401(k) Savings Plan
Annual Incentive Compensation Election
Special Considerations for
Deferred Compensation Plan Participants
This document is a supplement to the U.S. Retirement Savings Program materials you received regarding plan changes effective January 1, 2015 and the opening of the Annual Incentive Compensation Election Period. It highlights how your Deferred Compensation Plan election may impact your Annual Incentive Compensation election in the JPMorgan Chase 401(k) Savings Plan.
If you have elected to defer a portion of your Annual Incentive Compensation cash award to the Deferred Compensation Plan (“DCP”), you may also make an election to contribute a portion of your remaining cash award to the 401(k) Savings Plan. However, it is important for you to understand how these elections, along with applicable taxes, are applied to your Cash Annual Incentive Compensation (“Cash IC”). Please review the Important Considerations and Examples below for more information.
Important Considerations
The election you make under the 401(k) Savings Plan will be applied to your 401(k) cash annual incentive compensation (“401(k) Cash IC”), which is your gross cash annual incentive compensation (“Gross Cash IC”) amount less the amount you deferred under the Deferred Compensation Plan.
o If Employee A were awarded Cash IC of $250,000 and elected to defer $100,000 to the DCP, then the remaining $150,000 would be considered his/her 401(k) Cash IC.
Any 401(k) percent election you make will be applied against the 401(k) Cash IC resulting in a
calculated 401(k) contribution, which will be a fixed dollar amount.
o If Employee A were to elect to contribute 10% from the cash portion of Annual Incentive Compensation, the 10% is applied against his/her 401(k) Cash IC of $150,000 resulting in a calculated 401(k) contribution amount of $15,000.
You have the ability to contribute to the 401(k) Savings Plan on either a before-tax basis, Roth basis or a combination of both. The type of contribution you elect to make to the 401(k) Savings Plan will affect your current taxable income. However, your percent contribution election will always be applied to your 401(k) Cash IC – regardless of whether you elect a before-tax rate, Roth rate or a combination of both. Please see Example #1 for more detail.
November 2014
It is possible that, after the DCP Deferral and tax withholdings as explained below, the amount of remaining Incentive Compensation may be insufficient to withhold the full calculated 401(k)
contribution amount. In that instance, no 401(k) deduction will be taken. Partial, or limited, 401(k)
contributions are not permitted. See Example #2 for more detail.
DCP Deferrals, FICA and other possible tax withholdings
The entire cash portion of your Annual Incentive Compensation award is subject to Social Security and Medicare taxes (“FICA”), regardless of any deferral under the Deferred Compensation Plan or contribution under the 401(k) Savings Plan.
Federal, state and local income taxes (if any) can reduce your 401(k) Cash IC, depending on the type of contribution you make to the 401(k) plan. For instance:
o Roth Contributions are subject to federal, state and local income tax withholding – meaning if you elect a Roth contribution, that contribution amount does not reduce your current taxable income.
o Before-tax contributions are deducted prior to federal, and in most cases, prior to state and local income tax withholding thus lowering your current taxable income.
o In either case, as noted above, if your 401(k) Cash IC less all applicable tax withholdings is less than the calculated 401(k) contribution amount, then no 401(k) deductions will be taken. See Example #2 for more detail.
Please Note: The provisions of the Deferred Compensation Plan are complex. If you have questions
regarding your DCP election or how the DCP and related taxes are applied to your Cash IC, please contact the DCP call center or web center (contact information is on the last page). As noted in the DCP enrollment materials provided in June 2014, elections are irrevocable.
Examples
Example 1
Jack is awarded $150,000 in annual cash incentive. He elected to defer 15% of his Gross Cash IC under the Deferred Compensation Plan. He now elects to contribute 10% of his 401(k) Cash IC to the 401(k) Savings Plan. The following chart shows how his deductions are taken on a before-tax basis as compared to a Roth basis in the 401(k) Savings Plan.
401(k) before-tax election 401(k) Roth election
A Gross Cash IC $ 150,000 $ 150,000
B Deferred Compensation Plan deferral (15% of $150,000)$ 22,500 (15% of $150,000)$ 22,500
C 401(k) Cash IC (A minus B) ($150,000 – $22,500) $127,500 ($150,000 – $22,500)$127,500
D 401(k) Annual Incentive Compensation contribution (10% of $127,500)$ 12,750 (10% of $127,500)$ 12,750
E FICA (on Gross Cash IC)* $ 12,000 $ 12,000
F Amount Subject to Federal/State/Local Taxes (as applicable)
$114,750
($150,000 – $22,500 – $12,750) ($150,000 – $22,500)$127,500
G Withholding Taxes (as applicable) ** (Based on F) (assumed tax rate * F) $34,425 (assumed tax rate * F)$38,250
H Estimated Net Cash IC (Gross Cash IC – B – D – E – G) $68,325 (Gross Cash IC – B – D – E – G)$64,500
*For illustration purposes only; assumes a FICA rate of 8%
**For illustration purposes only; assumes a combined federal and state withholding rate of 30%. Please note, actual tax withholding rates at the federal, state, and local level are dependent upon your personal situation.
Example 2
Becky elected to defer 50% of her first $50,000 and 90% of the excess annual cash incentive under the Deferred Compensation Plan. She now elects to contribute 35% of her 401(k) Cash IC to the 401(k) plan. Before the DCP deferral and 401(k) election, her Gross Cash IC is $200,000. The following chart illustrates what would happen if 401(k) Savings Plan deductions are taken on a before-tax basis as compared to a Roth basis. Please note, in this case if she elects to contribute to the 401(k) plan on a Roth basis, she will have no 401(k) deductions taken because she does not have sufficient cash compensation remaining to have the full 401(k) amount withheld (and partial
amounts are not permitted).
401(k) before-tax election 401(k) Roth election
A Gross Cash IC $ 200,000 $ 200,000
B Deferred Compensation Plan deferral (50% of the first $50,000 and 90% of $ 160,000 the remaining $150,000)
$ 160,000
(50% of the first $50,000 and 90% of the remaining $150,000)
C 401(k) Cash IC (A minus B) ($200,000 - $160,000) $40,000 ($200,000 - $160,000)$40,000
D Before-tax 401(k) deduction $ 14,000
(35% of $40,000) N/A
E FICA (on Gross Cash IC )* $ 16,000 $ 16,000
F
Withholding Taxes (as applicable) **
(Based on A minus B minus D)
$ 7,800
(Based on taxable income of $26,000) (Based on taxable income of $40,000)$ 12,000
G Modified Cash IC (C minus D minus E minus F) ($40,000 - $14,000 - $16,000 - $7,800) $2,200 ($40,000 - $16,000 - $12,000)$12,000
H Roth 401(k) deduction N/A (Insufficient remaining to make full 401(k) $ 0 election of $14,000, or 35% *$40,000)
I Estimated Net Cash IC $2,200 $12,000
*For illustration purposes only; assumes a FICA rate of 8%
**For illustration purposes only; assumes a combined federal and state withholding rate of 30%. Please note, actual tax withholding rates at the federal, state, and local level are dependent upon your personal situation.
Contact Information
The 401(k) Savings Plan Call Center
If you have any questions, please contact the 401(k) Savings Plan Call Center at 1-866-JPMC401k (1-866-576-2401). (The TTY number is 1-800-345-1833.) Representatives are generally available from 8 a.m. to 9 p.m. Eastern Time, Monday through Friday, except New York Stock Exchange holidays.
The 401(k) Savings Plan Web Center
You can access the 401(k) Savings Plan Web Center via My Rewards: From Work: Visit My Rewards from the Intranet
From Home: Go to myrewards.jpmorganchase.com The Deferred Compensation Program Plan Call Center
You can contact the Deferred Compensation Program Call Center at 1-888-JPMC-DCP (1-888-576-2327). Participant Services Representatives are available from 9 a.m. to 5 p.m. Eastern Time, Monday through Friday, except certain holidays.
The Deferred Compensation Program Web Center
Deferred Compensation Program Web Center via My Rewards: From Work: Visit My Rewards from the Intranet
From Home: Go to myrewards.jpmorganchase.com
The JPMorgan Chase U.S. Benefits Program is available to most employees on a U.S. payroll who are regularly scheduled to work 20 hours or more a week and who are employed by JPMorgan Chase & Co. or one of its subsidiaries to the extent that such subsidiary has adopted the JPMorgan Chase U.S. Benefits Program. This information does not include all of the details contained in the applicable insurance contracts, plan documents and trust agreements. If there is any discrepancy between this
information and the governing documents, the governing documents will control. JPMorgan Chase & Co. expressly reserves the right to amend, modify, reduce, change or terminate its benefits and plans at any time. The JPMorgan Chase U.S. Benefits Program does not create a contract or guarantee of employment between JPMorgan Chase and any individual. JPMorgan or you may terminate the employment relationship at any time.
This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.
This is a Summary of Material Modification to the Summary Plan Description for the JPMorgan Chase 401(k) Savings Plan.
