401k vs 401a
Posted 02 March 2003 - 03:09 PM
Posted 03 March 2003 - 10:58 AM
The 401(a) plan offered by the governmental employer is not subject to Title I of ERISA (a federal law that does not apply due to states rights issues). Instead, the plan is subject to state law, which varies considerably from state to state. Title I of ERISA generally covers vesting, fiduciary actions (e.g., choice of investments), disclosures, and other participant-protection issues. A state may have very strict standards similar to, or exceeding, the Federal rules. However, usually states are not as strict. For example, they typically have much looser vesting rules, so you are not as quickly vested in the employer contribution as you would be under an ERISA plan.
The private employer offering a 401(a) with or without a 401(k) feature, will be subject to ERISA. Therefore, all of the fiduciary, benefit protections and disclosure provisions of the Federal rules apply.
As far as whether the "benefits will be just as good," that all depends on what benefit provisions the private employer incorporates in their plan (if they offer a plan at all). If the 401(a) plan produced a 6% contribution by your employer and the private employer's plan only produces a 4% contribution by the employer, it is obviously not as good.
Posted 03 March 2003 - 10:49 PM
Posted 04 March 2003 - 09:56 AM
Also, every plan is different in the investment options offered. There is no way to make generalizations of the nature of the PERS investments versus a private company's 401(k) investments without knowing what the specific options are.
Also note that your PERS "may" be a Social Security replacement plan. I.e., you are not contributing to, nor will you get Social Security benefits because you are a governmental employee and covered by the PERS. (Not all governmental plans are this way - do you pay 6.2% of your salary to SS?).
If that is the case, you will now start paying into Social Security and receive SS benefits.
Posted 04 March 2003 - 07:39 PM
Posted 05 March 2003 - 09:57 AM
I just looked at the Mississippi PERS webpage. You are not in a defined contribution plan. That means that your contributions are not invested in a fund that you will specifically see produce a payment in the future. Instead, it is a defined benefit plan. The amount of benefits that will be paid by the plan is determined by a formula and has absolutely nothing to do with the investments of the plan.
The statement that a private 401(k) is anything close to resembling what you have now is disingenuous and an outright misrepresentation. There is no way that a 401(k) from a private employer will be anywhere near as generous as the PERS defined benefit plan. I guarantee that one of the reasons for privatizing your work is to save money by not having you in the expensive plan that you are in now.