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Net Pay Impact Illustrations
ALERT!!
Effective 08/08/2008, no changes will be made to CCC’s legacy
website, now with Internet address www.ncompliancelegacy.com. Henceforth, www.ncompliance.com
goes directly to CCC's new, dynamic, database supported website.
For many months now, CCC has been developing and testing a new, dynamic, database-supported website,
which now resides at www.ncompliance.com, while at the same time maintaining this website, which is
now our legacy website (www.ncompliancelegacy.com). Development of the new website was essential to
allow CCC to provide dedicated sections of its website to more than 50 new clients accumulated since
publication of the Final 403(b) Regulations on July 23, 2007. We chose completion of the Plan Document
System on the new website as the appropriate time to migrate from the legacy website, even though
considerable work remains to be done. Specifically, we will be working with Vendors through the end
of calendar year 2008 to incorporate updated Vendor information into the new website. Moreover, 457(b)
Deferred Compensation Plan (DCP) information remains only on this legacy website, but those CCC clients
for which we are managing their 457(b) Plans may continue to refer to this legacy website until the full
migration has been accomplished.
We are very proud of our new website, especially the Plan Document System and the Content Management
System (CMS), which allows Client Employers and Vendors to manage the content of their own sections of
the website. We hope you share our enthusiasm and will create links form your own websites to your
dedicated sections of the CCC website. Doing so will provide everything your employees need to know
about their 403(b) Program.
Save More, But Spend The Same
On the "why should I participate" page, the following illustration
is given: Suppose you are in the 25% Federal tax bracket, meaning that
you pay 25 cents of each additional dollar you earn in Federal taxes
(this
is called your marginal Federal tax rate). Suppose also that you are
in the 9% Oregon income tax bracket and you determine that you could
save
$100.00 after taxes each month and still meet all of your financial obligations.
Then, you could contribute $151.51 to a tax-deferred savings plan plan
each month and reduce your spendable income by only $100.00. Hence, the
effect is that you are saving more, but spending the same, by taking
advantage
of your employer's 403(b) program.
Additional Illustrations
The tables on the right gives similar illustrations with different marginal
Federal tax rates. In all of these illustrations, it is assumed that your
income is subject to a 9% Oregon marginal income tax rate, which means
that you pay 9 cents of each additional dollar you earn in Oregon income
taxes. For those interested in the mathematics involved, the Federal marginal
tax rate is added to the State marginal tax rate to obtain an overall
marginal tax rate (MTR, expressed as a decimal). Then, the pre-tax amount
you may save is obtained by dividing $100 by (1 - MTR). Applying this
to the illustration in the above paragraph, MTR = .25 + .09 = .34 and
the pre-tax savings amount is determined by the formula $100/(1 - .34)
= $151.51. Of course, actual Federal and State withholding amounts depend
on your marital status, exemptions, and other information you provide
your employer on your W-4 Form, but when tax filing time comes around
your net reduction in after-tax income will, in fact, be only $100.00.
And, earnings on the $151.51 you invested will accrue on a tax-deferred
basis from now until retirement.
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