Population: New or Prospective Non-Represented
Your Contributions and Limits
You can contribute up to 50% of your pay on a before-tax basis, after-tax basis, Roth basis, or a combination of all three.
- Before-tax dollars are taken out before Federal income taxes and, in all states (except Pennsylvania), before state and local taxes are calculated. As a result, you pay lower taxes—and keep more of the money you earn.
- After-tax dollars are taken out of your pay after all taxes are calculated and withheld. While you won't benefit from paying lower taxes during the year when you make after-tax contributions, you'll have more flexibility with your account balance and your account will have the same earning potential as before-tax contributions.
Roth contributions are similar to after-tax contributions in that they are deducted from your paycheck after federal, state, and local income taxes have been withheld. You don’t reduce your taxable income during the year in which your contributions are made. You can make withdrawals from your Roth account tax free provided that you are at least age 59½ and the Roth account is at least five years old. That could be advantageous if you don’t mind paying taxes now, and prefer to have tax-free income at retirement.
Before-tax (401(k)) contributions and Roth contributions are considered "tax-advantaged" contributions and the withdrawal of these investments is limited by Internal Revenue Service rules. The earnings on all contributions are also considered tax-advantaged and fall under the IRS withdrawal guidelines. Your after-tax contributions, however, are considered fully accessible since you’ve already paid the taxes on that money.
Other Important Points About Contributions
Rollover contributions
You may be able to deposit the entire distribution (before- and after-tax contributions) from a qualified plan of your previous employer, if you meet certain requirements. For more detailed information, call Benefits Express at 1-800-571-0400 and follow the voice recognition prompts to speak with a Benefits Express representative.
Limits on contributions
The IRS limits the amount of before-tax and Roth contributions that can be made to your account each year. These limits are indexed, and may be adjusted each year to reflect increases in the cost of living.
| Contribution Limit | Amount for 2012 |
|---|---|
|
Annual IRS Before-Tax Contribution Limit: If your before-tax contributions reach this maximum during the year, they automatically will change to after-tax contributions for the rest of the year. The following January, contributions automatically will begin again on a before-tax basis, until you reach the IRS limit for that year. Please note: Roth contributions are included in this limit. If you begin working at PSEG during the year and had been making contributions to a previous employer's 401(k) plan, it is your responsibility to monitor whether your contributions will reach this limit. If they do, you need to contact Benefits Express by March 1 of the following year. Call 1-800-571-0400 and follow the voice recognition prompts to speak with a Benefits Express representative to find out procedures for receiving a refund. If you do not notify PSEG, you are subject to taxation on the excess amount you contributed above the IRS limit. |
$17,000 ($22,500 if you are age 50 or older) |
|
Salary Limit: The IRS limits the amount of compensation that can be considered each year when making before-tax, after-tax, Roth, and Company matching contributions to your Savings Plan account. |
$250,000 |
|
415 Limit: Based on Section 415 of the Internal Revenue Code, this is a limit on the total annual amount of employee contributions and Company matching contributions that may be made to this plan. |
The lesser of $50,000 or 50% of pay |
|
Highly Compensated Limit: The IRS sets limits on before-tax, after-tax, Roth, and Company matching contributions to ensure that employees considered "highly compensated" do not receive a disproportionately greater benefit from the Savings Plan than other employees. As a result, it may be necessary to lower contribution amounts or refund contributions made by higher-paid employees. (Any before-tax and Roth deposits, earnings on before-tax and Roth deposits, and earnings on after-tax contributions returned would be taxed as ordinary income.) |
$115,000 |
If limits imposed by the federal government affect your contributions, your contributions will stop or be changed from before-tax or Roth to after-tax contributions.