exceed the maximum Catch-up Contribution allowed by the Code for that year. If you have contributed to another employer's plan, you should complete a Citi Retirement Savings Plan 402(g) Refund Request Form to notify the Plan how much you have contributed to a prior employer's plan during the current calendar year.
Changing or Suspending Your Contributions
You can change your contribution rate (the percentage of eligible pay you contribute to the Plan), stop your contributions, or start them again at any time.
To make a change, contact the Plan as instructed under "How to Contact the Plan." Your change will become effective as soon as administratively possible.
Note: Generally, whenever the amount of your eligible pay changes, the dollar amount you contribute to the Plan also will change. For example, if your eligible pay increases from $2,000 to $2,100 per pay period, and you contribute 6% of your eligible pay to the Plan, your contribution automatically will increase from $120 to $126 each pay period.
Contributions from Cash Incentive Awards
If you receive monthly, quarterly, or annual cash incentive awards and you contribute to the Plan, a regular contribution and, if applicable, a Catch-up Contribution automatically will be deducted from your cash incentive award at the same percentage of eligible pay that you elected for your regular contribution and Catch-up Contributions.
If you receive an annual discretionary award package composed of a cash bonus, a deferred cash award and a stock award, a 401(k) contribution will be taken from the immediately payable cash portion of the award package.
However, you may be permitted to suspend your contribution from the immediately payable cash bonus portion of your award that is typically paid at the end of January. The suspension applies only to the award and does not change your contribution election applicable to other eligible pay.
If you contribute to the Plan and/or have a Plan loan, check your pay statement to be sure the correct amount is being deducted. Citi makes every effort to deduct the correct amounts, but it is your responsibility to review your pay statement. If you discover any error in your deduction or loan payment amount, call the Plan immediately as instructed under "How to Contact the Plan."
You may roll over before-tax and after-tax amounts and Roth after-tax amounts distributed to you from another employer's qualified plan, a 403(b) plan, a 457(b) plan of a government entity, another qualified retirement vehicle, or a conduit IRA (a traditional individual retirement account that holds only assets distributed from a qualified plan) into the Plan. Before-tax amounts (and their earnings, if any) that are contributed to the Plan will be held in your Rollover Account, and Roth after-tax amounts (and their earnings, if any) will be held in your Roth Rollover Account.
These amounts must be rolled over into the Plan within 60 days from the date they are distributed to you. You also may request that these amounts be directly rolled over into the Plan from a prior employer's eligible retirement plan through a direct transfer. At this time, the Plan does not allow rollover contributions from a Roth IRA.
To obtain more information and a Rollover Form, call or visit the Plan's website as instructed under "How to Contact the Plan."