Frequently Asked Questions (FAQs)
What is a 401(a) plan?
A 401(a) is a retirement savings plan set up by an employer and governed under Section 401(a) of the Internal Revenue Code. The Arizona State Retirement System Plan Supplemental Retirement Savings Plan (SRSP) is a 401(a) defined contribution plan created for State of Arizona employees.
Contributions are defined, meaning that once an eligible employee chooses a contribution amount, changes are not allowed. In 2012, the total amount that an employee may contribute to all 401(a) defined contribution plans is $50,000.
Note: Contributions made under 401(a) do not reduce the amounts an employee may contribute to a 457(b) or 403(b) plan.
How do employees participate?
To be eligible to participate, employees must:
- Meet the 20/20 criteria established by the State (work 20 or more hours a week/20 or more weeks a year), and
- Be at least 40 years old (or other age if the employer has chosen another eligibility age).
When employees reach the eligibility age, they have two years to make a contribution election. Employees already beyond the eligibility date have two years from the date of employment or date of adoption, whichever is later.
Why is an employee’s decision irrevocable?
The Plan, as approved by the Internal Revenue Service, requires the contribution election to be irrevocable. Employees who do not make a contribution election within the two-year window will not be able to participate in the SRSP.
How much may an employee contribute?
In 2012, the maximum amount that may be contributed to all 401(a) defined contribution plans that an employee participates in is 100% of pay or $50,000, whichever is lower.
May employees enroll online?
Not at this time. Because contribution elections are irrevocable, it is strongly encouraged that employees consult with a Nationwide® representative prior to enrolling in the plan. Nationwide will provide necessary enrollment forms. Participants may set up online account access and they always have online access to educational articles, retirement calculators, fund information and more.
Are loans allowed in the SRSP?
Yes, if the employer allows loans. The loan repayment period is 5 years for a general loan and 15 years for a primary residence loan. The maximum amount employees may borrow is whichever is less:
- 50% of the employee’s total vested amount that is loanable, minus any current outstanding loan amount
- $50,000, minus the employee’s highest outstanding loan balance for the past 12 months
Are withdrawals allowed for financial hardship?
No, but employers may elect to allow loans, in-service withdrawals of the vested portion of the employer’s matching contributions, rollover account contributions or after-tax contributions.
Are rollovers allowed?
Yes, the Plan welcomes rollovers of assets from other qualified plans. Qualified retirement plans, deferred compensation plans and individual retirement accounts are all different, including fees and when employees can access funds. Assets rolled over from employee account(s) may be subject to surrender charges, other fees and/or a 10% tax penalty if withdrawn before age 59½. Neither Nationwide nor any of its representatives give legal or tax advice. Please contact your legal or tax advisor for such advice.
Is a Self Directed Brokerage Option (SDBO) available?
Yes. An SDBO, which allows employees to open a brokerage account that may offer broader investment options, is available through Charles Schwab & Company, Inc. This program carries additional fees and application materials. Employees should call Nationwide's Phoenix office for SDBO information.
What payout distribution options are available?
When employees are ready to begin distributions, employees may request a Lump Sum Payment, rollover to another qualified plan, or other acceptable payout schedule. A Nationwide representative can discuss payout options in more detail. Withdrawals are taxable income to you in the year the payments are made.
May employees manage their own accounts?
Employees have the choice between “do-it-yourself” and “do-it-for-me.” With a do-it-for me approach, employees select a diversified asset allocation fund that is automatically rebalanced periodically.
Do-it-yourselfers determine how they want their contributions to be allocated among different funds. There are no restrictions or fees for exchanges or allocation changes, but some fund managers may impose a redemption or short-term trading fee. These fees are disclosed in fund prospectuses, and are collected by the fund company. As always, investing involves risk, including possible loss of principal.
Get the help you need
For more information, talk to a Nationwide representative.