City of Alexandria, VA
Using Payroll Deduction for Roth IRA's
The City is now providing employees an additional way to save for retirement. Employees who enroll in a Payroll Deduction Roth IRA account with ICMA-RC will be able to make contributions to that Roth IRA account using payroll deductions.
The Payroll Deduction Roth IRA is another product from ICMA-RC, the City’s deferred compensation provider. Employees who enroll in the Payroll Deduction Roth IRA establish an account with ICMA-RC. The City does not own or sponsor the Roth IRA, but the City is providing employees the ability to make contributions to their ICMA-RC Roth IRA through payroll deductions.
What Is a Roth IRA Account?
A Roth IRA is one type of an individual retirement account. If you qualify based on your personal financial situation, this is a retirement savings account you have with a financial institution such as a bank or ICMA-RC that allows you to save in a tax-advantaged manner. A Roth IRA account allows you to save for retirement with after-tax contributions. A Payroll Roth IRA allows you to make payroll-deducted contributions to your Roth IRA.
A Roth IRA is different from both a Traditional IRA and the City’s 457 Deferred Compensation Plan because you make contributions with after-tax money. However, if you meet certain conditions, you will be able to withdraw the Roth IRA contributions and earnings tax-free. If you currently contribute to the City’s 457 Deferred Compensation Plan with ICMA-RC you are still eligible to participate in a Roth IRA. You may be able to make up to the maximum contributions to the Roth IRA even if you make the maximum annual contributions to the 457 Plan.
While each person’s financial situation may be different, you may be able to make after-tax contributions up to $5,000 ($6,000 if you are 50 or older) to a Roth IRA in 2010. The actual amount that you may contribute each year will be determined by taxable income, contribution limits, and age limitations.
Is the Roth IRA New?
The Internal Revenue Service (IRS) created Roth IRAs several years ago, and you may already have one. The feature now available for City employees is the ability to enroll in a Payroll Deduction Roth IRA account with ICMA-RC and make contributions using payroll deductions.
Any employee who already has a Roth IRA with ICMA-RC who wants to make contributions using payroll deductions can call ICMA-RC at 800.669.7400 to convert their Roth IRA to a Payroll Deduction Roth IRA.
Who Is Eligible to Participate in This Payroll Roth IRA with ICMA-RC?
All regular, full-time employees and regular, part-time employees who are scheduled to work at least 50 percent of the time may participate in the Payroll Roth IRA with ICMA-RC.
Why Might You Consider Using the Payroll Roth IRA to Save for Retirement?
How Can I Find More Information on the ICMA-RC Payroll Deduction Roth IRA?
This ICMA-RC brochure provides general information about the Payroll Deduction Roth IRA with ICMA-RC, contribution limits, and withdrawal provisions and limitations. You may also want to talk with your tax or financial advisor to determine if the Roth IRA is appropriate for your savings goals.
For general questions on the Roth IRA including rules on withdrawals call ICMA-RC at 800.669.7400 from 8:30 a.m. – 9:00 p.m. Monday – Friday. For general questions regarding the process to begin payroll-deducted contributions to an ICMA-RC Payroll Deduction Roth IRA or to request an enrollment package with plan information contact the Pension Administratio Division by email.
To read information regarding Roth IRAs and taxes you may want to visit the IRS website, www.irs.gov, and read Publication 590, Individual Retirement Arrangements. For questions on your specific maximum contribution limit each year and the tax consequences of saving or withdrawing from a Roth IRA contact your tax or financial advisor.
What Do I Need to Do to Start Participating in the ICMA-RC Payroll Deduction Roth IRA?
Be sure to keep copies of all materials you send to ICMA-RC or to the Pension Division. Once your Roth IRA contributions are deducted from your paycheck, they will continue unless your payroll deducted contributions reach the annual maximum contribution limits ($5,000 if younger than 50, $6,000 if 50 or older). It is your responsibility to determine what your maximum Roth IRA contribution limit is each year and to notify the Pension Division if you reach that limit. Payroll does not track each employee’s individual Roth IRA contribution limit since you can have Roth IRA accounts outside of the City Roth IRA accounts.
ICMA-RC will mail a confirmation to your home address each time it receives a contribution to your ICMA-RC Payroll Deduction Roth IRA Account. That confirmation will also provide you with a coupon in case you want to also send an additional contribution directly to ICMA-RC. Payroll will not receive any information of contributions you mail directly to ICMA-RC. If you choose to make contributions directly to ICMA-RC you will need to track all of your contributions and notify the Pension Division if you have met your contribution limit for the year.
When Will There Be Informational Meetings on the ICMA-RC Payroll Deduction Roth IRA?
Gloria Moody, the City’s ICMA-RC representative, will hold meetings on the ICMA-RC Payroll Deduction Roth IRA on the following days:
Ms. Moody will remain in the room after each one-hour meeting if employees still have questions. Employees who are not able to attend either meeting may contact Ms. Moody directly with their questions or to arrange an appointment to meet and discuss the Payroll Deduction Roth IRA, the 457 Deferred Compensation Plan, or any other ICMA-RC product.
An employee who enrolls in the ICMA-RC Payroll Deduction Roth IRA is entering into a financial arrangement with ICMA-RC. The City is providing employees the opportunity to make payroll-deducted contributions, but the City does not own or sponsor the plan. The Vantagepoint Payroll Deduction IRA Enrollment Package includes important information about the ICMA-RC Payroll IRA. Be sure to read the brochure, Custodial Account Agreement & Disclosure Statement (Vantagepoint Roth and Traditional IRA).