February DC Update: Nifty Saves of Pay
America Saves Week
Whether you like it or not, February is the month of love. And this year things are really heating up with a highly anticipated event that has everyone talking. We're of course talking about America Saves Week. Running from February 23-28, America Saves Week is a national event promoting good savings habits among Americans. If you're participating in the deferred compensation plan — as 70% of state of Missouri employees are — then you're already on the right track, but we encourage you to take advantage of this annual event by assessing your savings situation. If taking a serious look at your savings habits sounds a little scary, don't worry, we'll help you out along the way. Each day of America Saves Week we'll post a savings tidbit (or two) on our social media channels. All you have to do is catch up with the deferred compensation plan on Facebook, Twitter, LinkedIn or YouTube so you can follow all of the week's posts.
Saver's Credit
Have you started preparing your 2014 tax returns yet? Whether you prepare them yourself or work with a tax professional, don't forget about the saver's credit, which is a tax break for low to moderate-income taxpayers who are saving for retirement. Why is a tax credit so important? Unlike a tax deduction, a tax credit is a dollar-for-dollar reduction of your tax bill. It's the government's way of rewarding American's who are saving for retirement. As you can see in the table below, the saver's credit is calculated using your adjusted gross income (AGI) and filing status. Depending on those variables, a certain percentage of your contributions could result in a credit.
2015 Saver's Credit Limits
| Credit Rate | Married Filing Jointly | Head of Household | All Other Filers* |
| 50% of your contribution | AGI not more than $36,500 | AGI not more than $27,375 | AGI not more than $18,250 |
| 20% of your contribution | $36,501 - $39,500 | $27,376 - $29,625 | $18,251 - $19,750 |
| 10% of your contribution | $39,501-$61,000 | $29,626 - $45,750 | $19,751 - $30,500 |
| 0% of your contribution | more than $61,000 | more than $45,750 |
more than $30,500 |
*Single, married filing separately, or qualifying widow(er)
As an example, if an unmarried state employee earning $25,000 a year contributed $600 to the deferred compensation plan in 2014, he or she would receive a credit of $60. That's 10% of this employee's total contributions since his or her adjusted gross income falls in the 10% credit range.
Tax credits, while powerful, do have their limitations: They can only be used when a taxpayer has a liability, or, in other words, owes money to the government at tax time. A tax credit will not result in or add to a tax refund. The maximum saver's credit is $1,000 for singles or married couples filing separate returns and $2,000 for married couples filing joint returns. Visit the IRS website for more information on the saver's credit.
Now That's a Great Question
Every so often we like to highlight popular participant questions in a segment we call Now That's a Great Question. This month's great question is: Can I defer my annual leave payout into my deferred compensation plan account when I retire or leave state employment?
As a refresher :
“An employee entitled to annual leave who has resigned or otherwise separated from service shall be entitled to receive reimbursement for the amount of this accrued leave….”
Source: OA Personnel Website
Employees do indeed have the ability to defer all or a portion of that annual leave payout amount to a deferred compensation plan account, so long as doing so doesn't result in an annual contribution total that exceeds the IRS limits. If this is something you're interested in doing, you can download and fill out the Accrued Vacation and Other Leave Deferral Change Form, then submit it to your payroll department. The timing of your submission is extremely important, as this form must be signed and on file with your payroll office prior to the first of the month in which you will separate service. If you have additional questions regarding annual leave deferrals, contact a participant service representative at 800-392-0925.
Market Uncertainty
By now you've surely noticed the low prices at the gas station. These low costs are the result of a historic drop in worldwide oil prices. While you won't hear many people complain about cheaper prices at the pump, you may have heard more than a few news reports about how oil prices and Europe's economic conditions are impacting the markets. In times like this, it's important to remind yourself that saving for retirement is a long-term journey. While you may experience some fluctuations in your deferred compensation plan account from one day or month to the next, keep your attention focused on the future. Knee-jerk reactions, like "getting out of" or selling a fund because of short-term underperformance, could ultimately hurt your chances of meeting savings goals. As difficult as it may be, we encourage you, the investor, to stay the course and keep your focus on the long term.
Stay Connected with the Plan on Facebook, Twitter, LinkedIn and YouTube
If you're new to the state, or the deferred compensation plan, don't forget to check out our informative videos on the Plan's YouTube channel. With new videos added monthly, also be sure to subscribe to our channel so you can be the first to see the latest deferred compensation plan updates. Also, if you haven't done so already, please be sure to join your coworkers who have found the Plan online at our other social media outlets – Facebook, Twitter, and LinkedIn. Connecting with the Plan on social media is a great way to receive the latest Plan news, important savings tips and much more. Until next month, this has been Casey Fick from the State of Missouri Deferred Compensation Plan, your smart, simple savings solution.