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Borrowing or Withdrawing from Your Account
Because the 401(k) Savings Plan is intended to help provide income for your future, you should think carefully before accessing your account balance while you're still actively employed. However, if you need your money before retirement, you do have access to your account in two ways — loans and withdrawals.
The advantage of taking a loan from the plan is that you use payroll deductions to pay yourself back — with interest. If you withdraw money from the plan, it won't be available to you when you retire. In addition, certain taxes and penalties may apply to withdrawals. With this in mind, for most people, taking a loan from their 401(k) Savings Plan account is more advantageous than a withdrawal.
Loans
The plan lets most participants who are actively employed borrow against their vested account balance without paying taxes or incurring income tax penalties, subject to plan provisions. Plan loans are not available once you terminate employment, even if you have an account balance in the plan. When you take a loan, the plan funds in which you've invested are reduced by the loan amount. Money for a loan generally will be taken on a "pro rata" basis across all investment funds holding a balance. You'll continue to receive investment experience, but only on the balance of the remaining investments.
Loans are available for any reason. However, plan participants subject to a "window period" may request a loan only during a "window period" if the loan reduces their interest in the JPMorgan Chase Common Stock Fund. Please see " Approved Quarterly Window Periods" for more information. Also, in certain cases spousal consent may be required. You will be notified if this applies to you.
The exact terms and conditions of your loan will be incorporated into a promissory note.
Summary of 401(k) Savings Plan Loan Features
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Loan Features
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How It Works
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You decide how much you want to borrow as a loan.
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The minimum loan amount is $1,000.
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The legal maximum is the lesser of 50% of your vested account balance, or $50,000 minus your highest outstanding loan balance in the last 12 months.
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When you request a loan, you set the repayment period.
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The repayment period can be up to five years. However, if your loan is for the purchase of your principal residence, your repayment period may be up to 15 years (documentation is required).
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You may prepay your outstanding loan balance in full without penalty. Partial prepayments and overpayments are not permitted.
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When you take your loan, an interest rate (based on the prime rate, as published in the Wall Street Journal, in effect on the first business day of the month) is set for the duration of the loan.
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Your repayments (made with after-tax dollars) — both principal and interest — are deducted from your pay and are invested in the plan's investment funds in the same way that your contributions are invested.
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If you change to a different payroll schedule, your repayment amount will be updated to reflect the new schedule. Your loan cannot be extended beyond its original term.
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If you take an approved unpaid leave of absence, you may prepay your outstanding loan balance in full by cashier's check, certified check or money order, or authorize semi-monthly automatic withdrawals from your bank account.
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Your loan will be considered in default if you fail to make a repayment within 90 days of your last repayment. The taxable portion of an outstanding loan balance will be considered a taxable distribution and may also be subject to an additional 10% early distribution tax penalty. Please see "Tax Consequences" for more information. If you default on a loan, you won't be able to request or receive any new loans until you've repaid the defaulted loan in full.
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A request for a loan generally will be processed on the same business day if the request is made by 4 p.m. Eastern Time or the close of the New York Stock Exchange, whichever is earlier. Your loan check will be mailed to your work address on file, and generally will be sent the business day after your loan request is processed.
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What Happens to Your Loan If You Terminate Employment with JPMorgan Chase
When your employment with JPMorgan Chase terminates for any reason, you must repay all outstanding loans. However, if your employment terminates and your balance (including the amount of any outstanding loans) is $1,000 or more, your loan(s) may remain outstanding until the maturity date of your loan, as long as you defer receipt of your account balance. To take advantage of this feature, you must authorize semi-monthly automatic electronic withdrawals from your bank account. If after two consecutive attempts the direct debit fails (i.e., there are no available funds in your account), the outstanding amount must be paid in full within 90 days of your last repayment or the taxable portion of your loan will be treated as a taxable distribution and may also be subject to an additional 10% early distribution tax penalty.
Lump-sum payment of outstanding loans may also be made by cashier's check, certified check, or money order.
If your employment terminates and your vested balance (including the amount of your outstanding loans) is less than $1,000, your loan(s) may not remain outstanding as described above. You must repay your loan(s) in full or you will incur a taxable distribution to the extent that your outstanding loan balance includes taxable monies. You may also be subject to an additional 10% early distribution tax penalty.
Withdrawals While Employed
The rules governing withdrawals can be quite complicated because of legal restrictions and tax implications. For specific tax advice, you may want to consult with a qualified tax advisor.
The Internal Revenue Code restricts the circumstances under which you can take a withdrawal and, in most instances, penalizes you for early withdrawal of your plan money while employed by JPMorgan Chase. Accordingly, before making this request, you should carefully consider the limited circumstances under which a withdrawal can occur, as well as the possible tax consequences of such a withdrawal.
Subject to the plan provisions described below, active employees may request withdrawals. However, plan participants subject to a "window period" may request a withdrawal only during a "window period" if the withdrawal reduces their interest in the JPMorgan Chase Common Stock Fund. Please see " Approved Quarterly Window Periods" for more information.
If you take a withdrawal, you must withdraw a minimum amount of $500 unless the amount available is less than $500. Money for a withdrawal will be distributed on a "pro rata" basis from across all investment funds holding a balance as of the withdrawal date. If your withdrawal includes funds from the JPMorgan Chase Common Stock Fund, you can request payment in shares from that fund. Please see "Stock Distribution from the JPMorgan Chase Common Stock Fund" in the section " Receiving Account Payments After You Retire or Terminate from JPMorgan Chase" for more information.
JPMorgan Chase non-matching contributions, if any, are not available for withdrawal while you are employed by JPMorgan Chase.
The following paragraphs describe withdrawal options for participants still employed by JPMorgan Chase. In certain cases, spousal consent may be required. You will be notified if this applies to you.
Non-Hardship Withdrawals
If you've made after-tax contributions or a rollover contribution to the plan, or you're at least age 59-1/2, you may be eligible to request a non-hardship withdrawal. (Please Note: The after-tax contributions referenced here are contributions permitted by certain heritage plans. They are not to be confused with Roth 401(k) contributions.) The table in this section describes the types of money available for withdrawal in non-hardship situations and the related tax consequences.
Hardship Withdrawals
If you are not age 59-1/2 or older and you experience a financial hardship as defined by the plan, under certain conditions you can apply for a special hardship withdrawal from certain types of money in your account, such as before-tax contributions, Roth 401(k) contributions, and JPMorgan Chase matching contributions made prior to January 1, 2005. The Internal Revenue Code imposes strict limitations on hardship withdrawals. Before you can apply for a hardship withdrawal, you must:
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Withdraw all of your after-tax contributions, rollover contributions, and any other available contributions from the plan, as well as any funds from certain other plans maintained by JPMorgan Chase (such as the JPMorgan Chase Employee Stock Purchase Plan) or an affiliated company;
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Request all loans available from the 401(k) Savings Plan; and
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Elect to receive cash dividends from the JPMorgan Chase Common Stock Fund.
Then you can apply for a hardship withdrawal. Documentation of the financial hardship is required (examples are included below).
In general, financial hardships are defined as:
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Medical expenses for you, your spouse, your children, your dependents, or your primary beneficiary that are not paid by insurance. An example of documentation needed for this financial hardship is an explanation of noncoverage by a benefit plan for unreimbursed medical expenses;
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Tuition and related expenses — including room and board — for the next 12 months of post-secondary education for you, your spouse, your children, your dependents, or your primary beneficiary. An example of documentation needed for this financial hardship is an invoice for expenses — such as tuition, room and board, and related expenses;
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The purchase or construction of your principal residence (excluding mortgage payments). An example of documentation needed for this financial hardship is the purchase contract and mortgage commitment for purchase of your principal residence;
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The amount needed to prevent eviction from your principal residence or foreclosure on the mortgage of your principal residence. Examples of documentation needed for this financial hardship are court papers and notices of foreclosure; or
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Funeral expenses for an immediate family member (i.e. spouse, parent, or child), your dependent, or your primary beneficiary. Examples of documentation needed for this financial hardship are the unpaid bill(s) from the funeral home and a birth certificate (or other documentation) verifying the relationship.
See " Beneficiaries" for information about designating a primary beneficiary.
Please see " Summary of 401(k) Savings Plan Withdrawal Features" for a summary of the plan's withdrawal features and their associated tax consequences. However, you should consult with a tax advisor about the application of these and other exceptions to the penalty tax on your distribution.
Summary of 401(k) Savings Plan Withdrawal Features
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Type of Withdrawal
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How It Works
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Tax Consequences
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Prior to Age 59-1/2 Withdrawals — Non-Hardship Withdrawals
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After-Tax Contributions (as permitted by certain heritage plans; not to be confused with Roth 401(k) contributions)
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If you have after-tax dollars in the plan, you can request a withdrawal of these contributions. This type of withdrawal will be made in the following order:
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From after-tax (non-Roth) contributions made before January 1, 1987 to heritage plans, but not including earnings on these amounts.
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From after-tax (non-Roth) contributions to any heritage plan made after December 31, 1986, including all earnings on after-tax amounts.
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After-tax contributions are not subject to tax. However, investment earnings on these contributions are considered taxable income and are subject to a mandatory 20% federal income tax withholding requirement. State income tax may also be withheld.
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Your withdrawal of investment earnings may also be subject to an additional 10% penalty tax.
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You can roll these amounts over. Please see "Rollovers" for more information.
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You can withdraw rollover contributions.
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Your withdrawal is considered taxable income to you and will be subject to a mandatory 20% federal income tax withholding requirement. State income tax may also be withheld.
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Your withdrawal may be subject to a 10% penalty tax.
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You can roll these amounts over. Please see "Rollovers" for more information.
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There may be certain additional money types available to you for withdrawal prior to age 59-1/2. (Please Note: These money types do not include before-tax, Roth 401(k), or JPMorgan Chase matching and non-matching contributions.)
Please contact the 401(k) Savings Plan Web Center or Call Center.
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Your withdrawal is considered taxable income to you and will be subject to a mandatory 20% federal income tax withholding requirement. State income tax may also be withheld.
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Your withdrawal may be subject to a 10% penalty tax.
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You can roll these amounts over. Please see "Rollovers" for more information.
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Prior to Age 59-1/2 Withdrawals — Hardship Withdrawal
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If you qualify for a hardship withdrawal, you can access your before-tax contributions, Roth 401(k) contributions and vested matching contributions made to the plan prior to January 1, 2005. Further, you cannot withdraw income earned on before-tax contributions made after December 31, 1998. There may be additional money types available to you for hardship withdrawal.
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Your withdrawal of your non-Roth contributions is considered taxable income to you.
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Your withdrawal of Roth 401(k) contributions is tax-free. However, any withdrawal of Roth 401(k) investment earnings is considered taxable income to you unless it meets the criteria for a qualified distribution.
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The taxable portion of your withdrawal may be subject to an optional 10% federal income tax withholding requirement. State tax withholding may also apply.
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The taxable portion of your withdrawal may be subject to a 10% penalty tax unless certain exceptions are applicable.
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Hardship withdrawals may not be rolled over.
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After Age 59-1/2 Withdrawals
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Once you're age 59-1/2, you can generally apply for a withdrawal of up to your entire vested account balance for any reason.
Certain heritage money types may not be available for an age 59-1/2 withdrawal.
You can elect to withdraw your Roth account or non-Roth account.
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Your withdrawal of your non-Roth account is considered taxable income to you and will be subject to a mandatory 20% federal income tax withholding requirement. State income tax may also be withheld.
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Your withdrawal of Roth 401(k) contributions is tax-free. Any withdrawal of Roth 401(k) investment earnings is considered taxable income unless it meets the criteria for a qualified distribution.
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Your withdrawal won't be subject to a 10% penalty tax.
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You can roll these amounts over. Please see "Rollovers" for more information.
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When and How a Withdrawal Is Paid
A request for a withdrawal generally will be processed on the same business day if you make your request prior to 4 p.m. Eastern Time or the close of the New York Stock Exchange, whichever is earlier.
If you have direct deposit for your paycheck, your withdrawal will be credited to the same bank account. If you don't have direct deposit, a check for your withdrawal will be mailed to your work address on file. The payment (whether credited to your account or sent via check) generally will be sent the business day after your withdrawal request is processed.
Keep in mind that you may also be responsible for state and local income taxes as well as federal income tax.
JPMorgan Chase Common Stock Fund Dividend Election
Approved Quarterly Window Periods
To ensure compliance with certain federal securities law requirements, certain plan participants cannot make elections that affect participation in the JPMorgan Chase Common Stock Fund, except during specified quarterly "window periods." Please see " Approved Quarterly Window Periods" for more information.
If you wish, you may elect to have any dividend income attributable to your vested account balance under the JPMorgan Chase Common Stock Fund distributed to you in cash. If you don't make an election, your dividend income will be reinvested automatically.
Please Note: Making an election to receive dividends in cash will decrease your ability to save on a tax-deferred basis (or tax-free basis as it relates to investment earnings on Roth 401(k) contributions) and will reduce the value of your account balance at final distribution. However, reinvesting dividends adds to the "cost basis" of your JPMorgan Chase Common Stock Fund within the plan. (Please see " Tax Consequences" for more information.)
You can make or revoke your dividend election at any time through the 401(k) Savings Plan Web Center or Call Center. In accordance with plan procedures, the election on file prior to the dividend record date will govern. Your election to take your dividends in the form of a cash distribution will remain in effect until you revoke it.
Cash payments of dividends, to the extent declared, are generally paid quarterly. Payments for employees who have direct deposit for their paychecks will be credited to the same bank account. Otherwise, payment will be made by check.
Once your employment with JPMorgan Chase has ended, your quarterly dividends will still be paid in the same manner as when you were actively employed. However, you can provide alternative bank account information for the electronic transfer of your quarterly dividend by contacting the 401(k) Savings Plan Call Center.
Note on Taxes
You will pay federal, state, and local income taxes on cash dividend payments from the 401(k) Savings Plan, but there is no income tax withholding on these payments. Additionally, cash dividend payments are not subject to the 10% early distribution penalty tax. They do not qualify for the lower federal income tax rate normally applicable to dividends paid directly by a corporation, and are not a qualified distribution for purposes of receiving tax-free investment earnings with respect to Roth 401(k) contributions. You'll receive a Form 1099-DIV after the close of the calendar year that reports the payment as ordinary income taxable as a dividend. You may not roll over these dividends to an IRA or back into the 401(k) Savings Plan. You may want to consult with your personal financial or tax advisor for more information on how this would impact your individual situation.
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