401(a) Plan Overview

Below are the important features about your plan. This website is intended to be a summary of the plan provisions. In the event that a conflict exists between the information contained within this website and the Plan Fact Sheet, the Plan Fact Sheet provisions prevail. For more information, please contact your local representative.

Eligibility

Each Unclassified/Unit 99 employee hired on or after January 20, 2013 who has never been a member of the City’s Retirement System, has a one-time irrevocable election to either: (1) become a participant in the Tier 3 401a plan and make mandatory employee contributions to this plan; or (2) become a participant as a Tier 2 member in the federated employees retirement plan under Chapter 3.49, by executing a written election form on or before his or her first day of employment with the city.

If the employee fails to timely file a written election form with the city on or before that date, the employee will be deemed to have elected to participate as a Tier 2 member in the federated employees' retirement plan under Chapter 3.49.

Each employee shall have only one election (including a default election) to participate in the plan, and that election cannot be changed for any reason. If an employee who has made an election (including a default election) under this section leaves employment with the city and later returns to city employment in a capacity/position that would be covered by the plan, the employee's prior election will determine whether or not the employee participates in this plan. An employee who becomes a participant in this plan (and any survivors of such a participant) shall not eligible for retiree medical, dental, or other health and welfare benefits under Part 16 and Part 17 of Chapter 3.49.

Mandatory Contributions

Contributions under the Tier 3 401a Plan cannot be less than 7.5% each year. Under the Plan both the employee and the City make contributions. Employees are required to contribute 3.75% of gross compensation per pay period to the Plan (“mandatory contributions”). The City of San José will also contribute an amount equal to 3.75% of the employees’ gross compensation each pay period. Other than the required contributions and the City’s matching contributions, no additional contributions can be made under the Plan; however, employees may elect to participate in the Voluntary 457 Plan if they will to contribute additional amounts.

The employees’ contributions are made on a tax-deferred basis. This means that the contributions are not subject to Federal or State income tax at the time they are invested in the Plan. Participants will be taxed on the value of your contributions (including any earnings) when they receive a distribution of your benefits from the Plan. The participant will at all times be one hundred percent vested in the contributions paid by the city to the plan.

Unless your employment status changes, you may not stop or reduce mandatory contributions to the Plan.

Investment Information

Employees who elect Tier 3 will complete an EZ Enrollment Form which will direct contributions to an age based Target Date Fund. The specific target date fund is based upon your date of birth - not your anticipated retirement age as these funds are intended. You can choose how you want your future contributions invested by logging in to your account and making your elections. If you don’t actively select your investments, future contributions will be invested in the Target Date Fund. A full list of the available investments can be found here. Generally speaking, Target Date funds target a certain date range for retirement, or the date the investor plans to start withdrawing money. Investors can select the fund that corresponds to their target date. They are designed to rebalance to a more conservative approach as the date nears. An investment in the Target Date fund is not guaranteed at any time, including on or after the target date.

Distribution of Benefits

A participant may elect the method of payment and the settlement options for distribution in the event of separation from service. A participant may elect the method of payment and the settlement options for distribution in the event of the participant's death at any time before his or her death. If the participant fails to make an election of the method of payment before his or her death while still in employment status, the participant's beneficiary may elect the method of payment at any time before payments are due.

Payment Options

When you are entitled to a distribution of benefits under the Plan, you have the choice from a variety of payout options*. These include:

  • Distribution over your lifetime.
  • Distribution over your lifetime and the lifetime of your designated beneficiary.
  • Distribution over a set period, not extending beyond your life expectancy.
  • Distribution over a set period of time, not extending beyond the joint and last survivor life expectancy of both you and your designated beneficiary.
  • Systematic withdrawal of your account over a specified period, or of a specified amount.
  • Lump sum, or partial lump sum distribution, in combination with other options.
  • Transfer of all or a portion of your benefits to another eligible 457(b) Deferred Compensation Plan.
  • Rollover your benefits into another employer-sponsored or eligible retirement plan (an eligible retirement plan is a 401 qualified plan, a 403(b) tax deferred annuity program, or another governmental 457(b) deferred compensation plan).
  • Rollover your benefits into an IRA

* Some options require a minimum account balance

Estate Conservation Option (ECO)

This option will provide you with the Required Minimum Distribution (RMD) Amount determined according to Internal Revenue Service (IRS) requirements. Annual amounts are calculated by dividing your previous December 31 account value by a life expectancy factor. The life expectancy factor is determined by IRS tables and may be based on your life expectancy or the joint life expectancies of you and your designated beneficiary. Joint life expectancy results in smaller distributions and benefits are spread over a longer time.

  • ECO can only be elected if you are at least age 72 and retired.
  • The minimum account cash value to elect ECO is $5000.
  • Payments are made annually.
  • Payments are recalculated each year by IRS tables, unless otherwise required by law.

We are not responsible for calculating minimum distributions in the year amounts are rolled to us.

Taxation

Amounts distributed directly to you from the plan will only be taxable to you when actually paid, will be reported on IRS Form 1099R, and will be subject to 20% federal tax withholding (to the extent that the distribution is rollover eligible). 457(b) plan benefits are not subject to the IRS 10% premature penalty, even if distributed prior to attaining age 59½. Distributions from the Plan can be rolled into a traditional IRA or an eligible retirement plan, such as a 401(a), 401(k), 403(b), or other governmental 457(b) plan.

Divorce

In the event of your divorce, the court may issue a domestic relations order that addresses the split of your account and the payment of a portion of your benefits to an alternate payee. Voya® will review your domestic relations order to determine whether it satisfies the Plan and IRS requirements for a Qualified Domestic Relations Order. If it does, and the alternate payee is your former spouse, he or she is entitled to elect immediate distribution of the amounts awarded under the QDRO. A spousal alternate payee is also eligible to rollover amounts awarded to another eligible retirement plan in which he or she participates. Please review the Human Resources Divorce Information document before initiating the process. To obtain additional information, including the paperwork Voya® will need from the City, please contact Service Center.

Death Benefits

Upon your death, benefits would be payable to the beneficiary(ies) that you designated under the Plan. If the participant dies without naming a beneficiary or if the person(s) named are no longer alive at the time of death, the account balance will be paid to the estate of the participant in a lump sum. The Plan will provide a variety of payout options available for the payment of death benefits to beneficiaries. Your beneficiary must notify Voya Financial® of your death and make a payment election in accordance with the Plan.

 

It is important to note: If you have a change in status, your designation is not automatically updated. For example, if your spouse is your beneficiary, that designation is not void as a result of your divorce. Your ex-spouse would remain your plan beneficiary until you make a change to your designation. The beneficiary you designate under the Plan is separate from any designation you may have made under the City’s pension plan or other programs in which you participate. If you are unsure who your current beneficiary is, you may contact Voya® for further information and assistance.

More information can be found in the City’s Municipal Code by clicking here.

 

Insurance products, annuities and retirement plan funding issued by (third party administrative services may also be provided by) Voya Retirement Insurance and Annuity Company, One Orange Way, Windsor, CT 06095-4774. Securities are distributed by Voya Financial Partners LLC (member SIPC). All companies are members of the Voya® family of companies. Securities may also be distributed through other broker-dealers with which Voya has selling agreements. Insurance obligations are the responsibility of each individual company. Product and services may not be available in all states.