Deferred Compensation Plan Common Questions and Answers

1. What is a deferred compensation plan?
A deferred compensation plan is a plan, which allows for deferral of the payment of compensation until a later date. BART’s Deferred Compensation Plan is a Plan established under Section 457 of the Internal Revenue Code. As long as the Plan satisfies the requirements of Internal Revenue Code Section 457, the amount deferred and paid into the Plan, and the earnings on those amounts, are not included in your current income for tax purposes. The funds are not taxed until you receive a distribution from the plan.
2. What is the difference between a 457 plan and a 401(a) plan?

A 457 plan is established under Section 457 of the Internal Revenue Code. Similar to a 401(k) plan, a 457 plan permits the deferral of Compensation by participants. A 457 plan may be maintained only by state or local governments or tax exempt employers. Like a 401(k) plan, there are limits on the annual amount that may be deferred. The Compensation which is deferred may be paid only upon attainment of age 70½, separation from service, an unforeseeable financial hardship or death. The Deferred Compensation Plan is a 457 plan.

A 401(a) plan must meet many requirements under the Internal Revenue Code including requirements limiting contributions, governing coverage of participating employees, vesting, portability and the custody of investments. There are a number of different kinds of 401(a) plans, including defined benefit pension plans and defined contribution plans. BART’s Money Purchase Pension Plan is a 401(a) defined contribution plan.

3. What are the objectives of the Plan?
The purpose of the Deferred Compensation Plan is to provide BART Employees with a savings and investment program for retirement. Contributions to the Plan and earnings on those contributions are not subject to current income taxes, but are taxed only when you receive a distribution from the Plan.
The Plan will assist Employees in meeting individual objectives such as:
  • reducing current tax liability
  • accumulating tax-deferred retirement benefits
  • accumulating tax-deferred earnings on those benefits
  • supplementing retirement income
  • enjoying the benefits of group investment power
  • increasing financial independence
  • self-directing retirement funds
4. Who is eligible to participate in the Plan?
All Employees, officers and members of the Board of Directors of BART are eligible to participate in the Plan.
5. Does the Deferred Compensation Plan affect my PERS benefits?
Your PERS benefits are not affected by your participation in the Plan.
6. How do I participate in the Plan?

To become a Plan Participant, you must complete a Participation Agreement in which you specify:

  • How much of your pay you wish to defer
  • How you would like to invest the amounts you have deferred
  • Who will be the Beneficiary of your interest in the Plan if you die before you receive full distribution of your funds
The Participation Agreement must be filed before the first day of the month that deferrals will begin or, if you wish to begin participating in the Plan immediately, the Participation Agreement must be filed upon hire.
7. How can I change my rate of deferrals under the Plan?

You may change your rate of deferrals on a monthly basis. You must submit an Employee Change Form indicating your desired new rate of deferral to the Committee by the 25th of the month prior to the month in which the change is to take effect. The change will then be effective on the first payroll period that begins in that month.

Example: Mary currently defers $200 per pay period into the Plan. However, she would like to raise her deferrals to $250 per pay period beginning October 1st. Mary submits an Employee Change Form on September 20th. Her new deferral rate takes effect on October 3rd, which happens to be the first day of the first payroll period that begins in October.

8. What happens if I decide to stop contributing to the Plan?

The procedures for stopping your deferrals are the same as those outlined in question 7 for changing your rate of deferrals. You may stop your deferrals on a monthly basis. You must submit an Employee Change Form to the Committee by the 25th of the month prior to the month in which the change is to take effect. The change will then be effective on the first payroll period that begins in that month.

Stopping deferrals under the Plan does not entitle you to receive your Deferred Compensation Plan Account. It will be retained until you become eligible to receive a distribution (see Question 19).

9. Can you provide an example of how the tax-deferred accumulation of contributions to the Deferred Compensation Plan works?

The following illustration compares the benefits of saving $1,000 per year in the plan versus receiving $1,000 in salary and saving it in an after-tax investment. The comparison is based on the assumptions that you are in a 28% combined tax bracket and that your investment earnings would be 8% annually.

Saving after taxes Saving through the Plan
$1,000 Annual Benefit $1,000
- $280 Income Taxes - $0
$720 Available for Investment $1,000
+ $58 Investment Earnings + $80
-$16 Tax on Earnings -$0
$762 Balance at end of 1st Year $1,080
$61,084 Balance at end of 30th Year 122,345*

* This amount will be subject to State and Federal income taxes when distributed to you.

Please note that this is a general illustation. Please keep in mind that your specific situation will be different.

10. When will I pay income taxes?
Your income taxes will be payable in the year or years when your accumulated deferred Compensation (plus earnings or less any investment losses) is distributed ( Question 19). Distributions are subject to income tax withholding. Your actual tax on the distribution may be more or less than the amount required to be withheld.
11. Can I rollover my distribution?
Yes. Obtain a Withdrawal Form for further details.
12. Is there a limit to the amount which may be deferred?

You can defer up to 100% of your Includable Compensation each year, subject to the following maximum dollar amounts:

For 2010$16,500

After 2010 Subject to increases in accordance with IRS rules

13. What are the “catch-up“ contribution provisions?

BART offers two catch-up contribution provisions that allow participants to contribute an amount greater than the normal maximum contribution amount in effect for the year.

The two options are: The "Age 50+" catch-up provision and the "Pre-Retirement" catch-up provision

The "Age 50+" catch-up provision permits that if you will be 50 years old or older by the end of the year, you are eligible to make additional "Age 50+" catch-up contributions to your BART 457 Deferred Compensation Plan. The additional contribution amounts may exceed the normal maximum contribution limit in effect for the year, but not by more than the additional "Age 50+" catch-up dollar limit in effect for the year.

For 2010:

  • the maximum contribution limit is $16,500
  • the additional Age 50+ catch-up contribution limit is $5,500
  • the total contribution limit (including age 50+ catch up) is $22,000

The "Pre-Retirement" catch-up provision allows you to make additional contributions to your BART 457 Deferred Compensation Plan in order to make up for years in which you did not contribute the maximum permissible amount. To catch up, you must use the three-year catch-up period immediately preceding the year of your declared normal retirement age to defer additional income through BART. The amount you are permitted to contribute during this three-year period is determined by subtracting the actual amount you have already contributed to your plan from the maximum allowed by law. The amount you may defer during any year of your "Pre-Retirement" catch-up period is a combination of your normal deferral for that year plus amounts not contributed to the BART 457 Deferred Compensation Plan in earlier years since 1981, up to a maximum of double the normal contribution limit in effect for that calendar year.

BART permits the pre-retirement catch-up provision to be used as follows:

  • Police officers: between age 47 and 67½
  • All other employees - between age 52 and 67½

Once you have begun using the "Pre-Retirement" catch-up provision, you may not use it a second time under your current employer. You may designate only one period of time (one to three years) under your current employer as your catch-up period. This period will immediately precede your declared normal retirement age. You cannot use the provision during or following the year of your declared normal retirement age. If you have completed your three-year catch-up period, you may still be eligible for the "Age 50+" catch-up provision. Please be advised that if you change from pre-retirement to "Age-50+" or the basic limit during the three year period, you will not be able to restart the pre-retirement provision at a later date. Also, you are not permitted to change from one catch-up provision to the other mid-year.

*Please review the BART Deferred Compensation Plan Catch-up Provision Packet on the "Publications and Forms" page on this site for additional information regarding the catch-up provisions. The packet will also have instructions on how to get started and who to contact for assistance.

14. Can I make regular Pre-Retirement Catch-Up Deferrals and 50+ Catch-Up Deferrals in the same year?
No, only one kind of catch-up deferral can be used in a single plan year.
15. What happens to the amounts I defer?

An account is established on your behalf. Deferrals and the earnings (or losses) on these contributions are credited (or debited) to this Account.

The Committee has selected investment options for the Plan, including the opportunity to participate in a self-directed brokerage account providing access to outside mutual funds and individual stocks and bonds. (Certain minimum balance and other requirements apply to the self-directed brokerage account option.) You may direct the investment of your Account in one or more of the investment alternatives by completing the Employee Enrollment Form or Employee Change Form. You may change your election of investment option at any time (see Question 31).

16. May I contribute my own funds to the Plan other than through deferral of compensation?
No, the Plan does not allow you to contribute your own funds, because this type of plan does not provide for after-tax contributions.
17. What credits and debits will be made to my Account?
Your Account will be credited and debited with its share of earnings and losses experienced by your investment selection. Your Account will share in the costs of administering the Plan, such as record keeping, legal and accounting expenses.
18. What is vesting and how do I become vested?
A vested benefit is that part of your Account balance which belongs to you unconditionally. It can never be taken away from you, even if you quit or are fired. You are 100% vested in your Plan Account at all times.
19. When will I be eligible for benefits?

You become eligible to receive benefits upon your termination of employment with BART for any reason (including retirement, death, total disability, resignation or discharge), or at a later date at your election.

It is important to note that becoming totally disabled does not automatically entitle a Participant to payment. Generally, a Participant must also terminate employment with BART.

You may receive an early distribution under some circumstances if you encounter an unforeseeable financial hardship (see Question 25).

Please note: The distribution provisions in BART’s Deferred Compensation Plan and BART’s Money Purchase Pension Plan are different.

20. How will my benefits be paid to me?

You may elect to have your benefit distributed in a lump sum or a series of substantially equal installments of at least $50.00. If you chose a series of payments, you may additionally elect to have the installment distribution automatically adjusted annually for a cost-of-living increase. The installment pay-out period cannot exceed your life or life expectancy (or the joint life expectancies of you and your designated Beneficiary). You may make an election as to the form of your distribution at the same time you select the time of distribution. If you do not make an election as to the form of benefits, your benefits will be paid in a lump sum.

The Plan must make minimum required distributions to you in accordance with the requirements of the Internal Revenue Code, the main provisions of which are summarized below:

  1. Your account will be either distributed in full or begin to be distributed by April 1 of the calendar year following the later of (a) the year in which you attain age 70½, or (b) the year in which you retire.
  2. If you die before distribution begins,
    1. If your spouse is your beneficiary, the distribution must begin by December 31 of the calendar year immediately following the year of your death or the year in which you would have attained age 70½, if later.
    2. If your spouse is not your beneficiary, the distribution will begin by December 31 of the calendar year immediately following the year of your death or be paid in full by December 31 of the calendar year containing the 5th anniversary of your death.
  3. The required minimum distributions during your lifetime will be determined annually by dividing the value of your account by the appropriate factors under IRS regulations.
  4. If you die after distributions have begun, the required minimum distribution will be determined annually by dividing the remaining account by the longer of your remaining life expectancy or the life expectancy of your beneficiary using the tables in the IRS regulations.
  5. If you die before distribution begins, the required minimum distribution will be determined annually by dividing the value of your account by the beneficiary’s life expectancy using the tables in the IRS regulations.

Federal and state income taxes will be withheld from your Account as may be required under applicable laws.

21. How will benefits be paid to Alternate Payees and beneficiaries, and may I change my beneficiary designation?

Within the rules specified for their participation, Alternate Payees and beneficiaries have the right to direct the investment of the funds held under their social security number. They cannot contribute additional funds to this Account.

Alternate Payees must comply with certain rules with regard to beginning withdrawals and when those withdrawals are complete (see question 22, paragraph 2). For more information, please see the documentation the Plan Record Keeper sent to the Alternate Payee relating to his or her status as an Alternate Payee or Beneficiary.

To the extent funds in your account are not subject to a Domestic Relations Order mandating the payment of benefits from your Account, you may change the Beneficiary of your Account by requesting and submitting an Employee Change Form or a Designation of Beneficiary Form. See the answer to Question 38 for a list of forms and where they may be obtained.

22. What will happen to my Account if I die before I receive all of my benefits?

The balance of your Account will be paid to your designated Beneficiary. If you have not designated a beneficiary on either an Employee Enrollment Form, an Employee Change Form or a Designation of Beneficiary Form, or if your designated Beneficiary dies before you do, payments will be made to your estate or to persons who are generally entitled to your other property upon your death. You may change your designated Beneficiary at any time. To be effective, your signed Beneficiary designation must be received by the Committee or the Plan Record Keeper prior to your death. Be sure to keep your Beneficiary designation up-to-date.

Subject to the limitations discussed in the following paragraphs, you may select the time and manner of distribution of your benefit to your Beneficiary. If you have made no election, your Beneficiary may, within a reasonable period following your death, choose the time and manner of distribution. If neither you nor your Beneficiary has made an election, benefits will generally be paid to your Beneficiary in the form of a lump sum as soon as practicable after the later of your death or the date your Beneficiary is identified.

If you had already begun to receive distribution of your benefits prior to your death, your Beneficiary must receive the balance of your Account at least as rapidly as under the method of payment in effect at the time of your death.

23. What happens if I terminate employment with BART?
If you terminate employment, you may choose to have the value of your Account (less any applicable federal or state income taxes which are required to be withheld) distributed to you. Your benefits will be distributed to you at the time and in the manner specified in Question 19 and Question 20.
24. May I obtain a loan?
No. Loans are not allowed under this Plan.
25. What if I need money due to an unforeseeable financial hardship?

Early distributions are regulated by the Internal Revenue Code and may be made only in cases of financial hardship which are unforeseeable. The Committee shall determine if a Participant qualifies for a financial hardship withdrawal as defined in the Plan document.

An unforeseeable financial hardship generally means a sudden, unforeseen emergency which was beyond the Participant’s control (for example, a catastrophic illness, flood, fire, earthquake, death in the family, Employee disability) and which causes the Participant severe financial hardship.

To the extent that the financial hardship can be lessened by other means such as insurance, suspension of deferrals under the Plan or from the Participant’s other assets, early distributions may not be made.

Expenses which could have been budgeted (such as taxes, a down payment on a house, the purchase of an automobile, or college expenses) will not qualify for an unforeseeable financial hardship distribution.

26. Can I direct a trustee-to-trustee transfer to purchase permissive service credit with CalPERS?
Yes, effective January 1, 2002, such transfers can be made even if you are still an employee of BART. Permissive service credit has a narrow technical meaning under Code Section 415(n)(3) and is limited to service credit (1) recognized by CalPERS for purposes of calculating a person’s benefit, (2) which such person has not received under CalPERS, and (3) which such person may receive only by making a voluntary additional contribution to CalPERS. Please note you cannot use deferred compensation plan money to purchase Additional Retirement Service Credit. Please refer to question 25 under the Money Purchase Pension Plan.
27. What happens to my Account if my spouse receives an interest in my benefits in a domestic relations case?
If a state court awards your spouse (or former spouse) an interest in your benefits through a Qualified Domestic Relations Order, a separate Account will be established for your spouse (or former spouse) for the amount so awarded. He or she can make investment decisions with respect to that Account (Questions 17 & 31), but can not receive a distribution earlier or later than the time distribution may be made to you under the Plan. Your spouse may receive a distribution on account of an unforeseeable financial hardship (Question 25) only if it is your emergency and both you and your spouse (or former spouse) have applied for distribution.
28. What is the Plan Year?
The Plan Year is the calendar year (January 1 through December 31).
29. How often will I receive a statement of my Account?
A quarterly statement will be provided to you reflecting the activity in your Account.
30. What do I need to do with my Account statements?
You will receive regular statements regarding your Account from the Plan Record Keeper. You must read and review your statement and report any items which you believe may be in error to the Plan Record Keeper within 120 days of the day you receive the statement.
31. How can I change my investment choices?
There are two types of changes you can make to the investment of your Account:
  • Changes to the investment of your current Account balance.
  • Changes to the investment of your future contributions.

Changes to the Investment of Your Current Account Balance
You may transfer your Account balance among the various investment funds at any time. To do so, you may either complete an Employee Change Form, request a transfer by touch-tone telephone on the Plan Record Keeper’s voice response telephone system, or make a change through the Internet. Upon becoming a Participant in the Plan, you will receive instructions on how to use these systems. In each case, transfers are processed by the Plan Record Keeper based on the market value for the succeeding day.

Changes to the Investment of Your Future Contributions
You may change the investment direction of your future contributions at any time. To do so, you may either complete an Employee Change Form, request a transfer by touch-tone telephone on the Plan Record Keeper’s voice response telephone system, or make a change through the Internet. Upon becoming a Participant in the Plan, you will receive instructions on how to use these systems. In each case, transfers are processed by the Plan Record Keeper based on the market value em>for the succeeding day.

See the “Contacts” section for the Plan Record Keeper’s telephone number and other contact information.

32. Who is responsible for the administration of the Plan?

The Plan is administered by the Investment Plans Committee, which includes a representative from each of four employee unions and one representative from BART management. The Committee interprets and applies the terms and provisions of the Plan, receives claims for benefits, determines the eligibility of claimants for receipt of benefits and the amount of those benefits, authorizes benefit payments, and determines investment and administration policy. The actions taken by the Committee are final and binding on all Participants, beneficiaries, and their successors-in-interest.

The Committee has contracted with the Plan Record Keeper to provide record keeping and other administrative services for the Plan. Among other functions, the Plan Record Keeper provides educational services to Participants aimed towards educating Participants about investing their Account assets.

33. What are the fees for administering the Plan Participants’ Accounts?
As a Participant in the Plan, certain fees connected with plan administration are allocated to your Account. These include fees for record-keeping, consulting, trustee and legal services, and the Plan audit. All fees are allocated to your Account on a “pro-rata” basis-meaning that fees are allocated among Participants’ Accounts in proportion to the asset value of the Account.
34. Who is the Trustee?
A Trustee has been selected to receive, hold and distribute the assets of the trust fund in accordance with the Plan and upon instructions from the Investment Plans Committee. The Trustee for the Plan is shown on the contact page at the end of this Summary Plan Description.
35. What happens if the Plan terminates?
The Plan has no specific expiration date and is intended to be permanent, but BART has reserved the right to amend or terminate the plan subject to any collective bargaining requirements. Any such action would not affect your interest in your Account.
36. May my benefits be assigned or alienated?
Generally no. However, the Plan’s non-assignability Section should be read as to marital settlements.
37. What are the Plan’s governing documents?
The Plan is established pursuant to a formal Plan document and a Trust Agreement with the Trustee. In the event of any inconsistency between those documents and this description, the Plan document and Trust Agreement will govern. You may examine these documents by contacting the Committee. See the Contacts Section at the end of this booklet for address information.
38. What is Asset Allocation?

The allocation of investment dollars to different categories of assets. For example, an individual may want to put some of his or her funds into bonds and some into equities.

The Committee recommends that you carefully consider your investment goals and your risk tolerance as you decide how you wish to allocate your investment dollars to the various funds available through the Plans.

39. Who should I ask if I have questions?
Any questions can be addressed to the staff of the Committee at (510) 464-6208 or addressed to the Committee directly in the public meeting either in person or in writing. For complete information, see the contact information page at the end of this Summary Plan Description.
40. Where can I obtain Plan forms for the BART Deferred Compensation Plan?

The majority of forms are available at the BART Benefits Office. The following forms are also available at various work locations:

  • Employee Change Form—to change your address, Beneficiary designation, investment allocation or amount of Compensation deferred into the Plan.

The following forms are available through the BART Benefits Office (see contact page at end of this Summary Plan Description for address):

  • Employee Enrollment Form—to enroll in the plan, select investment alternatives and name your Beneficiary.
  • Withdrawal Form—to apply for benefits after termination of employment or on the basis of a hardship.
  • Designation of Beneficiary Form—to name or modify your Beneficiary designation.
  • Employee Request for Account Transfer—to request a transfer of assets from an eligible account into your Plan Account.
  • Direct Deposit Form—to have periodic distribution checks paid by direct deposit to your bank account (submit a direct deposit form with the Withdrawal Form).
  • Catch-up Provision Worksheet—to increase contributions to the Plan in the three taxable years prior to Normal Retirement Age.
  • Declaration of Normal Retirement Age—to state your retirement date in connection with using the Plan’s catch-up features.
  • Request for Benefit Illustrations—to ask the Plan Record Keeper to provide you with examples of different methods of receiving your benefits.
41. Are there meetings at which issues relating to the Plan are discussed?

The Investment Plans Committee meets once a month to discuss investments, policy and ongoing administrative issues relating to the Plans. The meetings are open to the public and Participants are encouraged to attend.

In addition to its monthly meetings, the Investment Plan Committee sponsors an annual meeting for the purpose of informing the Plans’ Participants of any notable events or changes to the Plans and responding to Participants’ questions and concerns regarding the Plans. The meetings are generally held in the second or third month of the year.

42. What if I am reemployed by BART under the Uniformed Services Employment and Reemployment Rights Act (USERRA)?
If you are reemployed by BART under USERRA, your military service will be deemed to constitute service with BART and you shall be allowed to make deferrals. Payment of such deferrals must be made during the period beginning with the date of your reemployment with BART and whose duration is 3 times the period of your military service, but not more than 5 years.
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