ING

 

ING is a stock life insurance company organized under the insurance laws of the state of Connecticut, and is an indirect wholly-owned subsidiary of ING Groep N. V., a global financial institution active in the fields of insurance, banking, and asset management.  Prior to May 1,2002, the company was known as Aetna Life Insurance and Annuity Company.

 

The group annuities and mutual funds offered through ING’s retirement plan are long-term investments designed for retirement purposes.  Early withdrawals may be subject to a deferred sales charge.  Money distributed will be taxed as ordinary income in the year the money is received.  Account values fluctuate with market conditions, and when surrendered, the principal may be worth more or less than the original amount invested.  Annuities are subject to additional fees and expenses to which other tax-qualified funding vehicles may not be subject.   However, an annuity does provide other features and benefits, such as lifetime payments and death benefits, which may be valuable to you.

 

457(b) Plan

 

What is it?

 

A 457(b) plan is also commonly referred to as a deferred compensation plan or retirement plan.  A deferred compensation plan is governed by Section 457(b) of the Internal Revenue Code (IRC).  Under a 457(b) plan, you can make pre-tax contributions through a Participation Agreement.  This means that your contributions are deducted from your salary before federal income taxes are calculated.

 

How does it work?

 

With a deferred compensation plan, you postpone receiving a portion of your salary.

 

You decide, within Internal Revenue Code set limits, how much of your salary you want to defer.

 

Your employer will deduct contributions from your paycheck before federal income taxes are taken out and forward them to ING.

 

Contributions are invested in one or more of the investment options offered under the plan.

 

Contributions and earnings accumulate tax-deferred.  You are subject to federal income taxes only when you receive benefit payments.

 

It has no effect on Social Security.  Your Social Security contributions and benefits will be based on your total pay, including the amounts paid into the deferred compensation plan.

Tax Credit

 

If you are in a middle- or lower- income range, you may be eligible for a non-refundable tax credit of up to $1,000 for before-tax elective contributions to your governmental 457(b) plan.  The tax credit may also apply to after-tax voluntary contributions made to 401(a)/(k) and 403(b) plans, and all contributions made to a traditional or Roth IRA. The availability and amount of the tax credit depends on your adjusted gross income (your total income less certain deductions for which you may qualify) and your filing status.  If your adjusted gross income is no more than $50,000 (married, filing jointly), $37,500 (head of household), or $25,000 (all other filers) and you make elective contributions, you may be eligible for this valuable tax credit.  To be eligible for the tax credit you must be at least 18 years of age at the close of the tax year but cannot be either a full-time student or declared as a dependent on someone else’s return.  The tax credit is non-refundable, which means it cannot be more than your total tax bill.

 

ING Custom Choice Program

 

The ING Custom Choice Program is offered under a group funding agreement between the contractholder, the State of Kansas, acting on behalf of the plan, and ING Life Insurance and Annuity Company.  The ING program makes a wide range of investment options available to your deferred compensation plan and the options, both institutional and retail, are leading fund families.

 

Credited Interest Option

 

The ING program includes a credited interest option and variable interest options.  The ING program offers the ING Fixed Account – 457/401 as its credited interest option.  The Fixed Account provides stability of principal and credits interest on amounts allocated to this option.  The different forms of interest rate guarantees applicable to the Fixed Account are as follows.

 

• The guaranteed contractual “minimum interest rate” is 3%.
• A declared “floor interest rate” for a stated time period and a declared “current credited interest rate” that we may change monthly.

 

The minimum interest rate, the floor interest rate, and the current credited interest rate are each expressed as an annual effective yield.  Interest is credited to your account on a daily basis.  Once credited the interest becomes part of your principal.  This means that your account earns compound interest.  Taking the effect of compounding into account, the interest credited to your account daily yields the current credited interest rate.  Any changes in rates will apply to all amounts in the Fixed Account.

 

Restrictions on the Credited Interest Option

 

If your account value is surrendered or withdrawn completely or partially from the Fixed Account, or if you surrender or close your account or transfer outside of the agreement, a market value adjustment may apply.  This market value adjustment would not apply to any distribution made to you as a benefit payment under the plan for reasons of: retirement, separation from service with your employer, death, employer-certified unforeseeable emergency, loan, or in-service withdrawals.

 

Variable Interest Option

 

The variable investment options include institutional and publicly available funds through a company separate account.  Each variable investment option has a different investment objective.  These investment options fluctuate in value and involve investment risks.   The value of the fund shares may increase or decrease, which will affect the value of your account.  Most of the variable funds offered under the agreement are those known as the institutional funds that are available only to insurance companies for various types of annuity contracts.  The publicly available funds are known as retail funds since they are available to the general public.

 

When contributions are allocated to a variable investment option, shares of that fund are purchased by ING and held in a pooled separate account.  The separate account actually holds the fund shares.  Your account under the agreement holds units of participation in the separate account.

 

At the end of each day that the New York Stock Exchange is open, a net asset value per share of each fund is determined.  This is based on the value of each fund’s securities, cash, and other assets, less any liabilities, divided by the number of shares outstanding.  The separate account unit value of the fund is then derived by multiplying the last unit value by the current net investment factor.  The net investment factor takes into the account the difference in net assets in the beginning and at the end of the period being valued, and taxes.

 

Each fund pays an investment advisory fee to its investment advisor.  Also, some funds may assess fees and other administrative expenses.  These fees and expenses are deducted from each fund’s assets as a liability when a fund calculates its net asset value.

 

Changing Your Investment Selection

 

You may change the investment options in your account.  Transfers are also permitted among the variable investment options or between the variable investment options and the Fixed Account.

 

Direct transfers between competing funds are not allowed.  A competing fund is defined as any investment option that provides a direct or indirect guarantee of investment performance (including the Fixed Account) or can be invested primarily in assets other than common or preferred stock.  Once any transfer involving a competing fund or any surrender has occurred, no subsequent transfers to or from a competing fund, nor surrenders from the agreement may occurred during the ensuing 90 days.  The Fixed Account, and the ING Money Market VP Portfolio are competing funds.  The competing fund transfer restrictions may be relaxed if warranted by prevailing market conditions.  Any non-enforcement of the competing fund transfer restrictions is temporary and will not constitute a waiver of these requirements.

Investment Risk

 

The relationship between risk and returns: the higher the potential return on your investment, the higher the risk – or potential for loss.  The higher the potential risk, the higher the potential for financial reward.

 

Changes in market conditions will cause investment principal and your return to fluctuate.  The end result of that fluctuation is that, when withdrawn, your money may be worth more or less than the original amount you invested.  There’s always the chance that an investment won’t earn what you expect.  You could even loose money.  Or your investment may do far better than you expect.

 

Generally though, investing consistently over long periods of time has the potential to reduce the effects of investment risk and reduce the chance you’ll lose money.  Past performance, however, is not indicative of future results.  However, past performance has shown that if you invested in the stock market for any 10-year period since 1940, you would not have lost the principal – your original investment – at the end of the period.

 

Inflation Risk

 

With good saving and investing habits, your retirement plan account has the potential to grow over time.  However, because the prices you pay for most things increase over time, there’s the chance that your money in the future won’t have grown enough to give you the same buying power you have today. This is called inflation risk.

 

Diversification

 

Diversification is a risk management tool.  Diversification means investing in a variety of asset classes that may help lower the risk of losing money.  A diversified portfolio won’t ensure a profit or guarantee your money against loss, but it can help even out the highs and lows your investments may experience over time.  Using diversification techniques, you can help decrease your investment risk.  If you invest your savings across a variety of investment options and asset classes, poor performance in one class may be balanced by good performance in the others.

 

You can also diversify investments to help overcome inflation risk.  By investing in asset classes with different investment objectives, your money won’t be stuck in one or two investments that may not keep pace with inflation.

 

Basic Investment Principles

 

The plan provides choices about where to invest your contributions, including a full range of investment options from some of the nation’s leading investment management companies that invest in stocks, bonds, and other securities.

 

Stocks, bonds, and money market securities are the three main investment categories.  Each has its own unique characteristics and each may be appropriate for investors in certain situations.

 

Investments are generally grouped by asset class and according to their level of investment risk.  You need to choose the right mix- one that balances your needs and expectations with your tolerance for risk.

Asset Classes

 

ING categorizes investment options into eight asset classes or categories and describes them according to the benefit they deliver to investors.

 

• Global/International: Highest relative risk rate of “aggressive”; invest in stocks of companies outside of the United States
• Aggressive Growth: Highest relative risk rate of “aggressive”; invest primarily in stocks of small- and medium-sized United States companies
• Growth: Relative risk rate of “moderate” or “aggressive”; invest primarily in stocks of larger United States companies
• Growth and Income: Relative risk rate of “moderate”; invest primarily in stocks of larger, mature companies
• Income: Relative risk rate of “conservative” to “moderate” to “aggressive”; invest primarily in bonds
• Stability of Principal: Relative risk of “conservative” invest primarily in options that seek to hold the principal value of an investment stable through all markets

 

Model Portfolios

 

Model portfolios are based on widely-held investment theories that asset allocation is a key factor to achieving investment objectives and a longer holding period for investments to help reduce risk.  The portfolios consider the historic rates of returns of different asset classes over long periods of time, although performance is no guarantee of future returns.  Each model portfolio may show an allocation among up to six different asset classes, which are represented by the generally accepted market index.  The performance returns and risk of each index for the past 25 years are used as the basis for the model portfolios.

 

• Aggressive Portfolio: An aggressive portfolio has primarily equities or similar higher risk investments, weighted toward aggressive growth, small company, and international investment.
• Moderately Aggressive Portfolio: A moderately aggressive portfolio has 80% equities or similar higher risk investments focused on growth, while also offering income-oriented investments.
• Moderate Portfolio: A moderate portfolio is an intermediate risk and return portfolio that provides a blend of equities and income-oriented investments.
• Moderately Conservative Portfolio: The moderately conservative portfolio has 10% invested in stability of principal, 50% invested in income-oriented investments and the remaining 40% in equities to provide growth potential.
• Conservative Portfolio: The conservative portfolio is a conservative performer with only 20% invested in growth and growth and income investments, 60% in income-oriented investments, and 20% in stability of principal.

 

System Allocation

 

ING offers a method to reallocate a lump-sum amount from one of the variable investment options available under the agreement to another investment option within a selected asset source account in substantially equally monthly installations.  This systematic allocation option is offered to permit shares of the second investment option to be purchased using the dollar-cost-averaging method.

 

This option involves continuous investment in funds regardless of fluctuating price levels.  You should consider your financial ability to continue to purchase through periods of low price levels.

 

Required Payments and Distribution Options

 

Distributions for all participants must begin in the form of periodic benefit payments no later than April 1 following the calendar year in which you turn 70 ½, or retire, whichever occurs later, or be made in a lump sum by the same date.

 

ING may offer one or more Systematic Distribution Options (SDO) that allow for scheduled withdrawals from a participant account.  SDO payments are available, where allowed by the plan, to participants who meet certain minimum account value requirements under the agreement.  Age requirements may also apply.

 

The distributions that are currently available include the Systematic Withdrawal Option and the Estate Conservation Option.  Because SDO payments are not annual annuity options, the participant account remains in the accumulation phase under the agreement.  This means that transfers among investment options continue to be available, agreement charges continue to apply, and the lump-sum payment and other payment options under the plan continue to be available.

 

Once elected, you may revoke SDO payments by submitting a revocation form.  This revocation will apply only to amounts not yet paid.

 

If you die before payments begin, any benefits due under the agreement are payable to the plan.  Your beneficiary will receive a lump sum payment.

 

Tax Information

 

Under federal tax law, plan contributions and investment earnings are not taxable until they are distributed.  Taxation occurs when amounts are paid from the agreement to you or your beneficiary for benefits due under the plan.

 

Current federal law requires that ING withhold federal income taxes from the taxable portion of distributions under the agreement made directly to your or to any beneficiaries.  Withholding does not increase tax liability; it is simply a way of paying taxes that are due from each payment.

 

Under existing law, any tax liability that is not paid by withholding generally must be paid on an estimated basis each calendar year.  Penalties may be imposed if the total tax paid by withholding or estimated taxes, or both, is not enough.  ING must report the taxable portion of distributions to the IRS, whether or not federal income taxes are withheld.

 

Based on current law, withholding does not apply to distributions that are rolled over via direct transfer to an Individual Retirement Account/Annuity, a qualified plan, a Section 403(b) tax deferred annuity arrangement, or another governmental 457(b) plan.  However, a 10% excise tax will apply to any subsequent pre-mature distributions of such-rolled over amounts and to pre-mature distributions from a 401(a) plan.  Generally, pre-mature distributions are those made before you attain age 59 ½.

 

Frequently Asked Questions

 

Q. How much can I contribute?

 

A. Federal law restricts the amount you may contribute to the 457(b) plan.  Generally, you  may defer up to 100% of your includible compensation or a dollar amount limit ($13000 for 2004, increasing in $1000 increments to $15,000 in 2006, and adjusted for cost of living thereafter), whichever is less.  Keep in mind that deferrals you make to more than one 457(b) plan in the same year count toward this deferral limit.

 

You can change the amount of compensation you defer as your retirement planning needs change.  You may increase the amount you defer up to the legal maximum, or reduce, stop, or restart deferrals based on the terms of the plan.

 

 

Q. Can I contribute more?

 

A. Yes.  As a result of pension reform (the Economic Growth and Tax Relieve Reconciliation Act of 2001) and if your plan permits, you may be able to take advantage of the ability to make higher contributions to the 457 deferred compensation plan through catch-up provisions.

 

Catch-up Provisions

:

• 457(b) catch-up: During the three consecutive years prior to normal retirement age, the IRC allows a 457(b) plan to include a catch-up provision, which allows participants who have not always deferred the maximum amount allowed to “catch-up” on past contributions.
• Age 50+ catch-up: Participants under a 457(b) sponsored by a governmental entity who will be 50+ in any calendar year may be able to defer an additional amount over the regular annual limit in that same year.  These age 50+ catch-up contributions are limited to $3000 in 2004, increasing in $1000 increments annually to $5000 in 2006, with adjustments for cost of living in later years.

 

You cannot use both catch-up provisions in the same year.  However, you may contribute up to the greater of these two catch-ups.

 

 

Q. What investment options are available?

 

A. The plan provides a wide range of diversified, professionally managed investment options – each designed to pursue a different investment objective.

 

You should consider the investment objectives, risks, and charges and expenses of the funds carefully before investing.  Depending upon the plan, you may be able to:

 

• Customize your own portfolio to match your individual needs
• Diversify, or spread, your contributions over different options, thereby potentially reducing investment risk
• Change the mix of your current contributions and transfer prior contributions among the various investment options

 

 

Q. How do I decide where to invest my money?

 

A. What type of investor are you?  How will you design your investment strategy to help meet your dreams for the future?  Deciding where to invest your retirement contributions requires careful consideration.  To help you determine your place in the range of aggressive to conservative investor, please contact a local representative for information at 1-800-262-3862, or visit their web site at www.ingretirementplans.com

.

 

 

Q. What is dollar cost averaging?

 

A. Dollar cost averaging is a method for investing a fixed amount of money at regular intervals over a period of time.  Dollar cost averaging does not ensure a profit nor protect against a loss in declining markets.  You should consider your financial ability to continue making purchases through periods of low price levels.

 

 

Q. Once enrolled in the plan, how can I manage my account assets?

 

A. ING can help you stay in touch with your investments through:

 

• Quarterly Account Statements
• Toll-Free Telephone Account Access
• Internet Account Access
• Local Service

 

 

Q. When can I receive a distribution from the plan?

 

A. Generally, withdrawals from a deferred compensation plan are not allowed unless you retire, attain age 70 ½, sever from employment, or die.  In addition, a withdrawal can generally be made to meet an “unforeseeable emergency” if your plan permits.  The IRC defines an unforeseeable emergency as a “severe financial hardship of the participant or beneficiary resulting from an illness or accident of the participant or beneficiary, the participant’s or beneficiary’s spouse or dependent.”  This definition does not generally include the purchase of a principal residence or payment of college expenses.

 

The IRS requires that you begin to take Required Minimum Distributions (RMD) no later than April 1st of the year following the year you retire, or the year you reach age 70 ½.  If you fail to receive the RMD for any tax year, a 50% excise tax is imposed on the amount that has not been distributed.

 

 

Q. What are my payment choices when I am entitled to a distribution?

 

A. The plan will describe the available payment methods.  Your choices may include:

 

• Distribution over your lifetime
• Distribution over your lifetime and the lifetime of your designated beneficiary
• Distribution over a set time period not extending beyond your life expectancy
• Distribution over a set time period not extending beyond the join and last survivor life expectancy of both you and your designated beneficiary
• Other systematic withdrawal options that provide periodic income for either a specific dollar amount of a specified time period
• Lump sum or partial lump sum distribution in combination with one of the other options
• Deferral of all or a portion of your benefits to a future date, no later than April 1st of the year following the year you reach 70 ½ or retire, whichever is later

 

An estate conservation option that allows you to receive only the minimum amount required by law at either age 70 ½ or retirement, whichever comes later.  Money distributed will be taxed as ordinary income in the year the money is withdrawn.

 

 

Q. Can I transfer my benefits to another 457(b) plan?

 

A. After severance from employment with your current employer sponsoring the 457(b) plan, you may transfer your plan assets to another governmental 457(b) plan, if both plans permit.

 

 

Q. Are my plan benefits portable?

 

A. A 457(b) deferred compensation plan sponsored by a governmental entity is “portable”.  This means that if you go to work for another employer you may be able to roll over your account balance to a new employer’s eligible retirement plan (such as a governmental 457, 403(b), 401(a)/(k), if the plan permits).  Account assets may also be rolled over into a traditional IRA.  In addition, you can choose to leave your assets in your former employer’s plan (if the plan allows).  There, it will continue to accumulate tax-deferred until the IRC requires that you begin receiving minimum distributions – either when you attain age 70 ½ or retire, whichever comes later.

 

Plan assets rolled from another plan type into a governmental 457(b) deferred compensation plan would still remain subject to the IRS 10% penalty if distributed prior to age 59 ½ (unless another exemption applies).  Any amounts rolled from a governmental 457(b) deferred compensation plan to another plan type would then become subject to the IRS 10% penalty if distributed prior to age 59 ½.

 

 

Q. When are my benefits taxable?

 

A. If you choose to take your benefits, the distribution will be taxable in the year you receive the money. Or, you may choose to spread your payments out over time.  Should you choose to spread out your payments, you will only be taxed on the amount you receive from your account.

 

 

Q. What happens upon my death?

 

A. Upon your death, the plan will provide your beneficiary with a choice among various death benefit options.  If you die before your minimum distribution required beginning date (generally the later of age 70 ½ or retirement) and your plan beneficiary is also your spouse, he or she is not required to begin receiving payments any earlier than when you would have reached age 70 ½.

 

If you die after your required beginning date, the balance of your account must be distributed at least as rapidly as under the method in place at your death.

 

 

Q. How do I get started?

 

A. Once you have determined that participating in this retirement plan is right for you, you will need to complete a Participation Agreement through Crawford County’s Fiscal Clerk Office to authorize deductions from your salary.

 

 

Q. What is Tax Deferral?

 

A. Tax deferral is offered through the plan and this means that contributions are made from your salary to the plan before they are taxed.  Taxes on earnings are also delayed.  This means that less taxes are taken out of your check because your taxable income may be lowered by your contribution.

 

Contributions and earnings are not taxed as long as they remain in the plan.  However, when money is distributed from the plan, it becomes taxable.

 

Contact Information

 

ING

151 Farmington Avenue

Hartford, Connecticut 06156

Phone: 1-800-262-3862

Web site: www.ingretirementplans.com