Retirement Benefits

Union Workers

Q: What happens to my pension if I am not working? 

A: For individuals participating in the Industry Wide Pension Plan: Pension credits are based on the total hours you work in a calendar year. The IWA requires your employer to contribute 10.5% of payroll to the pension fund. Your Employer does not contribute on your behalf if you are not working.

But you should know that you only need to work 1,000 hours a year to get a full pension credit, that means that if you work a 35 hour work week you can be out of work for about 23 weeks and still be able to earn a one credit if you work full- time (at least 35 hours per week) the rest of the year. And, even if you work less than 1,000 hours, you may be able to earn a partial pension credit. 

You can find out more about your pension by visiting www.hotelfunds.org 

2 Q: How is my 401(k) affected if I’m not working? 

A: If you are not working, then you are not receiving a paycheck. Without a paycheck, your employer will not be able to deduct contributions on your behalf for your 401(k).

3 Q: Is it possible for me to take money out of my 401(k)? 

A: Yes. Plus, due to the COVID-19 crisis, the CARES Act (Coronavirus Aid, Relief and Economic Security Act), which was enacted into law by the Federal Government on March 27, 2020, allows for individuals to take an early withdrawal from their retirement account without penalty so long as you qualify (see next question.)  If you participate in the Industry Plan 401(k) or the Division A Annuity (401(k)), you can now take a distribution from your 401(k) without penalty regardless of your age.

Q: How do I know if I qualify to make an early withdrawal? 

A: Under the CARES Act, you are eligible to withdraw a penalty-free distribution from your 401(k) if:

  • You have been diagnosed with COVID-19
  • Your spouse or dependent has been diagnosed with COVID-19
  • You have suffered financial consequences as a result of being quarantined, furloughed, laid off, or had hours reduced; and/or,
  • You have lost income for other qualifying reasons due to the crisis, including having to stay at home to provide childcare

5 Q: Is there a limit to how much money I can withdraw from my 401(k)? 

A: Under this unique arrangement, yes. If qualifying, you can withdraw up to a total of $100,000, or 100% of the retirement account balance, which is capped at $100,000, without penalty and regardless of your age.  If you take multiple withdrawals, the cap applies to the combined total of all the withdrawals, and you have until December 31, 2020 to make your withdrawals.

6 Q: Do I have to pay any penalties or taxes if I make an early withdrawal from my 401(k)? 

A: Normally, if you make a withdrawal from your 401(k) before the age of 59 1/2, you would be required to pay a 10% penalty.  However, this penalty has been waived by the CARES Act.  Keep in mind that your financial institution will withhold 10% of the amount you withdraw for taxes.  If you decide that you want to opt out of this and receive the full amount, you will still have to pay taxes on it.

7 Q: Once I am working again, can I repay the money I withdrew from my 401(k)? 

A:  You can repay the money you withdrew from your 401(k) over the next 3 years from the date you take it. The withdrawal will still be included in your taxable income over the next 3 year period, unless you elect to have the entire distribution taxed in the year of the distribution.

8 Q: How do I take advantage of these changes? 

A:  If you are a participant in the Industry Plan 401(k), you can speak with a customer service rep at Principal at (800) 547-7754, or go on-line at www.principal.com.  The Benefit Funds Pension Department is also taking calls to assist members between 9:00 AM and 5:00 PM, Monday through Friday, at (212) 586-6400, ext. 4125.

If you are a participant in the Division A Annuity Plan (401(k)), the Division A Funds office will assist you in filling out the form to receive a distribution, and can be reached at (212) 492-2136.

If you participate in your employer’s 401(k), you should contact the financial institution that oversees the plan, or contact your Human Resources Department to take advantage of these changes.

If you have more detailed questions about your 401(k) please contact the Employee Benefit Funds at 212-586-6400. 

9 Q: If I make a withdrawal from my 401(k), will it affect my unemployment benefits?
A: If you are the only contributor to your 401(k) (whereby your employer doesn’t contribute anything to the 401(k) on your behalf), then making a withdrawal from your 401(k) won’t have any impact on your unemployment benefits in New York or New Jersey. If you participate in a 401(k) where your employer matches or contributes money on your behalf, both New York and New Jersey may reduce your benefits for the week that you make the reduction.

Non-Union Workers

1. Q: What is the difference between a Pension and a 401(k)?
A:
The key differences between a 401(k) plan and a pension plan are 1) the security of retirement investments, 2) who is paying for the employee’s retirement, and 3) your 401(k) can run out of money before you die and a pension continues to pay you a monthly benefit for the remainder of your life.

A 401(k) plan is what’s called a “defined contribution plan.” Employees put pre-tax money from their paychecks into the 401(k) plan and some employers match a percentage of their investment. “Matching” means the employer never contributes more money into your account than you put in yourself, and only up to the percentage limit the employer sets for its own contributions. This type of plan operates similar to a savings account. Whatever is in the 401(k) account when an employee retires, that is the amount of money the employee has to count on to last from the day they retire until the day they die, in addition to whatever interest also accumulates on the account’s diminishing principal. Your 401(k) will run out money if you haven't saved enough if you live longer than you have expected when you decided how much of your retirement account to spend each year. And fluctuations in the stock and bond markets can dramatically reduce the amount in your 401(k), which is why most people move their 401(k) money to very safe investments (which earn very little interest) as they get close to retirement age.

A pension plan operates very differently. The pension plan is a “defined benefit plan,” which means that once an employee vests in the plan (after 5 years under the Pension Fund of the Union and Hotel Association of New York City, Inc. also referred to as the “IWA Pension”) when they retire, they are guaranteed a defined benefit each month until they pass away. This set monthly benefit is based on how old they are, how many credits they have (under the IWA Pension, each year an employee works at least 1,000 hours = 1 credit), and whether or not they include their spouse as a beneficiary. Right now, each pension credit is worth $60/month. An individual can earn up to 40 pension credits, for a value of up to $2,400 if they retire at age 65 (40 credits x $60/credit = $2,400).

The other significant difference between a 401(k) and a pension plan, is that the IWA Pension is completely funded by the employer. Each hour that an employee works under our Industry Wide Agreement, the employer contributes an additional 10.5% of payroll into the pension fund (on top of their wages and contributions to healthcare benefits). This money is then pooled with the contributions of tens of thousands of other hotel workers and invested. The risk is by effect, pooled across tens of thousands of other hotel workers. If you have a 401(k) and your investments go south, you can lose a lot of money in your individual account. With a pension plan, there is a much bigger cushion to protect the beneficiaries.

2. Q: Are workers represented by the Union required to join the Industry Wide Pension plan?
A:
No. In nearly every contract our Union has negotiated since 1994, we have negotiated a choice for employees who are at the hotel/casino at the time that we organize to join our pension plan or stay in their employer’s 401(k) plan, if there is one. However, the overwhelming majority of workers elect to join the pension plan because it is more secure and it is free to the employees. If they elect to join the pension plan, by law, they do not lose any of the money that they’ve already saved in their 401(k).

For those employees who have elected to stay in their employer’s 401(k) plan, management is prohibited from retaliating against them for organizing the union by reducing the percentage that they match in their 401(k), however, just like when the workers were non-union, the company has the right to change the terms of the 401(k) and reduce the percentage match or contribution company-wide.

3. Q: Does the Union have a 401(k) plan?
A: Our Union’s Industry Wide Agreement (the “IWA”) has a non-matching 401(k). Workers in an IWA hotel/casino have the option to join the IWA Pension and save additional money towards their retirement through the contract’s 401(k) plan. With both the IWA 401(K) and employer 401(k) plans, the money employees contribute to their 401(k) is tax-deferred. This lowers the employee’s taxable income in the current year and defers taxes until the employee withdraws from the 401(k) account. So, under our Industry Wide Agreement, HTC-represented workers can contribute their own money into the 401(k) plan, and have their employers contribute 10.5% into their pension plan, thereby being able to retire with both a pension and a 401(k).

4. Q: How is my 401(k) affected if I’m not working?
A: If you are not working, then you are not receiving a paycheck. Without a paycheck, your employer will not be able to deduct contributions on your behalf for your 401(k).

5. Q: Is it possible for me to take money out of my 401(k)?
A:
Yes. Plus, due to the COVID-19 crisis, the CARES Act (Coronavirus Aid, Relief and Economic Security Act), which was enacted into law by the Federal Government on March 27, 2020, allows for individuals to take an early withdrawal from their retirement account without penalty so long as you qualify (see next question).

6. Q: How do I know if I qualify to make a penalty-free early withdrawal?
A:
Under the CARES Act, you are eligible to withdraw a penalty-free distribution from your 401(k) if:

  • You have been diagnosed with COVID-19
  • Your spouse or dependent has been diagnosed with COVID-19
  • You have suffered financial consequences as a result of being quarantined, furloughed, laid off, or had hours reduced; and/or,
  • You have lost income for other qualifying reasons due to the crisis, including having to stay at home to provide childcare

7. Q: Is there a limit to how much money I can withdraw penalty-free from my 401(k)?
A: Under this unique arrangement, yes. If qualifying, you can withdraw penalty-free up to a total of $100,000, or 100% of the retirement account balance, which is capped at $100,000, regardless of your age. If you take multiple withdrawals, the cap applies to the combined total of all the withdrawals, and you have until December 31, 2020 to make your withdrawals.

8. Q: Do I have to pay any penalties or taxes if I make an early withdrawal from my 401(k)?
A: Normally, if you make a withdrawal from your 401(k) before the age of 59 1/2, you would be required to pay a 10% penalty. However, for a limited time, this penalty has been waived by the CARES Act. Keep in mind that your financial institution will withhold 10% of the amount you withdraw for taxes. If you decide that you want to opt out of this and receive the full amount, you will still have to pay taxes on it.

9. Q: Once I am working again, can I repay the money I withdrew from my 401(k)?
A: You can repay the money you withdrew from your 401(k) over the next 3 years from the date you take it. The withdrawal will still be included in your taxable income over the next 3 year period, unless you elect to have the entire distribution taxed in the year of the distribution.

10. Q: If I make a withdrawal from my 401(k), will it affect my unemployment benefits?

A:
If you are the only contributor to your 401(k) (whereby your employer doesn’t contribute anything to the 401(k) on your behalf), then making a withdrawal from your 401(k) won’t have any impact on your unemployment benefits in New York or New Jersey. If you participate in a 401(k) where your employer matches or contributes money on your behalf, both New York and New Jersey may reduce your benefits for the week that you make the reduction.

Related News

Union 401(k) Enrollment Postponed

May 26, 2020 2:26 PM

Due to the ongoing restrictions in place as a result of the COVID-19 pandemic, we regret to announce that the Benefit Funds has had to postpone the upcoming 401(k) Open Enrollment, originally scheduled to take place from May 26th through June 12th, until later this year. We will alert the membership as soon as new dates have been determined.

New options for accessing money in your retirement account

April 8, 2020 9:00 PM

Many working people are struggling to make ends meet during the Coronavirus crisis and may need to access their retirement savings to get by.  

On March 27th, 2020, the Federal government passed the Coronavirus Aid, Relief, and Economic Security Act, or “CARES Act”. The CARES Act includes new options for individuals to withdraw money from their retirement account during the crisis.