Financial: Employee 401k Savings Plan
It's never too early to begin thinking about retirement and planning for life after work. Your Total Rewards retirement package is made up of two distinct plans: the defined benefit pension plan and the defined contribution employee 401(k) savings plan. While many companies are moving away from providing traditional pension plans, State Farm continues to offer both a pension plan and a 401(k) plan to assist you in planning and saving for retirement. While the pension plan is offered at no cost to you, the 401(k) plan represents your opportunity to save additional funds for retirement.
Most employees, full time or part time, age 18 or older, are eligible to participate in the 401(k) plan on their date of hire. Eligible employees are 100 percent vested in their account, which means the account cannot be forfeited or reduced (other than with respect to market fluctuations).
New employees are automatically enrolled in the 401(k) plan. The default is a before-tax contribution rate of 3 percent of your gross biweekly income amount and includes an automatic increase of 1 percent each year (up to a maximum limit of 10 percent) generally corresponding with your annual merit increase timing.
The default investment fund is the Target Date investment option based on the year you will attain age 65. New employees may opt out of automatic enrollment within 30 days of their hire date. They may also change your contribution levels and/or investment options at any time.
If you want to take a more active role in your employee 401(k) savings planning, you can choose your own contribution rate based on either a dollar amount (e.g., $50 per pay period) or a whole percentage of pay (e.g., 3 percent of pay). These contributions can be made with before-tax dollars, after-tax dollars through the Roth 401(k) contribution option or a combination of before-tax and Roth 401(k) contributions. Should you elect to contribute a percentage of pay, the percentage you elect will apply to all pay, including overtime, performance awards and bonus payments. These contributions will be taken out of your paycheck every pay period. The maximum dollar amount you will be allowed to contribute to the plan each year is set by the Internal Revenue Service (IRS).
IRS 2015 maximum contribution limits are:
- $18,000 if you are under age 50
- $24,000 if you are age 50 or older or turn 50 during 2015
Note: All of your contributions to the 401(k) Savings Plan count toward the limit set by the IRS.
Your employee 401(k) savings plan also includes an optional, automatic contribution increase feature which allows you to increase your contribution amount annually without taking any additional action.
In addition to the money you contribute to your 401(k), State Farm® assists you in saving for retirement by contributing a $300 Non-Elective Contribution (NEC) annually into the account of each eligible employee. In addition, if State Farm realizes a sufficient consolidated profit for the year, the Company will match employee contributions to their 401(k) accounts on a dollar-for-dollar basis up to $900.
For added flexibility, several investment options are available for you to choose from. You have the ability to allocate your contributions among:
- The Fixed Income Account, which primarily invests in bonds,
- The Equity Account, which primarily invests in stocks,
- The Balanced Account, which provides a mix of stocks and bonds, and
- 12 Target Date Portfolio options. Target Date Portfolios offer a diversified mix of investments, which gradually and automatically reduce risk by shifting portions of its investment mix from stocks to bonds and short-term reserves as your identified target date for retirement approaches.
This brief overview of the State Farm 401(k) Savings Plan is not intended to be a complete explanation of plan features. For more detailed information, please refer to the Summary Plan Description found within the online Human Resources Policy Manual for U.S. employees.