NYC Deferred Comp & Age 59 1/2

The NYC Deferred Compensation Plan (NYCDCP) really needs to update their distribution form, distribution guide, website, etc.  As a result of the SECURE Act, active 457(b) and 401(a) participants who are 59 ½ years of age or older are permitted to take withdrawals.  In other words, an active NYC employee who is 59 ½ years of age or older can now rollover their entire 457(b) or 401(a) account to an IRA or simply take a withdrawal (subject to taxes).  Active NYCDCP participants (over 59 ½) who do not have a favorable view of the NYCDCP due to its lack of customer service, high fees, lack of investment choices, quick access to money, etc. should consider taking advantage of this new rule.  In Thomann Tax’s opinion, any (active or retired) NYCDCP participant who is older than 59 ½ does not need the NYCDCP, except for ongoing contributions if they are still active.

Based on the NYCDCP 2019 Annual Report, NYCDCP is permitting active participants who are over 59 ½ years old to take a distribution/rollover from the 457(b) or 401(a).  But, typical of the NYCDCP their distribution form has not been updated to account for this rule change.  Also typical of the NYCDCP they have not notified participants either via a newsletter or an update to their website.

Thomann Tax has created the following simple distribution table to help NYCDCP participants understand this new rule.

Current Rule effective 01-01-2020

Retirement Plan

In-service Distribution Age 10% Early Withdrawal Penalty

Subject to Taxation

457(b)

59 1/2 No Yes
Roth 457(b) 59 1/2 No

No, if 5-year rule met

401(k)

59 1/2 No Yes
Roth 401(k) 59 1/2 No

No, if 5-year rule met

401(a)

59 1/2 No

Yes

 

Old Rule

Retirement Plan

In-service Distribution Age 10% Early Withdrawal Penalty

Subject to Taxation

457(b)

70 1/2 No Yes
Roth 457(b) 70 1/2 No

No, if 5-year rule met

401(k)

59 1/2 No Yes
401(a) 62 No

Yes

6 replies
  1. Robert Boyce
    Robert Boyce says:

    Thank you Pete, for your NYCDCP information. Always insightful. I too would encourage all (at least retired) NYCDCP participants to GET OUT asap!! In January, I determined I had enough (of their pathetic service) and decided to transfer my five funds to a rollover (and Roth) IRA. I can’t begin to explain what a HORROR it was. It took over THREE months to accomplish. I transferred these assets to a very large money management fund group (that begins with a “V”). I pay a LITTLE more, but I have a personal financial planner guy that I can call and speak to. Smartest thing I’ve done in a long time… Respectfully. Bob Boyce

  2. Jim B
    Jim B says:

    Thanks Pete, just add this to list of reasons for retirees to pull their funds from the NYC DCP and roll them over to a bona fide retirement fund. I was lucky enough in my after life retirement employment to roll my NYC DCP fund to the NYS DCP Fund. The service along with the multitude of funds to choose from really have made it a great move. I’m sure there are plenty of other Managed funds that are similar. The DCP like everything else under this socialist NYC Government is horrible, take your money elsewhere ladies and gentleman

  3. John
    John says:

    Can we open an IRA Roth acct with DCP without funding it, just to start the clock ticking on the 5-year requirement?

    thanks,

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