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401(k) RETIREMENT SAVINGS
Planning for your financial future
Reasons to participate
Contributing to a 401(k) plan is one of the simplest ways to save for retirement. Providing you with a means to save for your financial future is important to HM.Clause. After satisfying the 1-month waiting period, eligible employees can enroll in the 401(k) or Roth (more on this) at any time during the year.
Why should you contribute? Here are some key reasons:
1. It’s easy to enroll – HM.Clause offers automatic enrollment after 90 days. Contributions are taken out each payday automatically and the company offers a generation match up to 6%!
2. Save on a pre-tax basis – this means you defer the tax liability on your contributions until you retire, when you may be in a lower tax bracket. The amount you contribute on a pre-tax basis is sheltered from the IRS and doesn’t count toward your income, lowering your taxable income during your earning years.
3. Tax free withdrawals – the plan allows Roth 401(k) contributions; you’ll contribute on an after-tax basis. You’ll pay taxes on your contributions at your current tax rate so that when you access the money after retirement, withdrawals are tax-free, as long as the funds have been invested for a minimum of five tax years. Contribution limits are the same as for the traditional pre-tax 401(k).
4. Save on a pre-tax basis AND tax-free withdrawals – the plan allows you to make both types of contributions, helping you diversify your tax position at retirement. Then you’ll have the option of which account to draw from.
5. Free money (company contributions) – HMC makes a generous matching contribution each time you contribute. The company matches dollar for dollar, up to 6% of your pay.
6. Compounding - although we do not know what the future holds in terms of market appreciation, financial advisors project an average rate of return for funds invested in a 401(k) plan over the next 20 to 30 years to be somewhere between 5 and 8 percent. A monthly contribution of $1,000 that returns 6% annually becomes $162,473 after 10 years. After 20 years that becomes $453,438!
7. Emergency access - While withdrawing funds from a 401(k) before retiring is not the best course of action, if a true financial emergency arises, then borrowing from or withdrawing funds from a 401(k) could be a lifeline. Our plan even allows a loan for the purpose of a down payment for a new home. Check with your Benefits team for more information.
8. Take it with you – 401(k) plans are portable so even if you decide to move on from your position you may be able to transfer those funds to your new employer’s plan.
Enrolling in your 401(k)
We partner with Empower to maintain our 401(k) plan. Their website offers resources for the beginning to the experienced investor. Topics range from ways to help you save on your next vacation, prepare for a baby and his/her college savings, caring for aging parents and more.
Visit www.empowermyretirement.com (you can also download the Empower app to your mobile device).
- Click on Register.
- Select I do not have a PIN.
- Create a username and password.
You'll need to enter your:
- Social Security Number
- Zip Code
- Last name (including suffix)
- Date of birth
*The next time you access your account choose Sign In.
Contributions
Employee Contributions (salary deferrals)
These are the 401(k) contributions that come out of employee paychecks. They may also be called elective deferrals, and they can be made as either pre-tax (a/k/a tax-deferred) contributions or Roth contributions. You can choose to split your contributions between pre-tax and Roth contributions. Review the table below to compare the two. The tax advantage you receive depends on which type of deferral you choose. Remember you can also split the difference.
| Pre-Tax | Roth |
|---|---|
| Payroll contributions made before you pay taxes | Payroll contributions taken after taxes are paid |
| Tax-deferred growth | Tax-deferred growth |
| Distributions are taxed at normal income if taken at retirement age* | Distributions are Tax- FREE if taken at normal retirement age* |
| Mandatory distribution at age 73 | No mandatory distribution |
| Contribution amount � 1% - 70% up to $23,500 (age 50 + can add $7,500) | Contribution amount � 1% - 70% up to $23,500 (age 50 + can add $7,500) |
Employer Contributions
The HM.Clause 401(k) plan is considered safe harbor which means that the Company makes a matching contribution in an amount equal to a percentage of your elective deferrals. This safe harbor matching contribution is subject to a 2-year vesting schedule. The specified matching percentage for the corresponding level of your elective deferrals is shown in the following table.
| Your Contribution | HMC Contribution |
|---|---|
| 1% | 1% |
| 2% | 2% |
| 3% | 3% |
| 4% | 4% |
| 5% | 5% |
| 6% or more | 6% |
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