Texa$aver 401(k) / 457 Program

Texa$aver is a voluntary retirement savings program offered through ERS. Texa$aver can help you save for your future today.

Many financial experts agree that you will need 70-100% of your income to maintain your current way of life in retirement. And while you may receive money in the form of a pension and Social Security benefits when you retire, that may not be enough. The ERS retirement plan does not provide automatic annual cost of living adjustments (COLA). And while you may receive money in the form of a retirement annuity and Social Security benefits when you retire, that may not be enough.

That's where the Texa$aver 401(k)/457 Program comes into play.

You’re already contributing to your ERS retirement, but that may only replace about 50% of your salary when you retire. Even Social Security with your ERS retirement probably won’t add up to your working monthly income. By contributing to the Texa$aver program, you can bridge the gap and be more prepared to meet your retirement goals. For additional information click on the Plan Highlights link.
 

To have a comfortable retirement income, you cannot rely on a pension plan and Social Security alone. Instead, you will need to plan, invest and make good use of tax-advantaged savings like the Texa$aver program. With the Texa$aver voluntary retirement savings program, you can increase your personal retirement savings to bridge the financial gap.

You already contributed to the ERS retirement fund, with the State and the agency you work for also contributing on your behalf, but your ERS annuity may replace only about 50% of your salary when you retire. State of Texas Retirement does not include automatic cost-of-living adjustments (COLAs). During retirement, a Texa$aver account can help you weather inflation and things like increased medical expenses as you age.

1. Sign into your account  on the Texa$aver website  to enroll in or make changes to your 401(k) or 457 Plan any time of the year.
2. Choose between the 401(k), 457, or both accounts, if offered by your employer.
3. Decide how much should come out of your paycheck before taxes each month. (Use the Texa$aver Resource Center to help you decide. Review the minimum/maximum contributions per year.)
4. Choose your investments. The Texa$aver Advisor Service can help with your choices.

If you do not have internet access, you can enroll/make changes by calling Texa$aver at (800) 634-5091 or mailing in your form (401(k) form or 457 form).

Important note:  As part of the enrollment process, make sure you designate a beneficiary  for your account in the event of your death. This is different from your ERS retirement beneficiary designation.
 

Participants have access to objective, personalized investment advice through the Texa$aver Advisor Service. Financial advisors can provide advice about investing your Texa$aver account money. They can help you build a personalized profile of your financial resources and a plan to help you meet your retirement goals. Advisors can build a profile of your financial resources and a plan to help you meet your retirement goals.

The Target Date Funds offer a simple solution to investing for retirement.  Watch the Target Date Fund video to learn more. With a single decision, you'll get a fund that is:

• expertly managed, 
• well diversified across a range of asset classes and investment styles, 
• invested based on your time frame until retirement (becoming more conservative as you move to retirement), and
• each month the Fund is automatically balanced between stocks, bonds, and cash.  

The minimum contribution amount to the 401(k) and 457 plans is either $20 or 1% of your monthly gross salary. The annual maximum contribution limit is 99% of your eligible compensation or the IRS limited amount per year, whichever is less. Federal tax law has set the limit, which is subject to annual adjustments based on the cost of living index. Contributions are automatically deducted from your paycheck and traditionally withdrawn on a pre-tax basis.

If you are age 50 or older by year-end, you are automatically eligible to participate in the Age 50 and Over Catch-up. If you contribute the maximum amount, you can make an additional $6,000 "catch-up" contribution annually.

First, decide whether it is a direct or indirect rollover. Use the forms located on the Texa$aver website. You can also call (800) 634-5091 for help with rollovers.

Direct Rollover

A direct rollover is when a distribution from your former employer is made to your Texa$aver 401(k) or 457 Plan. This lets you avoid a 20% withholding by the IRS. Follow these steps:

1. Complete the appropriate Incoming Transfer/Rollover Request form, sign it, and mail it to the address on the form. Include a copy of your statement from your former employer's retirement plan.
2. Once you receive an approval letter, complete your previous employer's required form using the payment instructions indicated in the approval letter.

Indirect Rollover

An indirect rollover is when you get a check from your previous employer 401(k) or 457 Plan. The previous employer usually withholds 20% of this check for federal income tax. Follow these steps:

1. Complete the appropriate Incoming Transfer/Rollover Request form.
2. Sign the form and mail to the address on the form. Include a copy of your statement from your previous employer's retirement plan and the check for the amount you are transferring.
3. To avoid an IRS penalty, mail the rollover distribution check within 60 days of receipt. 

The Texa$aver 457 plan also allows you to double your annual contribution limit if you are within three years of retirement age. Keep in mind you cannot use the Special 457 Catch-up in conjunction with the Age 50 catch-up.

In the last three years prior to retirement, you may defer up to double the normal Section 457 contribution limit. Visit the Texa$aver website for annual limits and more information.

Please see the Plan Highlights document for more information about account fees.

Texa$aver has a variety of distribution options to suit your financial needs when you retire or leave employment. You can change your distribution arrangement as many times as necessary. You must start taking distributions once you reach age 70½.

You can initiate a distribution after you leave employment by submitting a distribution form. Use the Distribution/Direct Rollover Request form available from the Texa$aver website. Payout options include:

• periodic payments,
• partial distributions,
• roll over part or all of the balance into another qualified plan or an IRA or
• take all of the money as a lump-sum distribution. 

You are encouraged to talk with your tax advisor or financial planner before deciding to take your distribution. 

Generally, taxes are withheld at 20% of any amount you withdraw from your account. 
 

There are two types of withdrawals available through the Texa$aver program while you are an active employee: Age 59½ withdrawals and financial hardship withdrawals. 

Age 59½ withdrawals can only be taken from your 401(k) account if you are age 59½ or older. You will not have a penalty; however, a 20% tax on your withdrawal will be withheld if the funds are not rolled over to an IRA or other qualified plan. Funds that are rolled over will not be subject to taxes at that time. For more information or withdrawal assistance, please call the Texa$aver customer service center at (800) 634-5091. 

Financial hardship withdrawals can be taken for any of the following reasons:

• payment of non-reimbursed medical expenses, 
• purchase of your primary residence, 
• prevent eviction from or foreclosure on your primary residence, 
• qualified post-secondary education expenses, 
• funeral expenses for family members and 
• principal residence repair. 

You must exhaust your 401(k) and/or 457 loan option (if applicable) before you can apply for a financial hardship withdrawal. You can request a form by calling the Texa$aver customer service center.

Note: Distributions are subject to federal income taxes.

You must begin taking distributions from your account at age 70½ (if you are retired). The required minimum distribution is calculated separately for each Plan using your account balance as of the last day of the previous year.

1. If you have turned 70½ in the calendar year, you will have until April 1 in the following calendar year to take your required minimum distribution.
2. If you are still employed, and you have already begun taking your required minimum distribution, you may choose to stop receiving distributions until you retire.
3. If you have retired and do not take the required minimum distribution in a given year, you will be penalized 50% of the amount that should have been distributed.

You should consult with your own tax advisor or the IRS to discuss the best way to comply with the rules based on your individual financial needs. Contact Texa$aver to set up your plan.

You do not have a penalty for withdrawals taken from your 401(k) account if you are age 59½ or older. However, a 20% tax on your withdrawal will be withheld if the funds are not rolled over to an IRA or other qualified plan. Funds that are rolled over will not be subject to tax at that time. For more information or withdrawal assistance, contact the Texa$aver program.

If you're under age 59½, you may have to pay an additional 10% when you file your tax return. If you are still working when you are 59½, you can take money out of your 401(k).