Retirement is a scary word, but it doesn’t have to be. Best Buy Retirement has the expertise and knowledge to help you plan your retirement in just about every way conceivable. Best Buy Retirement will help you decide how much money to save and what investments are best for you.
It’s never too late to begin planning for your future at Best Buy Retirement!
Best Buy Retirement Savings Plan
On October 1, 1990, Best Buy created the Retirement Savings Plan. This PLAN is a DEFINED CONTRIBUTION PLAN. This kind of program is designed to create a separate account for each Participant, with a pre-determined amount contributed by the participant, the employer, or both. 401(k), 401(a), Savings Plans, Employee Stock Ownership Plan (ESOP), and Profit-Sharing Plans are among the most common types of plans.
How is the Plan Administered?
The Benefits Committee is the Plan’s Administrator and the “named fiduciary” (for ERISA purposes) in general, with the exclusion of the Employer Stock Fund Fiduciary, who serves as an independent fiduciary. They are the designated fiduciary with full power and discretion to control the Trustee in relation to the Employer Stock Fund’s continuing offering and operation, as well as its continued holding of qualifying employer equities.
The Board of Directors of the plan names the members of the Benefits Committee. Written claims should be sent to the Benefits Committee at the address above, and they should include a signed acknowledgment.
The Plan Sponsor has also given authority to the Benefits Committee to perform part of the plan sponsor’s fiduciary responsibilities in relation to the investment and management of the plan’s assets, including selecting and monitoring the Plan’s Trustee and other people or organizations involved in managing the plan’s assets. The Benefits Committee has assigned part of its fiduciary and administrative tasks to Best Buy Enterprise Services, Inc. (“BBES”), the Plan’s Trustee, and other contract administrators with whom BBES has contracted for services to the plan.
How Does the Plan Work?
The benefits you obtain from your Plan accounts will be determined by the following:
- The amount of money you want your compensation to be put in your savings deferral account;
- The number of matching contributions made by Your Employer to your safe harbor accounts;
- Any gains or losses in the funds you pick for your accounts under the plan; and
- The percentage of your regular matching contributions account that is vested when you leave employment. (Note: Participants in the Plan prior to 2007 received “regular” matching contributions, which are not subject to the safe harbor match requirement.)
You may be familiar with the Pension Benefit Guaranty Corporation, which ensures certain pension benefits. However, the Pension Benefit Guaranty Corporation doesn’t protect 401(k) plans like the plan against loss or bankruptcy.
When Can I Participate in the Plan?
You have to be an Eligible Employee who has worked for at least one year with Best Buy and its Affiliates at the time you apply. You will be eligible to take part in the plan as follows once you fulfill these conditions:
- Hired on or after June 1, 2014 – You may begin contributing two weeks following 60 days of continuous service. Starting the first of the month following one year of service, you are eligible to receive the employer match.
- Full-Time Workers hired before June 1, 2014 – You are qualified to begin contributing and receiving the employer match after 60 days of continuous service in which you are scheduled to work at least 32 hours per week.
- Part-Time Workers hired before June 1, 2014 – You may contribute and get an employer match beginning the first day of the month following one year of service. However, if you are hired before April 3, 2014, and have not completed the required service period, you can contribute as of June 1, 2014 (if you are still an Eligible Employee). Still, you must complete one year of service to begin receiving the employer match.
To meet any minimum service requirement to participate in the plan, all past service you have done for Best Buy and its Affiliates is credited. If you were a member of another qualifying plan that was folded into the plan, you would get credit for your previous work with the employer who sponsored that plan. The number of hours worked is not recorded, and instead, the service time is calculated using an “elapsed time” approach. If an employee works for a year (whether consecutive or not), the employee will receive credit for a year of service under this method.
How is Compensation Defined?
The definition of compensation has a particular meaning in determining contribution amounts under the plan. Compensation for the 2017 Plan Year generally includes amounts paid to you by the Participating Employer Group during the Plan Year (or another measuring period) as wages, salary, or commissions if those amounts are taxable and not part of specific exclusions.
Bonuses are not covered in the calculation of compensation, nor are cost-of-living relocation benefits, transitional pay components, any expense reimbursements, fringe benefits (cash or non-cash), moving expenses reimbursement, tax gross-up, imputed income, third party disability pay, severance payments, health and welfare plan coverage or contributions.
Your compensation is not reduced by (1) your savings deferrals under the plan or (2) any pre-tax payment you make to a cafeteria plan like the Best Buy Flexible Benefits Plan. Severance pay and deferred compensation are not included in your income.
Amounts paid after you leave employment, whether they are paid within the Plan Year in which you terminate or two and a half months after your termination, are included in compensation. This rule doesn’t apply to any differential wage payments made to active duty military personnel who served for more than 30 days.
What are Employer Matching Contributions?
Your employer will match your savings deferrals to the plan for each pay period. Under the plan, your employer will make a “safe harbor” matching contribution to your safe harbor contributions account of up to $270,000 in eligible compensation earned in a year based on the first 5% of comp you defer into the plan.
For the first 3% of your income that you postpone, your employer will contribute 100% toward the matching amount. Furthermore, Your Employer will match $.50 for each $1 of the following 2% of pay that you defer into the plan.
Keep in mind that your employer only matches your deferrals on a per-pay period basis. Starting in 2015, Your Employer no longer makes a “true-up” matching contribution at the end of the year based on your deferral percentage for the entire year. You should be aware of this so that you don’t miss out on safe harbor matching contributions.
You should contribute in as many pay periods as possible to get the most out of your matching contributions for the year. Your company only matches up to 5% of your salary each pay period, and once you get to the deferral limit, both your deferrals and matching contributions cease. If your deferral percentage was 5%, for example, you would extend the number of pay periods during the year in which you contribute before reaching the deferral limit, resulting in greater matching contributions for the year.
How Do I Make Rollover Contributions?
You may contribute to the plan any distributions you are qualified to receive from other eligible retirement plans and IRAs, as well as certain taxable distributions that would otherwise be taxable and qualify to be transferred into the plan as a “rollover.” The plan accepts qualified rollover contributions from the following IRS-approved retirement plans.
- A qualified plan outlined in Code Section 401(a), 401(k) or 403(a);
- An annuity contract outlined in Code Section 403(b) (often called a “tax-deferred annuity”);
- An eligible retirement plan under Code Section 457(b) maintained by a state, a political subdivision of a state, or any agency or political subdivision; and
- Suppose you have an individual retirement account or annuity in Code Section 408(a) or 408(b). In that case, you can rollover your IRA assets to another IRA if the rollover includes only pre-tax contributions.
To decide if a rollover is in your best interests, you should consult with a specialist tax advisor; and to see whether the planned distribution may be rolled over into the plan, you should contact Your Employer.
You can request a direct rollover of any amount you are qualified to get as a taxable distribution from a plan or IRA while working for the Participating Employer Group. You may ask your previous plan administrator, Trustee, or IRA custodian to transfer all or part of any amount you are due to receive as a taxable distribution from an eligible plan. If you have newly received a distribution from an eligible plan or IRA, you can choose to deposit the taxable part of that distribution that is eligible for a rollover into the plan within 60 days after receiving it if the Plan’s Trustee receives that deposit within 60 days after you receive the payment.
When is my Plan Benefits Vested?
Fully Vested Accounts with Savings Deferrals, Safe Harbor Matching Contributions, and Rollovers. After adjustments for investment gains or losses, your plan accounts that contain your savings deferrals, the safe harbor matching contributions of Participating Employer Group, and any rollover contributions you make are always 100 percent vested. This implies you are entitled to all of the funds in those accounts, which can’t be taken away under the plan.
How Can I Direct the Investment of my Plan Accounts?
The plan enables you to choose how the funds in your Plan accounts should be invested, allowing you to select from among the Trustee’s offered investment options. The Best Buy Benefits Center website has information on investment funds in which your accounts may be invested, the process for directing these investments, and other topics.
When the funds in your Plan account are invested according to your instructions, they will be split into one or more distinct investment accounts for you, and gains and losses on those accounts will be reported separately. The performance of your Plan accounts is not affected by the success or failure of accounts kept for other participants who have directed their own investments.
Keep in mind that when you instruct the Trustee to invest in your Plan accounts, you will be held accountable for its success or failure. The purpose of the plan is to satisfy Section 404(c) of ERISA. Suppose the plan’s provisions comply with this Section. In that case, the plan’s fiduciaries, including the Participating Employer Group, Trustee, and Plan Administrator, will be relieved of legal responsibility for any losses that are directly and immediately caused by your investment decisions for your Plan accounts.
When you give investment instructions, the Trustee and Plan Administrator must follow the specified procedures. Suppose you do not make additional investment directives with your enrollment in the plan. In that case, your accounts may be invested in the age-appropriate lifecycle retirement fund (also known as a target-date fund) available under the plan.
Fees and Expenses
There are expenses and fees connected with participating in and investing in the plan. The cost of investment mutual funds, including commissions, investment management fees, and other transactional expenses, is paid out of the mutual fund reducing its return rate.
The expense ratio of a mutual fund is the amount paid by investors for each $1,000 invested in the fund. The administration fees of $16.50 per quarter are charged straight to participants’ accounts and may be adjusted as needed. The plan’s administrative expenses include Trustee and record-keeping fees, auditor costs, communication expenses, and other expenditures.
Can I Borrow from my Vested Plan Accounts?
No new loan may be requested under the Plan after January 1, 2015, but all outstanding loans will continue to be administered according to their terms and the plan’s loan provisions. All loans must be paid back within five years unless they are used to acquire a principal residence, in which case the term is 15 years.
When you leave Best Buy and its Affiliates, you must pay your loan in full or choose to make monthly direct debit payments until the loan is paid in full within the existing terms. You must secure any loan you take with half of your account balance in the plan. Loans must be repaid through payroll deductions, personal checks, or direct debit if you do not receive any pay.
The money will be credited to your accounts and re-invested according to your other investment instructions as you pay down the debt. If you have a loan, you may continue making contributions to the plan.
Can I Get Any Benefit Distributions While Employed?
While you work for Best Buy or any of its Affiliates, the following distributions may be made, but not more than two times each Plan Year.
You can request a hardship withdrawal from your rollover account (if any) and some or all of your savings deferrals if you qualify. Any hardship distribution must first be drawn from any existing rollover account balance, and second, from your savings deferral contributions (minus any investment gains), with any past benefits paid to you from your savings deferral account deducted.
Distributions after Age 59½
You will be entitled to an in-service distribution if you are a working employee who has reached age 59½ and has incurred a financial hardship. In-service distributions will be made from your rollover account, savings deferrals account, safe harbor contributions account, and best-interest matching contributions account in that order.
Distributions from Rollover Account
You may also ask for a distribution from your rollover account.
Distributions on Account of Extended Military Service
If you are required to serve on active duty for 30 days or longer, you may ask for a distribution of all or part of your accounts. For the next six months, you will not be permitted to make savings deferral contributions after receiving any distribution on account of extended military service.
Taxation of Distributions Made During Employment
You may be subject to a 10% penalty tax if you receive a Plan distribution while working for Best Buy or one of its Affiliates and before you reach age 59½. In-service distributions are generally taxable. Hardship payments are always taxable because they cannot be rolled over to another retirement plan or IRA.
If you get any distribution from the plan while you work for Best Buy or one of its Affiliates, 20% federal income tax will be deducted. However, if you are entitled to an in-service distribution at age 59½ for reasons other than hardship, you may be able to roll it over to a tax-qualified plan or IRA.
How Are Benefits Distributed After Employment Termination?
Distribution After Employment Termination
The Best Buy and its Affiliates’ policy regarding employee vesting applies after your employment with them has finished. You may choose to get your vested accrued benefits right away or at a later date before you attain age 65.
- If the present value of your vested Plan accounts (other than any rollover account) is $1,000 or less at the time of termination, you will receive a cash payment as soon as feasible following your employment termination.
- Rollover accounts in the plan are not taken into account for the $1,000 calculation, but they will be paid out along with other benefits worth at least $1,000. You have a choice whether to take the distribution or roll it over to another retirement plan, such as an IRA.
The Administrator will give you further information regarding your distribution rights once you have been terminated from employment.
Manner of Distribution
The vested plan will be paid in a single payment, either directly to you or through a direct rollover to your IRA or tax-qualified retirement plan.
Taxation of Distributions
When you receive a distribution from a plan, it is usually taxed; and if you are under the age of 59 1/2, an additional 10% penalty may apply. You may, however, choose to have any vested Plan benefits paid out in a lump sum transferred to another tax-qualified retirement plan (if one is available) or an IRA rather than receiving a direct rollover.
This would eliminate the need for 20% income tax withholding, which must be withheld from lump-sum payments that are not rolled over by a direct rollover. You should get more information on a direct rollover through the Best Buy Benefits Center website before deciding to make a direct rollover election.
Best Buy Retirement is a defined contribution plan, which means that this type of retirement account usually establishes an account for each individual participant. It also means there are different types of plans where the money comes from either the employee or employer.
For those who have not yet started planning for retirement, it might be time to start looking into what your options are with these types of accounts so you can better prepare financially for when you stop working full-time altogether!