FAQs - Roth Contributions

1. What are Roth contributions?  Are they different from traditional pre-tax contributions?

Roth contributions are voluntary contributions that are made on an after-tax basis. The amount you contribute is included in your W-2 in the year you make your contribution. Roth contributions and any earnings on those contributions are tax-free upon distribution because you already paid income tax on your Roth contributions.  A withdrawal of your Roth contributions is always 100% federal income tax free.

Traditional contributions are made on a before–tax basis, reducing your taxes at the time you make the contribution. Traditional pre-tax contributions, and any earnings on those contributions, are subject to ordinary taxes upon distribution.

Deciding which contribution type is better for you is a personal decision as you can choose to contribute pre-tax contributions, Roth contributions, or a combination of both.

 

2. Can I contribute both pre-tax and Roth contributions to the New Jersey State Employees Deferred Compensation Plan (NJSEDCP)?

Yes. You can choose to contribute pre-tax contributions, Roth contributions, or a combination of both.

 

3. How much can I contribute to the Plan if I make pre-tax and Roth contributions?

The IRS limit applies to the combined contribution amount. The limit for 2012 is $17,000. You may also be eligible to make catch-up contributions. Your Plan offers two types of catch-up contributions. If you are age 50 or over as of December 31, 2011, you can contribute an extra $5,500 for a total contribution amount of $22,500 in 2012. Your Plan also offers a Special 457 Catch-up for participants who have not always maximized their annual contributions to the NJSEDCP. If eligible, your maximum annual contribution would be $33,500 in 2012.

 

4. Do I need to set up another account to make Roth contributions?

No. You would only need to select an allocation percentage for your Roth contributions. You may do this by logging into your account at Prudential online or by completing the Deferred Compensation Change Request Form.  The contributions will be made to your existing NJSEDCP account.  

If you are not currently participating in the NJSEDCP and would like to participate, please complete the NJSEDCP Enrollment Form.  

 

5. What is a 5-taxable-year period of participation? How is it calculated?

The 5-taxable-year period of participation begins on the first day of the calendar year in which you make your first Roth contribution to the Plan and ends when five consecutive calendar years have passed.

 

6. How do I keep track of my pre-tax and Roth contributions?

Roth contributions will be tracked separately both on your paycheck and in your account at Prudential Retirement. Roth contributions will be listed as a separate ‘source’ of money on the participant website and on your quarterly statement.

 

7. Can I make Roth contributions to the NJSEDCP and to a Roth IRA?

Making Roth contributions to the Plan does not impact your eligibility to make Roth IRA contributions. Based on your income, however, you may not be able to contribute to a Roth IRA.

 

8. Can I roll my Roth IRA into the NJSEDCP?

No. The law does not allow Roth IRAs to be rolled into the Plan.

 

9. Where do I get more information about Roth Contributions?

For additional information about the Roth Contributions visit the Prudential website.

You may call your Prudential representative, Susan McAleavey at 1-866-657-3327

You may call a Benefits Specialist at 848-932-3990

 

 

 

 

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Last Updated: 01/10/2012