1. Understand your salary and employee benefits

2. Compare different offers Compare base salary with cost of living http://www.areavibes.com/cost-of-living-calculator/ Example: compare Los Angeles, CA and Atlanta, GA Atlanta is 22.3% less expensive than Los Angeles Median house price: $350,000 (CA)/ $140,000 (GA) $50,000 in Los Angeles, CA = $38,857 in Atlanta, GA Los Angeles, CAAtlanta, GA Overall index12799-22.3% Groceries106 0.3% Housing17689-49.4% Utilities11296-14.2% Transportation106102-3.6% Healthcare110101-8.2% Goods & Services1031040.4%

3. Example of W-2 Statement

4. Understand your W-2 statement? Wages vs. Social Security wages vs. Medicare wages Adjustments to YTD gross pay for Federal and State wages Subtract before-tax deductions Medical/dental/vision/FSA Health/FSA Dependent care/401k/403b/457 plans Add Employer paid taxable fringe benefits (e.g., group term life insurance over $50,000) Adjustments to YTD gross pay for Social Security and Medicare wages Cannot subtract contributions to 401k/403b/457 plans Max. Social Security wage is $113,700

5. Tax withheld Federal income tax withheld Use W-4 to make adjustments to tax withheld When you file federal income tax return with 1040: If Tax>tax withheld, you pay the difference If Tax<tax withheld, you get a refund Social Security tax withheld 6.2% of Social Security wages, up to max. wage base of $113,700 If you have two jobs with total Social Security wages over $113,700, you may have paid excess Social Security tax. Claim it as a refundable tax credit on 1040. Medicare tax withheld 1.45% of Medicare wages (X total income, there is no max income) State tax withheld Local tax withheld

6. Other types of income Self-employed income Use Schedule SE to file income tax return 1099 Series 1099-DIV: dividends and distributions (e.g. stocks) 1099-INT: interest income (e.g. CDs) 1099-MISC: payments to independent contractor, rent, loyalties, prizes 1099-R: distributions from pensions, annuities, retirement plans, IRAs, insurance contracts

7. Employee benefits Health insurance Dental insurance Vision insurance Retirement plans Group term life insurance(first 50,000 free) Short-term disability insurance Long-term disability insurance Long-term care insurance Flexible Spending Account (FSA) Legal assistance Child care/dependent care assistance Transportation benefits

8. Health insurance PPOHMO Deductibles Coinsurance Max. out-of-pocket No referral needed More flexible Higher premium Lower level of benefits for out-of-network physicians Co-pay PCP (primary care physician) Needs referral to see specialists Less flexible Lower premium No benefit for out-of- network physicians

9. Copay vs. deductible vs. coinsurance Copay: fixed payments for each visit Deductible: amount needs to be paid by the patient in a calendar year before insurance starts to kick in Coinsurance: after copay and deductible, the percentage that needs to be paid by the patient Out-of-pocket maximum: when the patient’s payment in a calendar year has reached the limit, no coinsurance is required

10. Open enrollment Open enrollment period Enroll/add participant/change plan Annually Special events: marriage, child birth Pre-existing condition exclusion Generally pre-existing conditions will be excluded for 6 months

11. Example Bill’s health insurance has a $15 copay, $1,000 deductible, 20% coinsurance and $3,500 out-of-pocket maximum (excluding copay). Medical bill Copay (Bill) Deductible(B ill) Insurance paid Coinsurance (Bill) Out-of- pocket Bill paid $500$15$500$0 $500$515 $1,000$15$500$400$100$1,100$615 $2,000$15$0$1,600$400$1,500$415 $30,000$15$0$28,000$2,000$3,500$2,015 $800$15$0$800$0$3,500$15

12. COBRA continuation coverage I Three requirements for eligibility Plan must be covered by COBRA ≥20 EE (both full time and part time) on 50% of business days A qualifying event must occur Termination of employment (no gross misconduct) Reduction in employment hours Covered EE is eligible for Medicare Divorce/legal separation from the covered EE Death of covered EE Loss of the dependent status You must be a qualified beneficiary of the event Covered EE Spouse of the covered EE Dependent child of the covered EE

13. COBRA continuation coverage II ER can charge the EE up to 102% of premium (2% administration fee) ER needs to be notified within 30 days Maximum period of coverage Termination or reduction of hours: 18 months Disability: can be extended to 29 months Second qualifying event: can be extended to 36 months Other qualifying events: 36 months

14. Group term life insurance First $50,000 coverage paid by employer is free to employees Employees can buy more If employer pays for more than $50,000 coverage, premiums for the part of coverage over $50,000 is taxable income to the employee Usually the coverage offered is n X employee’s salary No cash value Will terminate once the employee leaves unless it is portable May be converted to individual policy May be converted to whole life policy

15. Retirement plans Qualified plans Private corporation: 401(k), profit sharing plan, money purchase plan, ESOP Government/non-profit: pension, 403(b), 457 Small business/partnership: SEP, SIMPLE IRA Individual: traditional IRA, Roth IRA Non-qualified plans Stock option Deferred compensation plan Executive bonus plan Split-dollar life insurance plan

16. 401(k)1 EE defers part of the salary and invest in the plan ER matches EE’s contributions up to a % of EE’s salary EE and ER’s contributions, and growth in 401k account are not taxable until withdraw/distribution Example: Jason’s ER matches EE’s contributions up to 3% of salary. Jason’s gross salary is $60,000. If he contributes $2,000 to his 401k account, his ER will contribute $1,800. If he contributes $1,000, his ER will contribute $1,000.

17. 401(k)2 Contribution limits EE elective deferral: $17,500 (catch-up $5,500 for age 50+) Total contribution: 100% of salary or $52,000 ($57,5000 for 50+) EE elective deferralER non-elective deferral ER match contributionAllocation of forfeitures ER’s contributions are not available to EE immediately Vesting schedule Year of serviceImmediate vesting Cliff vestingGraded vesting 1100%0% 2100%0%20% 3100% 40% 4100% 60% 5100% 80% 6100%

18. 401(k)3 EE chooses investment instruments from mutual funds offered in the plan. Most popular choice is “target-date fund”, which adjusts asset allocation from aggressive to conservative when EE approaches retirement age. Fund prospectus should be given to EE before EE sign up for the fund. EE’s risk tolerance will be evaluated with questionnaires. EE will receive account statements at least quarterly.

19. 401(k)4 Early withdrawal from 401(k) (and other tax-advantaged retirement plans) before age 59 1/2 will result in 10% penalty plus income tax unless: It is a hardship distribution Immediate and heavy financial needs It is made to a beneficiary after EE’s death It is made to EE after qualifying disability It is made after separation from service after age 55 It is made under qualified domestic relation order (QDRO) Note: Withdrawal from 401(k) to buy home will result in 10% penalty. Withdrawal from IRA for first-time home-buyer up to $10,000 is free of penalty.

20. 401(k)5 Loans from 401(k) if it is allowed by plan Not taxable if: May borrow up to 50% of vested account up to $50,000 (reduced by outstanding loan) Must be repaid within 5 years unless it is used to buy principal residence Required minimum distribution (RMD) Start date: the later of April 1 of the calendar year following the year in which your reach age 70 ½ April 1 of the calendar year following the year of retirement After the first year, distribution must be made by Dec. 31 Minimum distribution amount will be determined by the plan each year. 50% penalty if RMD is not made

21. 401(k)6 Rollovers from 401(k) to other qualified plan or IRA is not taxable if: Direct rollover from plan to plan (no distribution) EE receives a distribution of cash or assets and contributes the distribution to another qualified plan or IRA within 60 days. However, it is subject to 20% mandatory tax withholding. Termination of employment Rollover to new employer’s plan (no tax) Rollover to a traditional IRA (no tax) Rollover to a Roth IRA (tax due)

22. 401(k)7 Distribution from 401(k) Included in your income and taxable Can be lump-sum or annuity Leave it in the plan and grow Rollover to IRA Beneficiary of 401(k) If you are married, your spouse is automatically the beneficiary by law. Waiver must be signed in order to name someone else as the beneficiary.