Roth & Traditional

IRA Guidebook

2021 Individual Retirement Accounts At-a-Glance Roth IRA Traditional IRA

Eligibility Members of Utah Retirement Systems are eligible to participate. Members of Utah Retirement Systems are eligible to participate. You may contribute as long as you have earned income. You may contribute as long as you have earned income.

Maximum Annual Contribution limits are the same for both the Roth IRA and Traditional IRA. Contributions to all IRAs must be combined toward Contribution the total limit. For example, if you contribute $1,000 to a Traditional IRA at your bank and another $1,000 to your URS (This is the total Traditional IRA (total of $2,000), you may only contribute up to $4,000 to your Roth IRA (for a total of $6,000 in 2021). amount for all IRAs The maximum annual contribution limit is $6,000 for 2021. you may have.) IRA For those ages 50 and older an additional “catch-up” contribution of $1,000 may also be made, bringing the total to $7,000 in 2021. Contributions » A single income tax filer with income up to: No income limits. are subject to $125,000 — qualifies for a full contribution Roth & Traditional income limits. $125,000 to $140,000 — qualifies for a partial contribution Individual Retirement Accounts If you are: over $140,000 — cannot contribute See Page 3 for deductibility income limits for active participants. » A married/joint income tax filer, with income up to $198,000 — qualifies for a full contribution $198,000 to $208,000 — qualifies for a partial contribution Utah Retirement Systems (URS) over $208,000 cannot contribute

administers a Roth IRA and a Rollover/Transfers You may roll over or transfer money into a Roth IRA from: You may roll over or transfer » 401(k) » Traditional IRA » Roth IRA » 457(b) » 403(b) money into a Traditional » 401(a) » 403(b) Contents Traditional IRA. Individual retirement accounts » Roth 401(k) » 401(a) » Qualified Pension (only IRA from the following: » 457(b) » Pension (only a lump- » Roth 403(b) » 401(k) a lump-sum distribution) sum distribution) (IRAs) combined with other retirement plans See page 6 for details. IRAs At-a-Glance . . . . 1 (e.g., 401(k), 457(b), pension, Social Security, Convert IRA You may convert all or part of your Traditional IRA to your Roth IRA. You may convert all or part of a Traditional IRA to a Roth IRA. Roth IRA ...... 2 Amounts converted from a Traditional IRA to a Roth IRA are Amounts converted from a Traditional IRA to a Roth IRA are etc.), provide additional options to save for subject to income taxes, but are not subject to the 10% early subject to income taxes, but are not subject to the 10% early Traditional IRA . . . . . 3 withdrawal penalty tax. See Page 7 for more details. withdrawal penalty tax. See Page 7 for more details. retirement and may assist you in your tax and Roth and Key Tax Advantage Federal tax-free growth (earnings may also be free of state income taxes). Tax-deferred growth. Traditional IRA estate planning. Contribution Limits . . . . . 5 Tax-Deductible Contributions to a Roth IRA are not deductible from your income The deductibility of contributions is subject to modified adjusted gross A Roth IRA allows nondeductible (after-tax) Contributions for tax filing purposes. income (MAGI) limits and participation in an employer-sponsored retirement plan. (See page 3 for MAGI limits.) Transfers and Rollovers ...... 6 contributions. This gives you the advantage of Withdrawal Eligibility A withdrawal may be made at any time. A withdrawal may be made at any time. Conversions ...... 7 tax-free withdrawals when certain conditions Tax Treatment Contributions can be withdrawn, at any time, without taxes or penalties. All earnings and deductible contributions may be subject to income of Withdrawals Earnings can be withdrawn without taxes or penalties if you are over age taxes when withdrawn. Investing Your Funds . 8 are met. 59½ and you have had a Roth IRA for at least five years.

Other Things A Traditional IRA may allow you to deduct 10% Early Withdrawal If you are under age 59½ you may avoid the penalty tax if your withdrawal is for one of the following reasons: to Consider ...... 10 Penalty Tax » Payments up to the amount of your deductible medical expenses (without regard to whether you itemize deductions for the taxable year). all or part of your contributions for income » The distributions aren’t more than the cost of your medical insurance due to a certain period of unemployment. URS Savings Plans » You are totally and permanently disabled. » You are the beneficiary of a deceased IRA owner. Comparison Chart . . .11 tax purposes, while deferring any taxes on » You are receiving distributions in the form of an annuity. » The distributions aren’t more than your qualified higher education expenses. » You use the distributions to buy, build, or rebuild a first home. » The distribution is due to an IRS levy of the qualified plan. Glossary of investment earnings until you start making Investment and » The distribution is a qualified reservist distribution. Financial Terms . . . . 12 withdrawals. Required Withdrawals There are no required (or minimum) distributions while you are living. Required minimum distributions must begin after you reach age 72.

08/18/21 1 URS Roth & Traditional IRAs URS Roth & Traditional IRAs

Things to Know

Roth IRA » Penalties Traditional IRA As with a Traditional IRA, you may be subject to a penalty tax if you withdraw Benefits of a your earnings before you Benefits of a Roth IRA reach age 59½ or if you Traditional IRA Tax-Free Withdrawals contribute more than either 100% of your earned income Tax Deferral of Investment Earnings A Roth IRA, unlike a Traditional or the allowable maximum Investment earnings compound tax IRA, allows you to withdraw your for a year. deferred. This allows your IRA to grow faster earnings tax free if your account than if it were subject to annual taxation. has been established for at least » Tax Deductibility five years and you are at least 59½ of Contributions More Flexibility Contributions to a Roth years old or the withdrawal is for with Tax Withholding IRA do not qualify for a tax If you withdraw money from certain a first home purchase (subject to deduction, regardless of employer-sponsored savings plan (e.g., a $10,000 lifetime limit). Because your adjusted gross income. your contributions are from after- 401(k), 403(b), 457(b)), IRS rules may require tax (nondeductible) money, you can » Income Restrictions 20% of the amount you withdraw be Income Limits for Single income tax filers with withdraw your contributions at any withheld for federal income taxes. When Traditional IRA Deductibility modified adjusted gross time without taxes or penalties (with you withdraw money from an IRA, you income (MAGI) of $140,000 MAGI of Single Filer the possible exception of amounts can elect to have no taxes withheld.* or greater are not eligible Fully Deductible Partially Deductible converted or rolled over — see IRS to contribute. The maximum *IRS rules require 10% of your Traditional IRA withdrawal Year Up To Up To Publication 590-B for details about contribution limit is gradually amount be withheld unless you choose otherwise. Roth IRA withdrawal if UNDER age 59½ 2021 $66,000 $76,000 Roth IRA ordering rules). reduced if your MAGI is Tax-Deductible Contributions In addition, earnings and Account Established Account Established over $125,000 and less Your contributions are generally tax contributions can pass on to your for More than 5 Years for Less than 5 Years than $140,000. deductible if you are an active participant heirs income tax free. Married/filing jointly, Your All withdrawals are All withdrawals are in an employer-sponsored plan (e.g., 401(k), Contributions tax and penalty free. tax and penalty free. taxpayers with a MAGI Conversion from a Traditional greater than $208,000 are not 457(b), pension plan) and your MAGI is IRA or Employer-Sponsored Plan Your Ordinary income tax Ordinary income tax eligible to make a Roth IRA below a certain threshold. (See the table to One of the great tax planning tools available Investment applies unless a applies to any earnings. contribution. The maximum the right.) For information on calculating Earnings withdrawal is taken In addition, the 10% allowable contribution limit your Traditional IRA deductibility, see IRS is a conversion from a Traditional IRA or employer- for death, disability, penalty tax applies unless is gradually reduced if your sponsored plan to a Roth IRA. This allows you or for first-time home it is for an exception.* Publication 590-A or consult a tax advisor. MAGI is between $198,000 to pay income taxes on a Traditional IRA or pre- purchase. In addition, Broad Eligibility to Contribute tax employer-sponsored plan now and convert the 10% penalty tax and $208,000. If your MAGI is within If you are ineligible to make tax- the money into your Roth IRA. (See Page 7 for applies unless it is for an exception.* the Roth IRA contribution deductible contributions, you can still make more details.) phase-out limits (single filers nondeductible contributions if you have No Required Minimum Distributions Roth IRA withdrawal if OVER age 59½ — $125,000 to $140,000; earned income. During Your Lifetime married/joint filers — Account Established Account Established $198,000 to $208,000), Transfers and Rollovers The Roth IRA can be a worthwhile estate for More than 5 Years for Less than 5 Years review the Reduced Roth IRA When you directly roll over or transfer planning tool, because you are not required to Your All withdrawals are tax All withdrawals are tax Contribution Worksheet in money into a Traditional IRA, the amount MAGI of Joint Filer take distributions during your lifetime and it can Contributions and penalty free. and penalty free. IRS Publication 590-A, for an you roll over or transfer is not taxable at the Fully Deductible Partially Deductible pass on to your beneficiaries tax free. However, example of how to calculate time of the rollover. In addition, there are Year Up To Up To beneficiaries of an inherited Roth IRA may be Your All withdrawals are tax Ordinary income tax Investment and penalty free. applies to earnings, but your maximum Roth IRA no limits on the amount you can roll over 2021 $105,000 $125,000 required to take minimum distributions. Earnings there is no penalty tax. contribution. The MAGI limits or transfer to a Traditional IRA. are indexed for inflation each The MAGI limits are indexed for inflation each calendar year. *Exceptions to the 10% penalty tax include withdrawals taken due to death or calendar year. disability, first-time home purchase ($10,000 lifetime maximum), medical expenses These limits assume you are an active participant in an in excess of 10% of adjusted gross income, or medical insurance premiums when employer-sponsored retirement plan. The income limits unemployed. (See IRS Publication 590-B for a complete list of exceptions.) are based upon modified adjusted gross income (MAGI), which is used to determine IRA eligibility. For information on calculating your MAGI see IRS Publication 590 or consult a tax advisor.

2 3 URS Roth & Traditional IRAs

Traditional IRAs Continued. Things to Know Roth & Traditional IRA Required Minimum Distribution The RMD amount is determined by » Taxation of Withdrawals Once you reach age 72, the IRS taking all Traditional IRA balances at the When you withdraw money requires you to begin withdrawing money end of the previous year and dividing that from your Traditional IRA, you Contribution Limits from your Traditional IRA. This withdrawal total by a life expectancy factor provided will pay ordinary income tax is known as a required minimum by the U.S. Treasury. on your investment earnings and on any deducted (untaxed) distribution (RMD). If you have multiple URS allows you to withdraw your contributions. Traditional IRAs, you are allowed to RMD at any time during the year. You are IRA Contribution Limits withdraw from just one Traditional IRA to able to receive the payments monthly, » Penalties Tax Year Contribution Limit Under Age 50 Contribution Limit Age 50+ satisfy the RMD amount for all others (or quarterly, semi-annually, or annually. (including early withdrawal penalties) you can take some from each). URS can also calculate your new RMD You may be subject to a penalty 2020 $6,000 $7,000 amount each year (for your URS accounts). tax if you withdraw money before you reach age 59½, 2021 $6,000 $7,000 depending on the circumstances Things to Know of the withdrawal. You may also Contributions to the IRAs IRA Contribution Timing » Limits Apply to All IRAs be subject to a penalty tax if you The contribution limits for You can make personal contributions contribute more than either 100% Can be Made in Two Ways: IRAs apply to all IRAs you of your earned income or the » Payroll Deduction to an IRA any time from January 1 of the may have (including those allowable maximum for a year. If your employer participates, current year until the tax filing deadline at a bank or credit union). (generally April 15) of the following year. This limit is the total of all » Recordkeeping Requirements** contributions can be made directly from your paycheck. Any amount you choose Any contributions you make for a prior Roth and Traditional IRAs. URS will report to you all year must be made through a personal contributions, withdrawals, and to contribute to your IRA will be deducted » No Employer Contributions contribution (check) and cannot be made the year-end account value for after taxes from each paycheck. Keep All contributions to the URS through payroll deduction. Contributions your IRA. in mind the contribution limits to IRAs IRAs must be made by you. Your for a prior year should be submitted with Keep in mind, you must when you decide how much you want employer is not allowed to make a URS IRA Deposit Authorization Form contributions (except as an after- maintain personal records to contribute from each paycheck. There and must be postmarked by the tax filing tax deduction from your wages). tracking all deductible and non- is a tax penalty if you contribute more to deductible IRA contributions. deadline. For example, you could make an IRA than you are allowed. » All Payroll Deductions This type of record-keeping is vital an IRA contribution for the 2021 tax year are After Tax when you begin withdrawing » Personal Contribution any time from January 1, 2021, until If you choose to make IRA money from your IRA(s). You can make a contribution with a April 15, 2022. contributions directly from **The Internal Revenue Service and deposit directly to URS. These deposits Contributions made through payroll your paycheck, the amount you URS strongly encourage you to keep all must be in an amount of $100 or more. deduction will be applied to the tax year contribute will be deducted records related to your Traditional IRA(s). they are received by URS. after applicable federal, state, Social Security, and Medicare taxes are withheld.

Minimum Distribution Example: » Contributions Will *IRS Calculation Table be Reported to You Jacob will reach age 72 on September 25, 2021. He has a URS Traditional IRA with a Life expectancy factors are URS will report any IRA December 31, 2020, value of $6,400. Jacob has another Traditional IRA at his bank with a found in IRS Publication 590. contributions to both you and December 31, 2020, value of $4,480. Jacob’s RMD amount is calculated by doing the following: Life Life the IRS. It is your responsibility to Expectancy Expectancy Age Factor Age Factor maintain your own tax records. Add the December 31, 2020, value of Jacob’s URS Traditional 72...... 25.6 78...... 20.3 » Contributions Can IRA ($6,400) and his bank Traditional IRA ($4,480)...... $10,880 Be Recharacterized 73...... 24.7 80...... 18.7 A contribution recharacterization Divide Line 1 by the U.S. Treasury life expectancy factor (25.6*)...... $425 allows you to treat a contribution IRA Limits Example: 74...... 23.8 81...... 17.9 made to one type of IRA as Jacob must withdraw $425 for his 2021 required minimum distribution. having been made to a different 75...... 22.9 82...... 17.1 An individual under age 50 with both a Roth and type of IRA (e.g., from a Traditional IRA to a Roth IRA Because Jacob has more than one Traditional IRA, he can choose to withdraw his total RMD 76...... 22.0 83...... 16.3 Traditional IRA cannot from just one IRA or he may withdraw money from both accounts adding up to the total RMD. contribute more than $6,000 or vice versa). A contribution Jacob’s first RMD (for the 2021 tax year) may be deferred until as late as April 1, 2022. If he 77...... 21.2 84...... 15.5 combined to both the Roth and recharacterization can be made chooses to wait until April 1, he will have to take another RMD payment (for the 2022 tax year) Traditional IRAs within a tax year. up until the tax filing deadline by December 31, 2022. 79...... 19.5 85...... 14.8 (including extensions) for the year the contribution was made.

4 5 URS Roth & Traditional IRAs URS Roth & Traditional IRAs

Transfers Conversions

and Rollovers A Traditional IRA or pre-tax employer-sponsored plan If you have multiple retirement (e.g., 401(a), 401(k), 403(b), accounts with different employers 457(b)) may be converted to and other financial institutions, you a Roth IRA. Converting your may be able to consolidate them into Traditional IRA or pre-tax your URS IRA. Depending on the type employer-sponsored plan of account you own, your age and to a Roth IRA is taxable and employment status, there are multiple should only be done after methods to consolidate your accounts. careful consideration of the Rollover/Transfer Guideline tax consequences. Direct Transfers From... to Traditional IRA to Roth IRA A direct transfer is a transfer of funds from your Traditional IRA existing IRA to another IRA of the same type (e.g., Traditional IRA  * Traditional IRA to Roth IRA conversions Traditional IRA to Traditional IRA or Roth IRA to Roth 401(k) * are taxable as income. When converting   your Traditional IRA to a Roth IRA, you IRA). A direct transfer occurs when funds from a similar 403(b) * plan are sent directly to URS. Roth and Traditional IRAs   must pay taxes on any Traditional IRA 457(b) * that you have at other financial institutions can be   contributions you had previously deducted directly transferred and consolidated into your URS 401(a) Pension  * from your taxes and on any investment earnings. Roth and Traditional IRAs without tax consequences. Roth IRA  Employer-Sponsored Plan Direct Rollovers Roth 401(k)  Pre-tax employer-sponsored plans converted to a Roth IRA are taxable as income. A direct rollover occurs when a distribution from an Roth 403(b) The entire amount of the pre-tax converted amount is taxable (contributions and  earnings). You must be eligible for a distribution from your employer-sponsored plan eligible employer plan (401(a), 401(k), 403(b), 457(b)) Roth 457(b) is paid directly to your URS IRA. This avoids federal tax *May be taxable. to do a conversion to a Roth IRA. Things to Know withholding and possible early withdrawal penalties » No Limit on the Number because the distribution is made directly to URS. year holding period of the Roth IRA. For additional of Conversions Tax Considerations There is no limit to the number Traditional IRA information regarding the five-year holding period of conversions that can be Existing pre-tax employer-sponsored savings plans for designated Roth accounts see IRS Publication 4530. » If you convert a large balance from your Traditional IRA or pre-tax employer plan, made in one year. Keep in mind (e.g., 401(a), 401(k), 403(b), 457(b)) can be consolidated 60-Day (Indirect) Rollovers** the taxes may be substantial! that the total amount of any into your URS Traditional IRA through a direct rollover. A 60-day, or indirect, rollover differs from a direct While converted amounts are considered taxable, there is no 10% early conversions will need to be When you directly roll over into a Traditional IRA, the » rollover or direct transfer in that the funds are sent withdrawal penalty tax. Conversions may be subject to a 5-year holding period to reported for federal income amount you roll over is not taxable at the time of the tax purposes. to you (the member) and not directly to the new plan avoid the penalty. See IRS Publication 590-B for details. rollover. In addition, there are no limits on the amount (URS), then you subsequently deposit the funds to your » Conversions Cannot you can roll over to a Traditional IRA. However, to Conversions must be done before year end. It is important that URS receives your IRA within 60 days. These distributions may be subject » Be Reversed roll money out of your employer-sponsored savings request by December 15, to ensure completion of the process by December 31 of to mandatory federal tax withholding. Any portion of For tax years 2018 and later, plan you may be subject to withdrawal eligibility that same tax year. the distribution that is not rolled over, including any the IRS no longer allows requirements. Check your plan to find out if you are taxes that are withheld and not replaced, is treated Conversions must be reported to the IRS. For tax-filing purposes, you will receive conversions to be reversed eligible for a rollover. » as a taxable withdrawal and may be subject to an an IRS Form 1099-R and an IRS Form 5498 when a conversion takes place. You must (recharacterized). Because you cannot recharacterize Roth IRA additional 10% early withdrawal penalty tax. You may report any amount converted on your federal income tax return. a conversion, it is important Designated Roth accounts (Roth 401(k), Roth replace any amount that was withheld in order to » Consult a Tax Professional — The rules and tax implications of converting any to carefully consider the tax 457(b), and Roth 403(b)) can be directly rolled over rollover the entire distribution. amount from a Traditional IRA or pre-tax employer-sponsored plan to a Roth consequences before you and consolidated to your URS Roth IRA. When you roll **You can make only one indirect rollover from an IRA to another (or the IRA are very complex. URS suggests you consult a tax professional to find out make a conversion. Consult a designated Roth account to a Roth IRA the five-year same) IRA in any 12-month period, regardless of the number of IRAs that if a conversion is right for you. a tax advisor if you are holding period for qualified distributions is not carried you own. For additional information see IRS Announcement 2015-16 considering a conversion to and IRS Announcement 2014-32. over. Rather, the amount rolled over takes on the five- a Roth IRA.

6 7 URS Roth & Traditional IRAs URS Roth & Traditional IRAs

Target Date Funds Asset Allocations

Target Target Target Target Target Target Target Target Target Target Target Target Investing Date Date Date Date Date Date Date Date Date Date Date Date Asset Classes 2065 2060 2055 2050 2045 2040 2035 2030 2025 2020 2015 Retired URS Large Cap Stock Index 42% 42% 42% 42% 41% 38% 35% 33% 29% 26% 24% 20% Your Funds URS International 35% 35% 35% 35% 35% 32% 27% 20% 14% 9% 6% 6% URS Small Cap Stock 11% 11% 11% 11% 10% 9% 7% 6% 4% 2% 1% 1% Private Real Estate 6% 6% 6% 6% 6% 8% 10% 10% 10% 7% 5% 4% Investment options, the » Small Cap Stock Fund invests in URS Income — — — — — — — 1% 7% 9% 11% 11% low expense structure, and stocks of companies whose market URS Bond 4% 4% 4% 4% 5% 8% 13% 17% 20% 26% 29% 31% capitalization falls primarily within the International Bonds 2% 2% 2% 2% 3% 5% 8% 10% 11% 13% 14% 16% trading rules for URS Roth and smallest 10% of the U.S. market universe. Traditional IRAs are identical Global Inflation-Linked Bonds — — — — — — — 3% 5% 8% 10% 11% » Target Date Funds provide a to those of the URS 401(k) and diversified retirement portfolio through Target Date Funds Investment and Administrative Fees* 457(b) Plans. a single investment option. These funds gradually adjust throughout your career Date of Date of Annual Annual Annual URS offers 20 core investment options Fund Birthday From Birthday To Investment Administrative Fees and into retirement. The investment mix Fund Fees Fees Total (eight individual investment options Target Date 2065 July 1, 1998 — which includes stocks, bonds, and Income Fund 0.22% 0.16% 0.38% and 12 Target Date Funds) and a self- Target Date 2060 July 1, 1993 June 30, 1998 real assets — gradually and automatically Bond Fund 0.10% 0.16% 0.26% directed brokerage account (Personal shifts toward more conservative Target Date 2055 July 1, 1988 June 30, 1993 Choice Retirement Account (PCRA) offered Balanced Fund 0.24% 0.16% 0.40% investments as you age and enter Target Date 2050 July 1, 1983 June 30, 1988 Investment Allocation through Charles Schwab). The following is Large Cap Value Fund 0.42% 0.16% 0.58% retirement. Target Date 2045 July 1, 1978 June 30, 1983 and Fund Transfers a description of the investment options: Large Cap Index Fund 0.02% 0.16% 0.18% When enrolling in the savings plans, Consider the Target Date Fund with Target Date 2040 July 1, 1973 June 30, 1978 Things to Know Income Fund is a stable value the date closest to when you will start Large Cap Growth Fund 0.25% 0.16% 0.41% you should select an investment allocation » Target Date 2035 July 1, 1968 June 30, 1973 » Risk vs. Return withdrawing funds for retirement. For for future deposits. This allocation will direct fund, the most conservative of the International Fund 0.05% 0.16% 0.21% No investment is without risk. example: if you’re a younger employee Target Date 2030 July 1, 1963 June 30, 1968 URS how to invest your money each time investment options. Small Cap Stock Fund 0.33% 0.16% 0.49% Generally, stocks are more risky and you plan to leave the workforce and Target Date 2025 July 1, 1958 June 30, 1963 a new deposit is added to your account Bond Fund invests in fixed income Target Date 2065 0.11% 0.16% 0.27% than bonds. Stocks also have » begin withdrawals around the year 2055, Target Date 2020 July 1, 1953 June 30, 1958 (whether through contributions or rollovers). securities, such as corporate and potential for higher returns than consider the Target Date 2055 Fund. If Target Date 2060 0.11% 0.16% 0.27% If you do not submit an investment government bonds. Target Date 2015 July 1, 1948 June 30, 1953 bonds. Cash investments are you’re further along in your career and Target Date 2055 0.11% 0.16% 0.27% allocation for future deposits, URS will Target Retired June 30, 1948 typically safer than either bonds Balanced Fund invests in will begin utilizing your account close Target Date 2050 0.11% 0.16% 0.27% deposit your funds in the Target Date Fund » or stocks. approximately 60% stocks, 40% bonds. to the year 2025, consider the Target Target Date 2045 0.11% 0.16% 0.27% that corresponds to your birthdate. You new accounts as it has minimum Date 2025 Fund. may change this allocation at any time Diversify Your Account » Large Cap Stock Value Fund account balance requirements and Target Date 2040 0.13% 0.16% 0.29% » Fact sheets and current information on the URS website through myURS or A portfolio is the total of all invests in stocks that appear undervalued, additional risks. Target Date 2035 0.14% 0.16% 0.30% regarding rates of return, fees, and asset by submitting an IRA Contribution and with a favorable future outlook. Target Date 2030 0.15% 0.16% 0.31% your investments. Diversifying allocations can be found at www.urs.org. Invest in: Investment Change Agreement. your investments allows you to Large Cap Stock Index Fund Target Date 2025 0.16% 0.16% 0.32% You may also transfer the funds » Default Investment Option: not “put all your eggs in one invests in stocks included in the Russell » More than 8,500 mutual funds from Target Date 2020 0.15% 0.16% 0.31% within your account among the 20 If you do not select an investment basket.” How you diversify your 1000 Index.* over 630 well-known fund families. investment options. However, transfers option your funds will be placed in the Target Date 2015 0.13% 0.16% 0.29% investments depends on how among investment options are allowed Large Cap Stock Growth Fund Target Date Fund that corresponds to » Any stock listed on the major U.S. Target Date Retired 0.13% 0.16% 0.29% much risk you are able to bear » no more frequently than once every seven emphasizes capital appreciation and your date of birth, as shown in the chart exchanges, including over-the-counter Tier 2 Nonvested 0.15% 0.16% 0.31% and how much time you have stocks, and foreign securities. calendar days. seeks to identify companies with to the above right. *Investment and administrative fees are subject to change. until the money is needed. future relative earnings strength at Bonds and other fixed income Please visit www.urs.org or contact URS directly for an up-to-date PCRA – URS offers the Schwab Personal » Investment and Dollar Cost Averaging a reasonable valuation. » investments. fee schedule. » Choice Retirement Account® (PCRA) — Administrative Expenses Investing a predetermined International Fund tracks the Investment fees are charged by » a self-directed brokerage account » Money market and brokered CDs. Fees Example: amount on a regular basis is performance of the MSCI All Country available through Utah Retirement the fund managers to cover the costs of » Exchange traded funds (ETFs). called dollar cost averaging. World Index - ex. U.S. - Investible Market Systems Savings Plans. If you’re an Let’s assume you had $1,000 in the Large Cap Stock Index investing your money. Administrative fees Dollar cost averaging can help Index (ACWI ex. U.S. IMI) as closely as experienced investor and looking for For additional information regarding Fund on January 1, 2021, and left it until January 1, 2022. cover the costs of maintaining a retirement reduce risk by averaging out possible. The index is designed as a specific investments, the PCRA is a PCRA enrollment, requirements, and costs, Let’s also assume there was no change in the stock market plan, such as customer service, statements, the ups and downs of volatile and recordkeeping. Both fees are charged measure of the global stock market brokerage account with Charles Schwab please see the Personal Choice Retirement during that period. The fees for investing and administering investments. as a fraction of a percent of assets under performance of developed and & Co. that offers access to thousands Account (PCRA) brochure and the Charles this fund would be $1.80. Dollar cost averaging management and are calculated in each emerging markets that excludes of different types of investments. This Schwab Pricing Guide for Retirement assures you will automatically fund’s daily unit value. Therefore, balances the United States. option is generally not advised for Plan and Health Savings Accounts at buy more shares when the price in your account and all rates of return are www.urs.org located in the Publications is low and fewer shares when shown after these fees have been deducted. *Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights section or contact the Savings Plans the price is high. related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. Department for a copy.

8 9 URS Roth & Traditional IRAs URS Roth & Traditional IRAs

Investing Your Funds Continued. URS Savings Plans Comparison Short-Term Trading Fees Other Things to Consider Because of costs generated by frequent Lower tax bill now! Tax-deferred Tax-free trading and the potential impact on other Qualified Reservist Distribution growth! growth! participants’ accounts, it is necessary to impose Determining whether to invest in a Roth IRA, If you are a qualified reservist on a short-term trading fee. Individuals who active duty, who takes or has taken a Traditional transfer any or all of their current accounts Traditional IRA, 401(k) or withdrawal after September 11, 2001, of IRA Roth IRA among individual investment options more 401(k) 457(b) May be After tax all or part of your Traditional IRA, you will Tax deferred Tax deferred tax deductible deposits often than once every 30 days are charged 2% 457(b) plan depends on several factors. not have to pay the additional 10% tax on Pay income tax Pay income tax Pay income tax Tax-free of the amount transferred for each additional a payment that is eligible for roll over and when withdrawn when withdrawn when withdrawn withdrawals*** trade. Each transfer starts a new 30-day period. paid to you. You are a qualified reservist if Deferred Contributions Also, each savings plan is treated individually. Flexibility of Withdrawals Deposits 401(k) subject 457(b) subject IRA deductibility Roth subject You may withdraw money from you are a reservist or national guardsman vs. Tax-Free Withdrawals to employer to employer subject to earned to earned For example, fund transfers in your IRA do not Eligibility an IRA at any time. Unlike a 401(k), or ordered or called to duty after September Contributions to 401(k) and 457(b) plans, participation participation income and income and affect your ability to transfer funds in your and employment and employment other limitations; other limitations; 457(b) plan, money from an IRA can be 11, 2001, for a period in excess of 179 in addition to deductible contributions to a 401(k) or 457 plans. status status see IRA Guidebook see IRA Guidebook withdrawn while you are still employed, days or for an indefinite period. You may Traditional IRA, help reduce the amount of tax repay a qualified reservist distribution to you pay now, but are taxable when the money Payroll Inactive Account Maintenance Fee regardless of your age. deduction Because fees generated from small inactive However, you may still be able to an IRA at any time during the two-year is withdrawn. (if allowed     by employer) accounts generally do not cover the costs of access your 401(k) and 457(b) funds if period after the end of active duty. Contributions to a Roth IRA do not reduce account maintenance, an annual fee of $15 you find yourself in a financial hardship your taxes currently, but may be tax free when Rollovers/ Qualified Charitable Transfers is assessed. Small inactive accounts are those or emergency. In addition to hardship you withdraw money in retirement.     where the account owner is no longer employed withdrawals, the 401(k) and 457(b) Distributions (QCDs) You need to determine whether tax Personal A QCD is a non-taxable direct deposits by a participating organization, there have been plans offer a low-interest loan option. deferral is more beneficial to you today, or   transfer of funds from your URS IRA no deposits or withdrawals during the prior The interest you pay on these loans if the advantages of tax-free withdrawals from Withdrawals Separation Separation Any time Any time to a qualified charity (a 501(c)(3) » » » » 12 months, and assets in all URS Savings Plans is contributed back into your a Roth IRA will be more valuable. (Vested from service from service charitable organization eligible to balances only) Age 59½ if Age 59½ if are less than $5,000. respective plan. » » receive tax-deductible contributions). How much are you paying still employed still employed » Hardship » Emergency To qualify, you must be age 70½ or older Additional Information Penalty-Free Withdrawals in federal and state income taxes? » Qualified birth » Qualified birth Regarding Transfers If you are under age 59½, IRA at the time of distribution, and the funds If you expect your tax rate to be lower or adoption or adoption Transfer requests received at URS before withdrawals may not be subject to must be transferred directly by the IRA after you retire than while you are working, Early Yes – 10% early No penalty tax Yes – if withdrawn Contributions: No the close of the New York Stock Exchange a 10% early withdrawal penalty tax trustee (URS) to the eligible charity. Not a 401(k) or 457(b) plan may be more Withdrawal withdrawal penalty before age 59½ Earnings: Yes – if used for these reasons: all charities are eligible. For example, beneficial than a Roth IRA. Penalty Tax tax if withdrawn if withdrawn (NYSE), generally 2:00 p.m. Mountain Time, before age 59½ before age 59½*** are transferred using that evening’s closing donor-advised funds and supporting » Expenses to buy, build, or rebuild How are you planning market values. Transfer requests received after a first home ($10,000 lifetime organizations are ineligible. Distributions Exceptions: » You work into the » First home » First home from employer-sponsored retirement to use the money? (For additional calendar year you » Higher education » Higher education the close of the NYSE are transferred using maximum) exceptions see IRS plans, such as the URS 401(k) and 457(b) Keep in mind, IRAs and other savings turn age 55 (age » Payout based on » Payout based on the next business day’s closing market values. Publication 575 50 if you separate life expectancy life expectancy » Qualified higher education expenses plans sponsored by your employer are and IRS On days of unusually heavy transfer activity, Plans are not eligible for this option. Publication 590-B) from service as a » Disability » Disability Certain unreimbursed QCDs are limited to the amount that designed for use in retirement. However, you qualified public computer system failure or other unforeseen » safety employee) medical expenses would otherwise be taxed as ordinary may need to use some of the money for other circumstances, URS reserves the right to process » Payout based on income. This excludes nondeductible purposes. If you wish to help pay for college transfers using the next available business Disability life expectancy » » Disability day’s closing market values. contributions from your Traditional IRA tuition or for the purchase of a first home, » Health insurance premiums and tax-free amounts from a Roth IRA. an IRA may be more beneficial to you. Annual 2021 when unemployed Your eligible QCD amount is reduced When do you plan to Contribution $19,500* $19,500†* $6,000** $6,000** » Periodic payments based on by any deductible Traditional IRA Limits contributions you have made for tax withdraw your savings? your life expectancy With Age 2021 years after attaining age 70½ (to the You are required to begin withdrawals Payments to beneficiaries 50+ Catch-Up $26,000* $26,000* $7,000** $7,000** » extent the deductible contributions have from your 401(k), 457(b), and/or a Traditional IRA Provision after your death once you reach age 72. Withdrawals from a Roth not been excluded before). Loan Yes (Limitations Yes No No » Qualified birth or adoption QCDs will count toward your annual IRA are never required while you are living. Provision apply to Tier 2 employer required contributions) » See IRS Publication 590-B for IRA Required Minimum Distribution Do you wish to pass on a complete list of exceptions. (RMD) for the year distributed. For a money to your heirs? Special †The three years prior to the year you qualify to retire, your limit on 457(b) QCD to qualify as your annual RMD, the 457 Catch-Up contributions is double the standard limit (depending on past contributions). The 457(b) plan is not subject to Provision This is called the special catch-up. funds must be distributed by your RMD » Retirement savings are often passed from the 10% early withdrawal penalty Note: You cannot use the 457(b) age 50+ catch-up the same year as the special catch-up. deadline (generally December 31st). parents to children as an inheritance. tax. You may also avoid this tax in the If your IRA includes nondeductible » Pre-tax money from 401(k), 403(b), 457(b) 401(k) if you work into the year that *The 401(k) and 457(b) annual contribution limits are applied separately. You can contribute up contributions, the distribution is first plans, and Traditional IRAs is taxable to you turn age 55 (age 50 if you separate to the maximum into each plan. considered to be taken out of otherwise your heirs. from service as a qualified public **The IRA annual contribution limit represents the amount you can contribute, in total, across all taxable income. of your Roth and Traditional IRAs, including those that you hold with other financial institutions. safety employee). » Money from a Roth IRA may be tax free If you are considering a QCD, consult ***Roth contributions can be withdrawn, at any time, without taxes. Earnings can be withdrawn without to your heirs. taxes if you are over age 59½ and you have had a Roth IRA for at least five years. a tax advisor and IRS Publication 590-B.

10 11 URS Roth & Traditional IRAs URS Roth & Traditional IRAs

Health Insurance Premiums Pension Plan Qualifying Medical Expenses for the Unemployed A retirement plan organized to receive Distributions from an IRA to pay unreimbursed A taxpayer who has been receiving contributions and pay a lifetime monthly medical expenses that exceed 7.5% of Glossary of Investment unemployment compensation for 12 benefit when the participant retires. adjusted gross income are exempt from the consecutive weeks is eligible to take a 10% early withdrawal penalty tax. distribution to pay for health insurance Portfolio and Financial Terms premiums for the IRA owner, owner’s spouse, The total investment holdings of an Rebalancing and any dependents. This exception will result individual or the total investment holdings The process of restoring a portfolio to its in no 10% early withdrawal penalty tax. of a mutual fund. target mix by periodically buying or selling ­5-Year Holding Rule consequences that are solely some of each investment option. The Indirect (60-Day) Rollover Premature Distribution A member must have had a Roth IRA open your responsibility. For additional Balanced Fund and the Target Date Funds A withdrawal from a retirement account that Distributions taken from a Traditional or Roth for at least 5 years to qualify for tax-free information regarding the definition are automatically rebalanced quarterly, when is rolled over to an eligible plan or IRA within 60 IRA before the account owner is age 59½. of marriage for federal tax purposes target ranges are exceeded. distributions of earnings. days. An indirect rollover differs from a direct Premature distributions are usually subject to see U.S. Department of the Treasury rollover or direct transfer in that the money a 10% early withdrawal penalty tax, unless an Recharacterization 401(k) Plan Revenue Ruling 2013-17. A savings plan in which employees may elect is sent to the participant and not directly to exception applies. A choice to treat a contribution made to one type of IRA as having been made to a different to contribute pre-tax dollars to a tax-deferred A divorce or annulment revokes the the new plan. You can make only one indirect Prior-Year Contribution Direct Transfer type of IRA (e.g., from a Traditional IRA to a retirement plan. designation of a former spouse as a beneficiary. rollover from an IRA to another (or the same) A contribution made to a Roth or Traditional In order to redesignate a former spouse, the A direct transfer is a transfer of funds IRA in any 12-month period, regardless of the Roth IRA or vice versa). 403(b) Plan between similar plans (e.g., 401(k) to 401(k), IRA for the prior tax year. Contributions for designation must be submitted after the date number of IRAs that you own. For additional a prior-year may be made between January Required Minimum Distribution (RMD) A savings plan that permits employees of or Roth IRA to Roth IRA). information see IRS Announcement 2014-15 and of divorce. 1st and the tax filing deadline (generally After a Traditional IRA holder reaches 72 qualifying education or non-profit organizations Disability IRS Announcement 2014-32. to contribute pre-tax dollars to a tax-deferred Bond April 15th). or a 401(k), 403(b), 457(b) plan participant A taxpayer is considered disabled when he Life Expectancy Factor reaches age 72 and terminates employment, retirement plan. An interest-bearing security whereby Qualified Distribution or she is no longer able to engage in any An actuarial life expectancy based on your a minimum amount must be withdrawn the issuer agrees to pay the bondholder A distribution from your Roth IRA that meets 457(b) Plan substantial gainful activity and the disability’s age that is used by the IRS to determine your every year. a specified sum of money, usually at specific the following requirements: A savings plan whereby governmental intervals, and to repay the principal amount duration is expected to be indefinite and/or Required Minimum Distribution (RMD). 1. It is made after the 5-year period beginning Rollover IRA employees may elect to contribute pre- at maturity. This is a form of an IOU. result in death. tax dollars to a tax-advantaged deferred Modified Adjusted Gross Income (MAGI) with the first taxable year for which a A Traditional IRA that receives assets from Disclosure Statement Your MAGI is determined by taking your compensation plan. (The URS 457(b) is a Cash or Cash Equivalent contribution was made to a Roth IRA set another eligible plan. The disclosure statement explains the rules Adjusted Gross Income (AGI) and “adding governmental 457(b) deferred compensation Investments of such high liquidity and safety up for your benefit, and that govern an IRA. back” certain deductions. These are items Roth 401(k) or 457(b) (Designated Roth) plan regulated by Section 457(b) of the that they are similar to cash. 2. The payment or distribution is: which can be subtracted from your AGI, but A savings plan in which employees may elect Internal Revenue Code, and authorized under Distributions Catch-Up (Age 50) must be included in the calculation of your a. Made after the date you attain age 59½; to contribute after-tax dollars to an employer- Title 49 of the Utah Code.) Any withdrawal from your eligible savings An additional contribution allowed for MAGI. For a full list of these deductions, see b. Made because you are disabled; sponsored retirement plan. Contributions and plan or IRA. earnings may be withdrawn tax free provided 1099-R Tax Form individuals age 50 and over. IRS Publication 590-A. c. Made to a beneficiary or to your estate certain conditions are met. URS does not An IRS tax form that reports the amount of any Diversification after your death; or Compensation Mutual Fund currently offer a Roth 401(k) or Roth 457(b). distribution to the owner of an IRA or eligible Compensation typically includes salary, A spreading of risk by putting assets An investment allowing investors to pool d. To pay the expenses of a first-time home retirement plan. bonuses, overtime, vacation pay, and self- in several categories of investments — money for investments in stocks, bonds, purchase up to a lifetime limit of $10,000. Roth IRA stocks, bonds, cash, real assets, etc. and other securities. Diversification and A tax-deferred retirement account that allows 5498 Tax Form employment income. Compensation DOES Qualified Higher Education Expenses NOT include rental, investment and interest professional investment management are annual nondeductible contributions. Qualified An IRS tax form that reports any IRA Excess Accumulation Expenses such as tuition, fees, books, and income, pension, annuity, or Social Security among a mutual fund’s benefits. distributions from a Roth IRA may be tax free. contributions, rollovers, conversions, and An insufficient withdrawal from a 401(k), supplies at an eligible higher education income, disability payments, and deferred recharacterizations made by an IRA owner. 403(b), 457(b) or Traditional IRA for an Nondeductible Contribution institution. These expenses include those Stock or unemployment compensation. The fair market value of the IRA is also individual who is subject to the required A contribution made to a Traditional IRA of the IRA owner, spouse, children, or A security that represents an ownership share reported on IRS Form 5498. Contribution minimum distribution (RMD) rule. A 50% that cannot be deducted from an individual’s grandchildren. These expenses are exempt in a corporation. excise tax may be imposed on RMD amounts federal income taxes. If a nondeductible Adjusted Gross Income (AGI) A deposit into an IRA for a particular tax year. from the 10% early withdrawal penalty tax. Tax Deferral not withdrawn. contribution is made, the taxpayer must file Adjusted gross income is determined by Postponing payment of income taxes on Conversion IRS Form 8606. adding all sources of income such as wages Funds withdrawn from a Traditional IRA and Excess Contribution retirement contributions and any subsequent and interest income and subtracting certain deposited into a Roth IRA. A conversion is a The amount of an IRA contribution that Ordering Rules earnings until the money is withdrawn. deductions and adjustments to your income. taxable transaction. exceeds the allowable limits. If an excess The order in which Roth IRA assets are contribution is not corrected, a 6% IRS Tax Withholding Asset Allocation deemed to be withdrawn. The first assets Deductible Contribution penalty applies until the excess contribution withdrawn are considered to be a return of An IRS mandated or member elected tax Separating investment funds among different Contributions to a Traditional IRA may be fully is corrected. contributions made. After contributions are withheld from the gross proceeds of a asset types such as: cash or cash equivalents, or partially deductible from your income when withdrawn, further withdrawals are amounts withdrawal from an eligible savings plan or bonds, stocks, real assets, etc. Fair Market Value filing your federal income taxes. Contributions that have been converted from a Traditional IRA. The withholding rate varies according to The value of an account as of a certain Beneficiary to a Roth IRA are NOT tax-deductible. IRA or pre-tax employer plan. Finally, the the participant and the type of distribution. date, based on the current value of the A person or entity receiving the proceeds earnings are considered withdrawn. See IRS Deemed IRA underlying assets. Traditional IRA Publication 590-B for a full description. of an eligible savings plan or IRA when the A Traditional or Roth IRA maintained under an A tax-deferred retirement account that owner of the plan dies. eligible employer plan that accepts voluntary First-Time Homebuyer Penalty-Free Withdrawal allows voluntary contributions, and may be Tax Penalty Exception Beneficiary, Naming Your Spouse As employee contributions. A withdrawal exempt from the 10% early deductible on an individual’s income taxes. Generally, you are a first-time homebuyer if URS Savings Plans accepts information withdrawal penalty tax. Exemptions include: Withdrawals from a Traditional IRA are partially Direct Rollover you had no present interest in a main home regarding your spouse (the person you are age 59½, purchase of a first home, qualified or fully taxable when withdrawn. A direct rollover allows you to move a during the 2-year period ending on the date legally married to) as correct, and will not do education expenses, qualifying medical distribution from an eligible plan into of acquisition of the home with which the an independent verification of your marital expenses, health insurance premiums when another eligible plan, avoiding federal tax distribution is being used to buy, build, or status. Providing incorrect information unemployed, payments paid over the owner’s withholding and early withdrawal penalties rebuild. If you are married, your spouse must regarding your marital status may lead to tax life expectancy, disability, or payments to a because the distribution is made directly to also meet this no-ownership requirement. beneficiary. For a complete list of exceptions, the other institution. see IRS Publication 590-B.

12 13 IRA Savings Plans Department PO Box 1590, Salt Lake City, UT 84110-1590

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