The Deferred Compensation (DC) plan is voluntary, and employees elect to have money taken out of their salaries to contribute to their own DC account. The employees’ taxable income is decreased by the contributions and the account grows tax-deferred until the money is withdrawn at retirement. Taxes are then paid when the money is withdrawn.
Since this is a retirement account, there are penalties for “early withdrawal”. Therefore, many workers have been reluctant about contributing to DC plans because they cannot access the money for a house down payment, remodeling, or a child’s education.
I am pleased to report that now you can take out a loan against your DC account, pay interest to yourself (and not a bank!), and repay the loan from your earnings! The attachment provides further information.
I championed this new option to make our public employees’ financial matters more flexible and less stressful. I hope you consider this new opportunity!!