Deferred Comp Update

NOVEMBER 2000 -
Since June when Aetna replaced Copeland as coordinator of the Mass
Deferred Compensation Program, Association members, who participate in
it, have contacted us to discuss the changes. Here's some of the
frequent topics of conversation.

Members,
who previously had no state tax withholdings, may now take note that
such a withholding is being made from their deferred comp check.
According to Aetna, deferred comp payments are treated as a payment of
wages (not paid when originally earned but deferred) and therefore is
subject to state withholding at 5.85%, as well as federal withholding.

The
amount of state withholding is determined based on the marital status
and number of allowances shown on your state withholding election
certificate (Form M-4) filed with Aetna. Therefore, it may be advisable
to check with Aetna about your M-4 to make certain it is correct.

More
importantly, some members have no state tax liability whatsoever,
because their pension is tax exempt. They see no necessity for any
state withholding, since they will be refunded all the money withheld
when and if they file a state tax return.

According
to Aetna, you may not be subject to a state withholding if your
deferred comp payment is below the "No Tax Threshold Amount". For a
single member, the threshold amount is $667 or less monthly, and for a
couple, the monthly amount is $1,000 or less.

Check With Aetna

Another
item you may wish to check with Aetna is your designated beneficiary
upon death. Like your life insurance, you should review this
information periodically, and particularly when there has been a change
of circumstances. With the massive transfer of data from Copeland to
Aetna, it's only advisable to make certain now that the correct info is
on file and save your surviving spouse, or other beneficiary, any
potential problem down the road.

Even
before Aetna, when Copeland and PEBSCO were the deferred comp
coordinators, members questioned why they could not change the amount
of their payment some time after they begin receiving checks, unless
they could show what essentially amounts to a dire financial emergency.
This is particularly so when mutual funds in the program have been
doing exceptionally well and the balance in a member's account has
grown substantially.

Unfortunately,
this situation cannot be fixed by Aetna (as was true with Copeland and
PEBSCO) or the Commonwealth. When the feds allowed state and local
governments to establish deferred comp programs, also known as 457
plans, they included this restriction prohibiting any change in the
payment (within 30 days of the initial payment and any time
thereafter).It requires a change in the federal law.

You can contact Aetna, on these and other items, in a variety of ways including toll free (1-800-599-8618), via Internet (www.aetna.com) or at one of the 5 regional offices.

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