The Roth Contribution Option for Supplemental

Retirement Accounts

Dartmouth College Office of Human Resources

2

The Roth contribution option for Dartmouth employees 3

Is the Roth option right for you? 4

Comparing Roth post-tax and pre-tax contributions 5

Q&A 6-8

Summarizing the Roth contribution option 9

Taking the next step 10

Information sessions 11

Table of Contents

2

3

The Roth contribution option for Dartmouth employeesDartmouth College is pleased to announce that beginning September 1, 2018, Dartmouth will offer

an additional way to save for retirement through Roth contributions to your Supplemental Retirement

Account (SRA). To help you decide whether the Roth contribution option is the right savings choice

for your situation, please review this brochure. If you have questions, please contact your investment

provider, Fidelity Investments® or TIAA.

You may be familiar with how contributions and earnings work currently—your contributions are made on a pre-tax basis when you participate in the SRA Plan. This means the money comes out of your paycheck before your income is taxed, which lowers your taxable income and saves you money on taxes today. You don’t pay taxes on your contributions or any earnings until you take the money out, typically in retirement. When withdrawing money from your SRA Plan, you pay ordinary income taxes on the amount withdrawn.

With the Roth contribution option, your contribution is taken out of your paycheck after your income is taxed, which does not lower your current taxable income. You might be wondering why contributing post-tax income to the Roth option may be to your advantage. Any earnings accrue tax-free, and you pay no taxes when you withdraw money from the Roth option in the future, provided you’re at least age 59½ or disabled and your withdrawal is made at least five years after your first Roth contribution.

As part of this retirement savings enhancement, Dartmouth is implementing a new administrative feature to simplify percentage-based contribution elections. Effective September 1, 2018, any existing or future percentage-based contribution elections will be applied against all of your taxable cash salary or wages excluding certain welfare benefits and certain taxable cash salary or wages paid after termination of employment. Dartmouth encourages you to review your first pay check issued after September 1, 2018 to ensure that your retirement savings goal is on target for 2018. You can change your contribution election at any time.

4

Is the Roth option right for you?Should you pay taxes now or later? It depends on your situation. Generally, if you anticipate being in a higher tax bracket during retirement, you’ll benefit from making Roth contributions. If you think you’ll be in a lower tax bracket at retirement—or if you cannot afford to make contributions without the current tax savings—you may prefer to make pre-tax contributions. You may also choose to split your contributions between both options.

You often hear about the importance of asset diversification when investing: Spread your funds across asset classes, and don’t put all your eggs in one basket. Roth contributions are another way of diversifying your investments based on tax status. The Roth option may potentially help you to manage your taxes in retirement by providing you with a source of income that is tax-free.

You may benefit from Roth if you…

• Are just starting out and are currently in a lower tax bracket than you expect to be at retirement.

• Want to make Roth contributions that are greater than the Roth IRA contribution limit (see FAQs for details).

• Earn too much to contribute to a Roth IRA (see FAQs for details).

• Wish to diversify your financial assets among accounts that are taxable and tax-free when making withdrawals.

• Want to hedge against the uncertainty of future tax rates by having both pre-tax and post-tax assets in your retirement account.

• Are interested in passing a portion of your retirement assets tax-free to your heirs.

5

Comparing Roth post-tax and traditional pre-tax contributionsThe following table will help you compare the differences between making an annual $3,000 Roth post-tax contribution and a $4,000 pre-tax contribution to the SRA Plan. The illustration assumes an annual return of 6% over 20 years, and the future value of your account will depend on the actual rate of return plus your tax bracket before and after you retire.

The bottom three rows of the chart reveal three scenarios, illustrating different tax situations.

If you expect your tax bracket to increase, the Roth contribution option may provide you with greater tax savings over the long run. If you anticipate that you will be in a lower tax bracket in the future, pre-tax contributions may benefit you more in the long run.

It’s difficult to predict what your future tax situation will be, but you’ll want to consider that as well as what type of contribution will help your current tax situation as you compare the two SRA Plan options. Remember, you can also split your contributions among the two options.

FUND NAMEROTH POST-TAX CONTRIBUTIONS

PRE-TAX CONTRIBUTIONS

Annual contribution $3,000 $4,000

Annual tax savings $0 $1,000

Effect on annual income ($3,000) ($3,000)

Future account value $116,978 $155,971

Tax bracket remains the same in retirement.

Future account value (after taxes paid)—assuming 25% bracket before and after retirement

$116,978 $116,978

Tax bracket is higher in retirement.

Future account value (after taxes paid)—assuming 25% bracket while working and 30% bracket after

$116,978 $109,180

Tax bracket is lower in retirement.

Future account value (after taxes paid)—assuming 25% bracket while working and 20% bracket after

$116,978 $124,777

* This illustration is hypothetical and not intended to represent the performance of any specific investment product and cannot be used to predict or project investment performance. Charges and expenses that would be associated with an actual investment are not reflected.

6

Q&A

General

Q1: What is a Roth IRA and why is the Roth feature in the SRA Plan different?

A1: The Roth feature in the SRA Plan and Roth IRAs are both established with post-tax contributions. However, Roth IRAs are established by individuals outside of a retirement plan. A Roth SRA is part of your Dartmouth sponsored SRA Plan. Individual Roth IRA limits are restricted based on income levels, whereas a Roth SRA is not subject to income limits. The maximum annual contribution under a Roth IRA for 2018 is $5,500 ($6,500 for those age 50 and older). The maximum annual contribution under a Roth SRA for 2018 is $18,500 ($24,500 for those age 50 and older).

Q2: Is the Roth option part of the Dartmouth College SRA Plan?

A2: Yes. Beginning September 1, 2018, the Roth option is a new post-tax contribution option within the Dartmouth SRA Plan.

Q3: What are the benefits of the Roth SRA Plan option?

A3: It provides additional flexibility in planning retirement income—your contributions are made post-tax, and your qualified withdrawals (contributions and earnings) in retirement are not taxed. This can help protect you against higher future ordinary income tax rates. Additionally, there are no maximum income limits for Roth contributions within the SRA Plan (unlike Roth IRAs), and contribution limits are higher than those applicable to Roth IRAs.

Q4: Who might benefit from the Roth SRA option?

A4: In general, the Roth SRA option might benefit employees earlier in their careers for whom pre-tax contributions may not be as beneficial, participants who want to contribute more than the $5,500 contribution currently allowed to a Roth IRA, and those who believe they may be in a higher tax bracket in retirement.

The Roth SRA may also benefit individuals who seek to maximize tax flexibility when withdrawing their savings in retirement (e.g., looking for a balance of taxable and nontaxable withdrawals). However, those considering making Roth SRA Plan contributions should review their individual circumstances with a tax advisor, or consider scheduling a one-on-one consultation with a representative from either Fidelity Investments or TIAA.

Making Roth contributions

Q5: How much can I contribute using the Roth SRA option?

A5: You can make any combination of pre-tax regular SRA and post-tax Roth SRA contributions to your plan as long as your total does not exceed the IRS annual limit. For 2018, the annual limit is $18,500. In addition to regular contributions, you also may contribute an additional “catch-up” amount up to $6,000 if you are age 50 or older during the calendar year. Note that the contribution limits are adjusted by the IRS from time to time based on increases in the cost-of-living index. Limits are generally announced in October for the following calendar year.

7

Q6: Are there income limits with the Roth SRA option?

A6: No. The income limits that apply to Roth IRA contributions do not apply to the Roth option within the Dartmouth SRA Plan.

Q7: How do I elect to make Roth contributions within my SRA Plan?

A7: You elect to make post-tax Roth contributions to your SRA Plan by visiting FlexOnline, Dartmouth College’s online benefit enrollment system, on or after September 1, 2018. Visit http://benefits.dartmouth.edu, click Active Employee, and enter your NetID and Password. At the welcome page, click the link to Update your Retirement Plan Elections for 2018.

If you do not have an existing SRA, you can enroll online by visiting http://benefits.dartmouth.edu.

Q8: What investment options do I have with the Roth SRA Plan?

A8: You can choose from among the same menu of carefully selected funds that are available for the pre-tax SRA Plan contributions by visiting www.netbenefits.com/dartmouth and clicking on the Plans & Investments tab or by visiting www.tiaa.org/dartmouth and clicking on Investment Options. You can also have your contributions to the Roth SRA and the pre-tax SRA directed to different investments available under your Plan.

Q9: Can I make contributions to both the regular Dartmouth SRA and Dartmouth’s Roth SRA options?

A9: Yes, you may contribute to both options, as long as you do not exceed the IRS’s maximum annual contribution limit described earlier in A5.

Q10: Can I convert my current pre-tax SRA funds to Roth funds?

A10: No. This option is not available at this time.

Withdrawing money from your Roth SRA

Q11: When can I take a tax-free withdrawal from my Roth SRA balance?

A11: You can make a tax-free withdrawal of your Roth contributions and earnings within your SRA once you reach age 59½ or become disabled and it has been at least five years after you made your first Roth contribution to the Dartmouth SRA Plan.

Q12: How is the five-year time frame for my Roth contributions determined?

A12: The five-year period begins on the first day of the year in which you make your first Roth contribution to your SRA. For example, if you start Roth SRA contributions in October 2018, a full year of your five-year requirement will be met in 2019.

Q13: Can I take hardship withdrawals from my Roth SRA balance?

A13: Hardship withdrawals may be taken from your Roth SRA balance under the same rules that apply to hardship withdrawals of pre-tax funds. However, if it has been fewer than five years since your first Roth contribution, any investment earnings may be taxable and subject to a 10% penalty on early distributions.

8

Q14: Can I take a loan from my Roth SRA balance?

A14: No, loans are not available from your Roth SRA balance at this time. Loans may be available from your pre-tax SRA. Call your investment provider directly to discuss the details.

Q15: Can I roll over an account from a previous employer to Dartmouth’s new Roth SRA?

A15: Yes. Rollovers into the Dartmouth Roth SRA option are permitted only from another Roth 403(b), Roth 401(k), or Roth 457(b) governmental plans. They are not permitted from other 457(b) employer plans.

Q16: Can I roll over my Roth SRA savings from Dartmouth’s SRA Plan to my new employer’s plan if I leave the College?

A16: In some cases, yes. You can roll over your Roth SRA Plan balance to another employer’s retirement plan only if the new plan accepts Roth rollover funds. Check with your new employer to make sure their plan can accept a Roth rollover before you start the process.

Be sure to discuss your individual circumstances with a tax advisor before you roll over your Roth SRA balance into a Roth IRA or take any distribution from your Roth SRA.

Q17: Are Roth assets within my SRA subject to the IRS minimum required distribution rules?

A17: Yes. Minimum required distribution (MRD) rules for retirement plans also apply to Roth contributions held in your SRA Plan. You must begin MRDs no later than April 1 of the calendar year following either a) the calendar year in which you reach age 70½ or b) the calendar year in which you retire, whichever comes later.

You may be able to avoid the MRD requirement by rolling over your Roth SRA balance into a Roth IRA before January 1 of the year in which you turn age 70½. Roth IRAs are generally not subject to the MRD rules and do not require withdrawals until after death. Keep in mind that if you roll over your Roth SRA balance into a newly established Roth IRA, your five-year time frame for the Roth IRA begins on the date you roll over the Roth retirement plan balances. Your five-year period under the Dartmouth SRA is not carried over to the new Roth IRA with the money. On the other hand, if you roll over your Roth SRA balance into an established Roth IRA, the five-year Roth IRA period should begin with the date you made your first contribution to the Roth IRA and is unaffected by the transfer of the Roth SRA balances.

Q&A (continued)

9

Now that you have a better understanding of the new Roth contribution savings option, you may be in a better position to decide whether Roth contributions will benefit you. Because of the tax implications associated with pre-tax and post-tax contributions, you should consult with a tax advisor regarding your situation. You may also want to meet with one of the investment providers, Fidelity Investments or TIAA, on-site at Dartmouth College (see the following page for more information).

Summarizing the Roth contribution option

You expect to be in a higher tax bracket when you retireIt may be difficult to predict what your tax situation will be in the future. But, if you think you will be in a higher tax bracket in retirement than you are right now, you may want to choose the Roth option. You will pay taxes on the contributions now—potentially at a lower tax rate—and then receive your assets tax-free when you’re in a higher tax bracket.

You earn too much to contribute to a Roth IRAIf you earn more than the adjusted gross income (AGI) limits allowed for contributing to a Roth IRA, you might want to consider making Roth contributions to your retirement plan. Consult your tax advisor for details.

You want to make higher contributions than allowed through a Roth IRAYou can maximize your post-tax savings by contributing up to the maximum allowable limit set by the IRS each year for your SRA Plan, which is higher than the maximum for the Roth IRA. In 2018, the allowable limits are $18,500, or $24,500 if you reach age 50 or older.

You want to pass on tax-free income to your heirsIf you are near retirement and believe you will have more than enough savings to meet your immediate retirement income needs, Roth contributions may be a way you can pass some of your Roth retirement assets to your beneficiaries tax-free, as long as the five-year rule for qualified distributions is satisfied.

10

Taking the next stepFor additional questions on the Roth SRA option, contact Fidelity Investments or TIAA for more information.

Fidelity Investments Call: 800-343-0860, Monday through Friday, 8 a.m. to midnight Eastern time

Visit: www.netbenefits.com/dartmouth

TIAACall: 800-842-2252, weekdays, 8 a.m. to 10 p.m. Eastern time; Saturday, 9 a.m. to 6 p.m. Eastern time

Visit: www.tiaa.org/dartmouth

To schedule a confidential consultation, contact your investment provider directly.

FIDELITY INVESTMENTS TIAA

800-642-7131 800-732-8353

Monday through Friday from 8 a.m. to midnight Eastern time

Monday through Friday 8 a.m. – 8 p.m. Eastern time

OR OR

http://getguidance.fidelity.com www.tiaa.org/schedulenow

In addition, you're welcome to attend a Roth workshop or webinar as indicated on the next page.

11

Information sessions

Onsite Workshops

FIDELITY INVESTMENTS TIAA

Thursday, September 13 at 2:00 p.m. Tuesday, September 18 at 3:30 p.m.

Friday, September 14 at 10:00 a.m. Friday, September 21 at 9:00 a.m.

To register for a Fidelity workshop visit http://getguidance.fidelity.com

or call 800-642-7131.

To register for a TIAA Workshop visit www.dartgo.org/tiaa-roth-workshop

FIDELITY INVESTMENTS TIAA

Monday, September 24 at 2:00 p.m. Friday, September 21 at 12:00 p.m.

Register by visiting www.dartgo.org/fidelity-webinar-9-24

Register by visiting www.dartgo.org/tiaa-webinar-9-21

Friday, September 28 at 10:00 a.m. Tuesday, September 25 at 1:00 p.m.

Register by visiting www.dartgo.org/fidelity-webinar-9-28

Register by visiting www.dartgo.org/tiaa-webinar-9-25

All workshops will be held in the HR Training Room in Human Resources on the second floor at 7 Lebanon Street. Please note that the workshops are open to all SRA eligible employees regardless of whether they participate with Fidelity or TIAA, or don’t currently participate at all. The workshops will run about one hour. Due to capacity limitations, prior registration is required for all workshops. Additional workshops may be scheduled based on demand.

Webinars

As with the workshops, the webinars are open to all SRA eligible employees regardless of whether they participate with Fidelity or TIAA, or don’t currently participate at all. The webinars will run about an hour.