For Tier 2 & Tier 3 members of PFRS whose earnings are in excess of the social security wage base, which is $142,800 in 2021, in addition to your regular pension contributions, you also gain access to participate in The Defined Contribution Retirement Plan (DCRP). This plan provides eligible members with a tax-sheltered, defined contribution retirement benefit. For those qualifying to participate in the DCRP, you also gain access to an additional life insurance benefit which stacks on top of existing base benefits. The DCRP, like the Deferred Compensation Plan, contributions to the plan are not subject to federal or state income tax until you take a distribution from the plan. However, the DCRP has a maximum allowable contribution of 5.5% of wages in excess of the social security wage base. This is known as a top hat plan, allowing those higher income earners to save additional amounts towards their future retirement on wages that Social Security is not designed to supplement. Participation in this plan does not take away from your ability to save to the Deferred Compensation Plan under the PFRS. With the DCRP, there are a diverse set of investment options to grow your contributed funds and the option to rollover into the IRA upon severance. In addition, unlike the Deferred Compensation Plan, this plan offers a matching contribution of up to 3% of your eligible wages on a contribution of 5.5%. Also, for those retiring early this plan does carry a 10% Early Withdrawal Penalty for funds distributed prior to attaining age 59 and a half. Choosing a supplemental retirement plan can be difficult to navigate. Not sure if the DCRP is right for you? I’m Matt Levens, Director of Wealth Management at RMR Wealth Builders, Inc. Contact us today for a comprehensive review your retirement savings options.