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Deferred comp helps you save more in 2004

As state workers, WSU employees are eligible for a plan that lets them save money from their paychecks for retirement before that money is taxed. The Deferred Compensation Program (DCP) 457 is available to all state employees — full or part time, working a regular schedule or career seasonal.

The Washington State Department of Retirement Systems administers the DCP. State Employee Retirement Benefits recommends the types of investments to offer, and the Washington State Investment Board selects and monitors DCP’s investment options.

All pretax deductions and their respective earnings are held in trust by the State Investment Board and are owned by participants. The trust is established for the exclusive benefit of DCP participants and eligible beneficiaries.

To enroll in DCP, a minimum deferral of $30 per month is required. In 2004, the maximum amount that may be deferred from compensation will be $13,000 for the year. A catch-up option may be used to increase this amount for those age 50 or older.

Deferral amounts can be increased or decreased at any time by calling the DCP Information Line at 1-888-327-5596 and following the voice instructions, or by logging on to http://www.wa.gov/DRS/dcp.

Jan Rauk, associate director of WSU’s Benefit Services, has an account with DCP and says it is an easy way to save more for retirement. Participation in DCP can supplement other retirement benefits, but it does not affect them in any other way.

Rauk said she participates in the DCP 457 plan and TIAA-CREF’s 403(b) Tax Deferred Investment program. Each plan allows for a 2004 maximum deferral of $13,000 for a possible total of $26,000 for the year.

An estimate of the impact deferral will have on take-home pay can be figured by going to the above website and using the paycheck calculator. In addition, software is available on the site for estimating account accumulation.

In an upcoming issue, Money Watch will focus on another way to save money in 2004 — tax deferred investments offered by TIAA-CREF.

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