Employee Benefits While Working at SCE
Citrus Wealth Article by
Blaine Shira
Wealth Manager, RJFS
401(k) Savings Plan
SCE supplies a 401(k) for its employees, providing a means to save for retirement. Employees fund their 401(k) by contributing a percentage of their paycheck into the account. As a savings incentive, SCE will match up to the first 6% of your contributions. Because of this, we recommend that employees contribute a minimum of 6%, in order to receive the full 6% match. Recent hires at SCE will have up to a 10% match for their 401(k) contributions, however they are not offered a pension.
Traditional 401(k) vs. Roth 401(k) Contributions
You have the option to contribute to the Traditional 401(k), Roth 401(k), or a combination of the two. Traditional 401(k) contributions reduce your taxable income which can lower the taxes you pay. The money you contribute to the Roth 401(k) is taxed, but in retirement, the money comes out tax-free. Both options have pros and cons.
Auto-Save Contibution Feature
SCE’s 401(k) has a feature called “Auto-Save,” which helps employees automatically increase their contributions over time, to a targeted rate. For example, you may currently contribute 10% of your paycheck to your 401(k), but you would like to increase it to 20% in a few years. The auto-save feature can automatically increase your contributions by a set percentage each year until you reach your targeted contribution rate. We frequently assign March as the Auto-Save adjustment month, as this potentially is when many employees’ pay increases. Therefore, you could contribute more to your 401(k) and possibly have a higher paycheck at the same time that could offset the higher contribution rate.
Investments
Funds contributed to the 401(k) can be invested in several different ways:
Financial Engines: Financial Engines is a separate company that, for a fee, will invest your 401(k) in investments they select.
Target Date Funds: Target Date Funds are investments that automatically adjust the closer you get to retirement. The closer you are to retirement, the more conservative the investments will become. For example, if you think you will retire around 2038, you could select the Target Date 2040 fund.
Asset Class Funds: SCE provides several investments that are indexes of major asset classes, including large company stocks, small company stocks, international stocks, bonds, etc.
PCRA: The Personal Choice Retirement Account allows you to buy securities that are not offered by the SCE 401(k). We strongly recommend that you only consider this option if you are well informed about market volatility and the risks involved with specific security selections.
SCE Stock: We commonly find Southern California Edison stock in employee’s 401(k)s. Our chief concern is a possible overconcentration of SCE stock in comparison with other investments. To be clear, we have nothing against SCE stock, but we are advocates of having a well-diversified portfolio. If you would like the company stock to be part of your 401(k), we recommend limiting it to 20% of the portfolio.
Pension
Most employees of SCE have a pension. This is a retirement savings account that is only funded by the company (currently offered by only 16% of large companies*). Some veteran employees have grandfathered pensions, while most have “cash-balance” pensions. You can view your pension by logging on to EIX Benefits. Select Pension and click on “Benefit Earned to Date.” On the following page, scroll down to view the amount. If there are two lump-sum values, you have a grandfathered pension, and will receive the higher pension amount. If there is only one value listed, you have a cash-balance pension.
Life Insurance
SCE offers life insurance for its employees, usually providing a more cost-effective option. We typically recommend employees select the maximum coverage available. This is usually 5 to 8 times one’s base pay, plus $50,000. For many, this is sufficient coverage.
We're Here to Help
The information above is only a brief summary of some of the benefits offered. If you would like help reviewing these items, as well as your overall retirement picture, give us a call at 909-312-4412, or click below to schedule an appointment.
Citrus Wealth and Raymond James Financial Services are not affiliated with Southern California Edison (SCE) and Financial Engines, Inc. SCE has neither approved nor endorsed this information.
*Source: https://www.planadviser.com/mere-16-fortune-500-companies-offer-db-plan/
Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Citrus Wealth Management is not a registered broker dealer and is independent of Raymond James Financial Services. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Matching contributions from your employer may be subject to a vesting schedule. Please consult with your financial advisor for more information. Life Insurance policies have exclusions and/or limitations. The cost and availability of life insurance depend on factors such as age, health and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Guarantees are based on the claims paying ability of the insurance company. This information has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The material is general in nature. Past performance may not be indicative of future results. Raymond James Financial Services, Inc. does not provide advice on tax, legal or mortgage issues. These matters should be discussed with the appropriate professional.